Entrepreneurship & Small Business

Personal Bank Account for Incorporated Business (to save on currentcy)..

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  • Sep 26th, 2019 10:16 am
[OP]
Newbie
Apr 1, 2016
53 posts
1 upvote

Personal Bank Account for Incorporated Business (to save on currentcy)..

Hi All,

I want to get a US bank account (not a USD canadian bank account) and with it the RBC Reward Visa card.

The personal US Bank account with RBC is $3.95 per month, the business bank account is 150.00 per month.

I get paid in USD but it's automatically converted to Canadian if the bank is located in Canada. I am only talking about $4000 a month so the $150 in fees isn't worth it but I could say 2.5% on the conversion...

Here is what I would like to do:
Get payment into a personal US Checking account, withdraw money on deposit, convert it to canadian and deposit it to my canadian (business) account.

I know you are supposed to use business account but if I NEVER use the bank account for ANY personal reasons, can I do this to save $150 a month in fees. Seems like a pretty easy way to add 2.5% to the bottom line so long as the tax man/account wont be mad.
24 replies
Deal Addict
Feb 25, 2007
1310 posts
776 upvotes
Ottawa
Not sure about the nature of your business or the payments you receive.

In my case, I invoice some of my clients in USD. I have opened a USD small business account at RBC (which costs a minimal amount of money and the fee is waived if there is a minimum balance). My US payors just send me a physical US cheque (payable to my company) I deposit to it here in Canada. One client even sent me the funds electronically to the Canadian-domiciled USD account, no problem. Therefore not sure why your money would be automatically converted to CAD just because it is paid to a Canadian bank. It sounds like internal administrative policy of the payor, i.e. something you could get them to change.

I'm not an accountant, but I think there is nothing *inherently* impossible about you personally temporarily accepting a payment for your business, converting it, and depositing it to your business, provided you do it with a super clear paper trail. However, I see a couple of complexities which together probably create a roadblock. Presumably, your payor wants to pay your business, so they will not want to issue a check/cheque payable to you personally (or similar electronic payment). It sounds from the above they are at least somewhat rigid in their policies, and this seems like even more nonstandard. And presumably you want the funds to funnel through your business, not personally, anyway, for tax attribution reasons. In past times, when cheque/check endorsement was common and accepted, you could have accepted a paper check payable to XYZ Corp, as a signing officer of XYZ Corp endorsed it to you personally, deposited and converted it personally, and deposited the proceeds to your business account. But these days it sounds like you won't have a paper check anyway, and even if you did, endorsement to 3rd parties is frowned on. Finally, while with perfect paper trail I don't think this would explicitly fall afoul of any rules, I don't know if your overall business/employment situation puts you in any danger of being classified as a PSB. If you are essentially an incorporated consultant with one client, being paid regularly monthly, then this could be a real risk. In that instance, the last I would want to do is muddy the waters further by injecting yourself personally into the payment chain since the "intent" of the contracting parties may end up being important, and it will be hard to argue the intent is for you to be treated as a contractor when you are effectively being paid personally.
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User avatar
Nov 19, 2004
8943 posts
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Cambridge, ON
Not sure how this would work since a personal account would have to be opened in your name instead of the corporation name. Payments made to the corporation wouldn't match the name on the account.
Deal Addict
Feb 29, 2012
2654 posts
1456 upvotes
Richmond
I'm sure you'll find that it's against the terms of the account to use a personal account for business on behalf of a corporation, and they will find out.

Why would anyone pay $150/month for a U.S. business bank account? Find yourself a different bank or a different account. Ours is a BMO Harris account, free if we keep a monthly average of $1500 in it.
[OP]
Newbie
Apr 1, 2016
53 posts
1 upvote
Does you bmo account have an American address and transit number or a candian one?

