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Email this12:11 pm
October 10, 2013
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Hi Guys,
I am newbie when it comes to investing. Have been working for past decade but never thought about putting money aside in savings account. Need some advice.
I have a small business and have No Fee Business Chequing account from HSBC. I also have my personal chequing account in CIBC.
Currently I have around 30K in my Business chequing and in my personal chequing put together.
I was planning to put this money in a business savings account. But could not find rates higher than 1% for Business Savings accounts. Whereas I have seen personal savings accounts provide much higher rates.
I wanted to know as a small business owner what will be best for me;
Getting a business savings account opened and putting my money there
or
Opening Personal Savings account for myself and putting the money there.
Thanks,
A
2:26 pm
February 22, 2013
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A:
The first thing I think of asking is, "how much of the $30k is working capital and how much is what I will likely incorrectly call 'retained earnings'?"
I have no first hand knowledge of small businesses and small business banking but do know that if I had $30k and was rolling it over monthly (buy stuff, pay for it with $29k, sell the stuff, collect $30k, and repeat this cycle monthly) then I would not care about the interest earned as much as if I had $30k and was only rolling a small chunk of it monthly (buy stuff, pay for it with $5k, add value and then sell the stuff, collect $10k, and repeat this cycle monthly).
Others, will no doubt, weigh in.
Greg
8:02 pm
July 31, 2013
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Greg, you are right. I never owned a small business so I don't know either what is the main difference between business banking and personal banking.
I do know that as a small business as with anyone, you need a financial cushion and access to money when you need to purchase goods,services or just to pay certain expected and unexpected expenses, bills etc.
A difference of say maximum 90 basis points, 1.90% versus 1.00% is $270 a year, if the balance is about $30,000 give or take every day throughout the year.
The $270 interest is fully taxable. It all depends on his or her small business income but at a 30% income tax rate, Hello2adi will pay $81 in taxes and he or she will be left with $189 or $15.75 per month.
If I was a small business owner, I would be first concerned with access and liquidity of money in my business account and then the fees. The interest rate would be my last concern.
7:17 am
January 30, 2009
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Hello A,
Is your small business incorporated? If you are not incorporated, there is no requirement to keep your business funds in a small business account but it is essential that you keep detailed records of which funds come from where (which makes accounting much easier). You said you also have a business chequing account so we are really only talking about savings at this point (you already have all the benefits of the business account via your chequing acount). If these are profits we are talking about, it makes absolute sense to keep the funds in a personal account yielding higher interest than the business account (as long as you keep very detailed records - which you should do anyway for tax purposes).
If you are incorporated, the small business account may be preferrable for tax reasons.
1:14 pm
March 7, 2013
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Hi A.
As a self-employed professional (non-incorporated), I designate one account as a business account where all business income is deposited and all business expenses are paid from. A small balance is kept in another chequing account for non-business household expenses. Anything accumulating in the business account beyond what is needed for ongoing business expenses is transferred into High Interest Savings Accounts, GICs etc., after taxes have been paid and RRSPs and TFSAs maximized. As James said, as long as you are keeping track of your business income and expenses in your business account, you are free to put your savings where they will do the best job for you, if you are the sole proprietor of an unincorporated business.
See CRA info: http://www.cra-arc.gc.ca/tx/bs.....s/slprtnr/
Deb
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