Working with your Corporation Part 6: Banking

Another important aspect of working with your corporation that you must be familiar with is banking. 

Your banking relationship is important.  You will be depositing funds, writing cheques and paying for expenses regularly.  We’ve already covered paying for expenses and paying yourself, but there are some other things to consider in banking such as being on the right bank service package.  Bank Service Charges add up and it is important to be on the right package for the number of transactions you will be using.  Utilize Direct Deposit when it is free or relatively low cost as this will save you time and money.  Most banks have direct deposit/EFT systems. 

*Important Note on Banking: When making bank deposits, you must keep records of what you are depositing and where it is coming from.  If these are cheques and cash you are depositing, you should keep a bank deposit book that will track what all the deposits are.  If it is electronically deposited funds, get a record of the transactions, such as a merchant account statement.  If and when you are audited and you cannot prove where all funds that came into the company came from, CRA may determine that all funds that went into the company are income, when in fact some may be shareholder loans or from other sources.  Also, if you ever do directly withdraw funds from your Corporation for any reason, ensure to have a record of where it went or CRA may determine that these amounts are personal income to you.  The problem with CRA making either of these determinations is not only the extra tax and audit fees you will pay, but also the penalty and interest because of the timing when CRA would reassess!

Check back for the next segment of our blog series focused on Accounts Payable and Accounts Receivable.