I Require a USD account with US Transit number in order to get paid in usd. I do online retail and this is a requirement of merchant account, PayPal, Amazon etc.
[OP]
Newbie
Apr 1, 2016
53 posts
1 upvote
don242 wrote: Not sure how this would work since a personal account would have to be opened in your name instead of the corporation name. Payments made to the corporation wouldn't match the name on the account.
I get paid by wire. I believe it's all based on the account number. Perhaps there is "validation" on the name but I don't think so
Deal Fanatic
User avatar
Nov 19, 2004
8943 posts
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Cambridge, ON
WinnipegRedFlager wrote: I get paid by wire. I believe it's all based on the account number. Perhaps there is "validation" on the name but I don't think so
I get paid by wire from the US as well but it just automatically gets converted to CAD so I don't bother with a USD account. Or I just invoice in CAD and the payee does the conversion on their side.

I just think if it goes into a personal account with your name on it, instead of the corporation then you have a hard time if you ever get audited because it shows the money going to you vs the corporation. A corporation has specific rules requiring separate accounts in the corporation name. And as someone mentioned, it is probably against the terms of the account.
[OP]
Newbie
Apr 1, 2016
53 posts
1 upvote
don242 wrote: I get paid by wire from the US as well but it just automatically gets converted to CAD so I don't bother with a USD account. Or I just invoice in CAD and the payee does the conversion on their side.

I just think if it goes into a personal account with your name on it, instead of the corporation then you have a hard time if you ever get audited because it shows the money going to you vs the corporation. A corporation has specific rules requiring separate accounts in the corporation name. And as someone mentioned, it is probably against the terms of the account.
OK got you. Too bad because I am leaving 2.5%+ on the table by doing it that way vs. getting the US money and converting it myself. I am going to search to see if I can find a US business bank account cheaper....
Deal Addict
Feb 29, 2012
2654 posts
1456 upvotes
Richmond
WinnipegRedFlager wrote: Does you bmo account have an American address and transit number or a candian one?
BMO Harris is a U.S. bank with a U.S. address and transit number. We use it to receive U.S. payments via direct deposit, which we then transfer to Canada and exchange at a decent rate via Cambridge Mercantile FX. They have an online service where we can transfer funds directly from our U.S. BMO Harris account to any of our Canadian accounts and exchange the money at about 0.5% off the mid-rate. It only takes one day and there's no fee.
Newbie
Mar 8, 2014
5 posts
Surrey
WinnipegRedFlager wrote: Hi All,

I want to get a US bank account (not a USD canadian bank account) and with it the RBC Reward Visa card.

The personal US Bank account with RBC is $3.95 per month, the business bank account is 150.00 per month.

I get paid in USD but it's automatically converted to Canadian if the bank is located in Canada. I am only talking about $4000 a month so the $150 in fees isn't worth it but I could say 2.5% on the conversion...

Here is what I would like to do:
Get payment into a personal US Checking account, withdraw money on deposit, convert it to canadian and deposit it to my canadian (business) account.

I know you are supposed to use business account but if I NEVER use the bank account for ANY personal reasons, can I do this to save $150 a month in fees. Seems like a pretty easy way to add 2.5% to the bottom line so long as the tax man/account wont be mad.
I've been considering this issue recently myself. I have clients paying me for services from the UK and South Africa, and I'm paying subcontractors in UK, Switzerland, and South Africa. The best solution I've found so far to minimise fees and conversions (to and from my Canadian corporation in CAD) is to use https://www.currencyfair.com/ - they have a process so you can establish a corporate account (rather than a personal account). There are no fees for holding the account, the exchange rates are reasonable (maybe less than 1%?) and my corp can receive and hold funds in whatever currency it comes in as (which can sometimes happen via local accounts in any particular country). e.g. I can also convert direct from say ZAR (that I've been paid) to CHF (that I pay out) without needing to go via CAD (with my BMO business account), and I save on wire transfer fees too.

I think for your case this might work less well, as CurrencyFair is not as well set up for US + Canada - i.e. they don't have local accounts, and so it'll involve wire transfers to send / receive payments. However, if you're saving on the exchange rate, and you don't pay monthly fees, and you can group payments... then maybe it'll be cheaper for you?

Hope that helps.
Jr. Member
User avatar
Oct 26, 2015
166 posts
39 upvotes
Calgary, AB
Just wanted to update you on this. I am in the exact same situation. Had my accountant + my bank telling me that it was totally fine and then a CPA telling me that it wasn’t so anyways, I called the CRA and asked them if that’s something I can do or not.

