I get asked all the time – do I need to open another bank account for my freelance business? The truth is, that really depends on how your business is structured.
If you’re running a corporation, the answer is always yes. A corporation is a separate legal entity under the law – meaning it basically counts as a person. Since it’s a different person, it needs its own bank account. This is key as customers will expect to be making payment to the corporation that sent them the invoice. It also helps give a proper, professional look to your business.
If you’re running a sole proprietorship, or an unincorporated freelancing business, it’s different. You don’t technically need a bank account because there is no distinction between your business and personal money. Things can quickly get tricky, however. When you’re trying to figure out how much money you have earned and spent you need to keep really good records – or you risk making a mistake on your taxes. If you miss money coming in from a customer, you’ll underpay the CRA which will get you in trouble in a hurry. If you miss expenses you’re leaving money on the table by missing tax deductions.
This is is why we recommend that all our clients, no matter if they incorporate or not, get their own bank account and keep business and personal money apart.