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Personal or Business Chequing Account - Liability
January 22, 2023
2:13 pm
Lynx353
Alberta, Canada
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Hello. I'm a dietitian and I'm setting up my own sole proprietorship business in Canada. I'll be the only person in my business and I'll be counselling clients virtually. I have one personal chequing account (at TD Bank) and I want to get a second chequing account just for my business.

http://www.businessnewsdaily.c.....ation.html states that "Business banking helps limit your personal liability by keeping business funds separate from your personal funds." If I get sued, I want to protect some of my personal finances.

Would my personal liability be limited no matter if my second account is called a personal account or a business account?

Note: I may choose Manulife Bank for my second account. There are typically less fees to have a personal account than a business account.

Thank you!

January 22, 2023
3:57 pm
HermanH
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As long as you are a sole proprietorship, you are fully liable for the company. It will not matter how or what type of bank accounts you arrange. If you want to limit your exposure, you need to incorporate a limited company entity.

January 22, 2023
3:57 pm
Dean
Valhalla Mountains, British Columbia
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.
And if you get sued, you'll also want E&O Insurance, which may be available through your professional organisation.

'Good Luck' with the new business ❗

    Dean

sf-cool " Live Long And Prosper " sf-cool

January 22, 2023
4:22 pm
Loonie
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Most people don't bother incorporating until the income of the business is higher than what they personally take out of it. You should talk to a lawyer about that and about liability. Spend a few bucks for competent advice. If you do need a corporation, lawyers often know of one that has been set up but never used, and you can save money by buying one. It will cost you a few thousand though - tax deductible as a business expense.

You do need a proper business account in my view. All banks prohibit using personal account for business activity. Read the fine print on your accounts. They will shut down your account if they suspect business activity. You can get away with it for a while if you don't have too many transactions.

But, really, for anything like this with significant implications, do yourself a favour, spend the money, hire a professional for advice; don't rely on people you don't know on a public forum - including me.

January 23, 2023
9:13 am
Lynx353
Alberta, Canada
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Thank you everyone for the advice.

January 23, 2023
9:38 am
Norman1
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Also, don't rely on US material for Canadian matters.

That site, Business News Daily, is based in the US and has US-based material. Things don't work exactly the same here is Canada.

For example, there's no such thing in Canada as a limited liability corporation (LLC).

There is also no liability protection from a corporation for certain activities. Medical doctors, for example, cannot shield their malpractice liabilities through a corporation.

January 23, 2023
9:42 am
MG
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Loonie said
If you do need a corporation, lawyers often know of one that has been set up but never used, and you can save money by buying one. It will cost you a few thousand though - tax deductible as a business expense.
 

I do not agree with the advice to purchase a corporation that is already set up by a lawyer. Why pay extra fees? Do your own research first. It is quite easy these days to set up your own corporation. I set one up in 2012 for $385 in Ontario in a couple of days. The costs may be slightly higher now but it is not worth paying thousands for a small owner run corporation. It also may not be worth your while until your billings reach a certain level. Once you have a corporation, there are mandatory reporting requirements. Some folks feel comfortable doing that on their own, others need to hire an accountant - all of which costs more money. Good luck!

January 23, 2023
4:06 pm
Loonie
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I agree with most of what MG has said.
We used a lawyer and bought an existing corporation. I never thought of DIY in that regard, but I know we would not have been comfortable with it anyway.

January 24, 2023
9:10 am
Lynx353
Alberta, Canada
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Thank you all for the help.

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