First CRA agent told me that she couldn’t find anything saying that I couldn’t use a personal US account located in the US and transfer the money over to my business account. She transferred me to a more senior agent that couldn’t find anything either but said that technically you are not supposed to transfer personal funds from clients to your corpo. So he said that the safest route would be to try to get my clients to pay me via a USD business account in Canada. Problem is, clients require US routing number AND PayPal does not recognize US accounts located in Canada. (That’s for my Upwork earnings).

So I am not sure what to do. I can prove that clients paid me directly and I then transferred the money but unsure if that would work if I get audited and the CRA couldn’t comment on that!

If anybody else found the ideal setup please let us know!
Penalty Box
Jun 24, 2015
4820 posts
1440 upvotes
0 downvotes
its more of a banking rules than cra rules, banks want to ensure when someone pays a company, it goes into the companys account not an individuals, however, the only exception i saw to this is if the company is the same name as the individual. so if someone writes a cheque payable to the order of a company called: John fitzgerald but your real name is john fitzferald you technically CAN deposit into your personal cheque cus theres no way to distinguish if the TO field is a company or individual if they have the same name,.
Hi
Deal Expert
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Aug 2, 2010
15193 posts
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Here 'n There
WinnipegRedFlager wrote: Hi All,

I want to get a US bank account (not a USD canadian bank account) and with it the RBC Reward Visa card.

The personal US Bank account with RBC is $3.95 per month, the business bank account is 150.00 per month.

I get paid in USD but it's automatically converted to Canadian if the bank is located in Canada. I am only talking about $4000 a month so the $150 in fees isn't worth it but I could say 2.5% on the conversion...

Here is what I would like to do:
Get payment into a personal US Checking account, withdraw money on deposit, convert it to canadian and deposit it to my canadian (business) account.

I know you are supposed to use business account but if I NEVER use the bank account for ANY personal reasons, can I do this to save $150 a month in fees. Seems like a pretty easy way to add 2.5% to the bottom line so long as the tax man/account wont be mad.
If it's paid into a personal bank account it's a draw on your company account and classified as a loan or income. Loans on the book the second year after withdrawal are taxed in your hands. No way around this.

Get a BMO Harris account, which blows RBC out of the water terms of almost zero fees. Search in this thread for it as I've posted copious instructions on how to get it.
Deal Fanatic
Sep 23, 2007
5061 posts
1158 upvotes
CRA does not care what you use as long as you are able to identify what is personal and what is business. Of course, having a designated business account, that was opened under your business name, makes things a lot easier. Consider the more practical reasons like writing a cheque. Or doing e-transfers. Do you want the transfer to show up as "payment from John Smith" or "payment from ABC Inc.". People open business accounts and pay fees higher than a regular personal account because banks tend to offer services that are specialized. There may also be some vendors that give you headaches. Some vendors won't deal with you unless you fill out some forms and the payor names match or whatever. For small businesses I don't imagine this to be an issue.

With that said, when CRA does an audit, the onus falls on you to prove what expenses and incomes are business related. If you have a designated account, I don't think it is an issue for the tax man. Just be sure to keep your records in a way that is easy to explain and analyze.

If an accountant says CRA does not allow it, that's not exactly true, but he/she probably means "it is not recommended." Banking rules may also be an issue. I believe terms of service prohibit use of personal account as business. If you don't have a lot of transactions I don't think they will find out. But you are welcome to try. Worst case you open a business account if and when they find out.
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Aug 2, 2010
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BananaHunter wrote: CRA does not care what you use as long as you are able to identify what is personal and what is business. Of course, having a designated business account, that was opened under your business name, makes things a lot easier. Consider the more practical reasons like writing a cheque. Or doing e-transfers. Do you want the transfer to show up as "payment from John Smith" or "payment from ABC Inc.". People open business accounts and pay fees higher than a regular personal account because banks tend to offer services that are specialized. There may also be some vendors that give you headaches. Some vendors won't deal with you unless you fill out some forms and the payor names match or whatever. For small businesses I don't imagine this to be an issue.

