Managing your corporation’s finances can be a daunting task, especially when it comes to deciding how many bank accounts to have. While having at least one account is necessary, there are many factors to consider when deciding whether to open multiple accounts.
Ultimately, every corporation’s financial needs are different, and it’s essential to determine what works best for your business. This blog post will provide insights to help you make informed decisions about how many bank accounts your corporation needs to manage its finances effectively.
How Many Accounts Should My Corporation Have?
Knowing how many bank accounts you need for your corporation might be challenging, especially if you have only recently incorporated your business.
No two businesses are the same and while some businesses may only have one account, it’s possible that yours would benefit from having multiple open accounts. Having multiple accounts allows you to split your finances and keep a really close eye on your money, so you should do what’s right for your business’s financial situation.
The Importance of a Separate Account
Not only does having a separate business bank account make it easier to keep track of your finances but it’s also legally required. Corporations are legally classified as “individuals,” which means that the corporation must have its own bank account, do its own tax return, etc.
There are many other important reasons besides legality that warrant having a separate account for your business. A common reason is payroll and owner’s pay. You should have your corporation’s funds in a mandatory separate business bank account to ensure you’re abiding by legal standards. But it’s important to note that having a second or third account owned by the corporation might make it easier to complete payroll in a streamlined and organized fashion as the money isn’t being taken out of your main corporate bank account. Your second or third corporate accounts can also be used to invest, buy business assets, and acquire other businesses.
It’s important to remember that the corporation must own any extra accounts, assets, or investments that you open or purchase or else they will become classified as personal income.
If you’ve already set up a separate bank account for your new corporation but would like to take it a step further, a popular next step is opening a savings account for your business.
Many business owners open up savings accounts so they can put money aside for tax payments or unanticipated expenses.
Different savings accounts allow you to expand and grow your business more freely. Depending on your financial situation and the type of account you’re using, utilizing a savings account can give you more flexibility when it comes to taking advantage of expansion opportunities for your business!
Can I use Multiple Banks?
All banks have various different account benefits, sign-up perks, or banking tools so it’s always a good idea to do your research into which banks best suit your needs.
When opening up your corporation’s bank accounts, you don’t need to have every account at the same bank. You may even benefit from using a second financial institution for savings or investing! When deciding who to bank with, you’ll just want to make sure that they’re reputable and legitimate. This means making sure they are on the FDIC list to make sure that your money is insured. A good tip is always to go with one of the big six Canadian banks, credit unions, or online resources like Paypal or Wise.
Strategies for Needing Multiple Currencies
If your business deals with multiple currencies (USD, EUR, GBP, etc), there are a few different strategies that you can use to go about this.
One of the most popular strategies is to use an online banking resource like Wise Business that specifically assists with any money in a foreign currency. Banking tools like this, allow you to manage your cash flow overseas all in one place which makes it a lot easier and seamless for you as a business owner!
Other popular strategies for managing multiple currencies range from providing different invoicing or billing choices to adopting an automated payments solution in which global payments are automated and streamlined so that they’re easier to keep track of. Solutions such as this will likely require a USD account and your accountant or bank representative can support you in making that decision.
Managing your corporation’s finances requires careful consideration, as what works for one business might not work for another. In conclusion, it’s essential to determine what works best for your business when it comes to managing your corporation’s finances. By understanding the factors to consider, you can make informed decisions about how many different types of bank accounts your corporation needs to manage its finances effectively.