Entrepreneurship & Small Business

Using Personal High Interest Savings (HIS) Account for Business Savings

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  • Aug 29th, 2019 9:25 am
[OP]
Newbie
Oct 28, 2016
12 posts

Using Personal High Interest Savings (HIS) Account for Business Savings

Would there be any issues with using a Personal High Interest Savings (HIS) Account(s) for short-term savings of business funds from a Canadian corporation? This would be a through a dedicated personal savings account and would not be commingled with personal funds. Would there be any issue from the bank or tax-wise or any other issues? From what I could find in Canada the best business savings accounts are half or less than the best APR rates of personal savings accounts (e.g. 1.1% vs 2.4%). I've always been leaving large amounts of funds in the business chequing accounts and the easy extra couple grand a year would be nice if it's not being used actively for business in the short-term.
10 replies
Deal Expert
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Aug 2, 2010
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Here 'n There
Yes because the funds would be a draw on your corp and therefore an outstanding loan to shareholder. The funds are therefore in your hands and are indeed 'commingled' regardless if they sit alone in their own account. If on the books the second fiscal year after withdrawn that loan is taxable in your hands, which would incur income tax.

Of course any interest would be taxed in your hands too regardless if you pay the loan back or not.

You just can't take funds out of a corp for longer than one fiscal year without tax consequences. Otherwise we'd all be doing it!
Deal Fanatic
Oct 7, 2007
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Would there not also be a 3rd party component to consider? I am a bit fuzzy on this but when we sign up for accounts, I believe there is a checkbox that asks us how we will be using the account and whether there would be a 3rd party involved.
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choclover wrote: Would there not also be a 3rd party component to consider? I am a bit fuzzy on this but when we sign up for accounts, I believe there is a checkbox that asks us how we will be using the account and whether there would be a 3rd party involved.
no
[OP]
Newbie
Oct 28, 2016
12 posts
eonibm wrote: Yes because the funds would be a draw on your corp and therefore an outstanding loan to shareholder. The funds are therefore in your hands and are indeed 'commingled' regardless if they sit alone in their own account. If on the books the second fiscal year after withdrawn that loan is taxable in your hands, which would incur income tax.

Of course any interest would be taxed in your hands too regardless if you pay the loan back or not.

You just can't take funds out of a corp for longer than one fiscal year without tax consequences. Otherwise we'd all be doing it!
Would you not be able to structure it just like if you used a personal chequeing account for business you can separate the transactions and report it separately?
Deal Fanatic
Jul 4, 2004
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And don't forget if you earn any interest, the T4 will be coming to you and not the corporation.
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[OP]
Newbie
Oct 28, 2016
12 posts
Yeah the bank will send out a T5 slip in the personal name every year (if over $50) but are you not able to report it as business interest income if it is indeed business income?
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asdasdasdasads wrote: Would you not be able to structure it just like if you used a personal chequeing account for business you can separate the transactions and report it separately?
No such thing as 'structuring it'. If there was I would have answered that way in the first place. If the account is in your name it's personal not business - period. And, as I already explained to you once, if it remains as a loan to you as shareholder on your financial statements the next fiscal year after first reported on your financial statements then it is taxed as income in your hands.

If what you want to do was possible then everyone would be able to take money out of a corporation and never have to pay tax!
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Frankie3s wrote: And don't forget if you earn any interest, the T4 will be coming to you and not the corporation.
Yeah I already said that in post #2.
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Feb 19, 2019
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Stouffville ON
asdasdasdasads wrote: Yeah the bank will send out a T5 slip in the personal name every year (if over $50) but are you not able to report it as business interest income if it is indeed business income?
The bank doesn't care about your taxes, they issue T5 in your name because that's how you have set up the account, the tax problem is still your problem.
As it has been said already it you take money from the corporation there are tax consequences, transferring money from a corporation to a personal savings account means you owe money to the corporation.
Many people have a personal credit card set up to use for business expenses, it is different than what you are suggesting because in CC case company owes you money, and pays you back periodically for the expenses you have paid on behalf of the company.
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asdasdasdasads wrote: Yeah the bank will send out a T5 slip in the personal name every year (if over $50) but are you not able to report it as business interest income if it is indeed business income?
Oh geez. It ain't biz income if you earned it in a bank account that is registered in your personal name, regardless of what you wish it to be. You've been told this now multiple times yet you insist on thinking there is a way around a very basic tenet of the Income Tax Act of Canada.

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