With that said, when CRA does an audit, the onus falls on you to prove what expenses and incomes are business related. If you have a designated account, I don't think it is an issue for the tax man. Just be sure to keep your records in a way that is easy to explain and analyze.

If an accountant says CRA does not allow it, that's not exactly true, but he/she probably means "it is not recommended." Banking rules may also be an issue. I believe terms of service prohibit use of personal account as business. If you don't have a lot of transactions I don't think they will find out. But you are welcome to try. Worst case you open a business account if and when they find out.
Wrong, not to mention some of the worst advice I have ever seen on here. If the bank account is in your personal name you are unequivocally drawing upon your company personally and yes the CRA does care or else we'd all be putting company funds into our personal bank accounts and not ever paying tax! You can't just say "oh I didn't mean it that way". Sheesh!
Deal Addict
Mar 3, 2018
2038 posts
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GTA
eonibm wrote: Wrong, not to mention some of the worst advice I have ever seen on here. If the bank account is in your personal name you are unequivocally drawing upon your company personally and yes the CRA does care or else we'd all be putting company funds into our personal bank accounts and not ever paying tax! You can't just say "oh I didn't mean it that way". Sheesh!
Actually as long as you have the records to show how amounts are properly reported in the corp tax return I don’t see CRA having a problem with it. Yes it is more complicated to track everything. But if all income is reported what is the big deal.

It is up to CRA to prove you have unreported income. If you are reporting everything you will be fine.
Deal Fanatic
Sep 23, 2007
5061 posts
1158 upvotes
eonibm wrote: Wrong, not to mention some of the worst advice I have ever seen on here. If the bank account is in your personal name you are unequivocally drawing upon your company personally and yes the CRA does care or else we'd all be putting company funds into our personal bank accounts and not ever paying tax! You can't just say "oh I didn't mean it that way". Sheesh!
There is no written rule from any government body that you MUST have a business account. I will stand by my point. I think you read "CRA does not care" a little too literally. My meaning is that there is no law that you must have it, but it is highly recommended to open a business account to avoid a messy audit trail and also for business credibility purposes. The critical point to the CRA is the nature of a transaction. Substance, not form. The CRA does not care if the bank account is classified as business or personal. There is nothing stopping a person from paying business expenses from personal account and vice versa. You can just as easily draw funds from a business account if you have sole control. A person can absolutely choose to avoid paying tax and keep taking money. The problem is that over the course of time the CRA is likely to catch you and then be faced with penalties. This will be true regardless of the type of bank account you have.

And as I said, if the CRA audits, the onus will fall on the owner to prove a credit on the bank statement is not a business revenue. And that a debit on the bank statement is a business related expense. The proof rests on underlying transactions like an invoice, or an itemized receipt. Having business transactions go to a non-business account does raise red flags but it does not invalidate the nature of transactions completely. It may make it harder to convince CRA a transaction is business related. That's all.

The OP's point is that he does not intend to use the account for any personal transactions. Now whether the CRA will see it that way, will ultimately depend on the transactions going through the account.
Penalty Box
Jun 24, 2015
4820 posts
1440 upvotes
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when you hire a nanny, you need to pay her properly but this does not mean you have to open a business bank account, you can easily pay her salary with a personal cheque. as long as you have the correct cra deductions they do not care who it comes from. same with receiving money.
Hi
Deal Addict
Feb 19, 2019
1146 posts
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Stouffville ON
DaveTheDude wrote: Actually as long as you have the records to show how amounts are properly reported in the corp tax return I don’t see CRA having a problem with it. Yes it is more complicated to track everything. But if all income is reported what is the big deal.

It is up to CRA to prove you have unreported income. If you are reporting everything you will be fine.
It's not just an issue or reporting income, also a shareholder loan issue, and possibly separation of asset issue if there is ever a lawsuit.
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Deal Addict
Feb 19, 2019
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GoodFellaz wrote: when you hire a nanny, you need to pay her properly but this does not mean you have to open a business bank account, you can easily pay her salary with a personal cheque. as long as you have the correct cra deductions they do not care who it comes from. same with receiving money.
You are confusing an incorporated business with hiring a personal help, it's like comparing watermelon and grapes, not even in the same stratosphere.
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