Why do banks require small businesses to open a business bank account instead of a cheaper personal one?
The bank won't let you because: Differences in required account features — Business accounts have different features (many of them legal features) that are required by businesses. For instances: Do you want to be able to deposit cheques that are written out to your business name? You need a business account for that. Your business could be sold. Then it wouldn't be your business, so it wouldn't make sense to put the business account under your personal name. The bank account and the cash it holds is a business asset and should be owned by the business, so when the business is sold the account goes with it. This is especially the case for a corporation that has shareholders, and not a sole proprietorship. For a business, you could also, in theory, assign other people as signing authorities on the business account (e.g. your corporate treasurer), and the individuals performing that role could change over time. Business accounts allow for this kind of use. Market segmentation — The bank has consciously undertaken to segment their product offerings in order to maximize their profit. Market segmentation helps the bottom line. Even if there were zero legal reasons to have separate personal vs. business accounts, banks would still make it their policy to sell different account types according to use because they can make more money that way. Consider an example in another industry: The plain-old telephone company also practices segmentation w.r.t. personal/business. Do you want a telephone line for a business and listed as such in the phone book? You need a business line. Do you want a phone line hooked up at a non-residential address? You need a business line. Here it's clear it is less of a legal issue than with the bank account, and it doesn't matter that the technical features of the phone line may be identical for the basic product offerings within each segment. The phone company has chosen to segment and price their product offerings this way. Q. Why do companies choose to charge some kinds of customers more than others for essentially the same underlying service? A. Because they can. You could, but the bank won't let you... If you're a sole proprietor - then you could probably open a personal account and just use it, and never tell them that is actually a business. However, depending on your volume of operations, they may switch you on their own to business account by the pattern of your transactions. For corporations, you cannot use a personal account since the corporation is a separate legal entity that owns the funds. Also, you're generally required to separate corporate and personal funds to keep the limited liability protection (which is why you have the corporation to begin with). Generally, business accounts have much higher volumes and much more transactions than personal accounts, and it costs more for the banks to run them. In the US, some banks offer free, or very low-cost, business accounts for small businesses that don't need too many transactions. I'm sure if you shop around, you'll find those in Canada as well.
Yes it is (legal). There is of course no law requiring any business you walk in to break your money. What made you think there would be? Being a bank in the US (and in other countries) has some legal consequences, but none of them relates to 'having to do business with anyone that walks in', neither 'having to break bills for people' (not even for established customers). Yes, it was historically commonplace for most banks to do all money-breaking for free, but that does not establish any obligation to do it. Maybe the FED is required to do that, but that won't help you if you don't live near either. For a business, it has absolutely nothing to do with what's in the bank. A business could be billions of dollars in the hole cash wise and still be required to pay taxes, and it can also be flush with billions of dollars in cash and get a refund.  It's all from differences between tax accounting and accrual ( standard business) accounting. Many of the Financial intermediaries in the business, have extraordinary high requirements for opening an account. For example to open an account in Credit Suisse  one will need 1 million US dollars. In the US, paper checks are still the rule, and there is a large amount of the population that does not care to use online banking. As a result, those people need to go to the bank once a week or more often, to deposit checks they get from anywhere, to get cash, etc.; so all those little banks have traffic. This is slowly changing, and banks start to automatic the processes even in the brick-and-mortar location, but for now, they are around. They might not have to open accounts at 12 bank because the coverage does allow multiple accounts at one institution if the accounts are joint accounts. It also treats retirement accounts a separate account. The bigger issue is that most millionaires don't have all their money siting in the bank. They invest in stocks, bonds, government bonds, international funds, and their own companies. Most of these carry risk, but they are diversified. They also can afford advisers to help them manage and protect their assets. Many small businesses are still cash and check.  For example my landlord does not take credit card or online transfer.   My choices are cash and check, and I prefer checks for the paper trail. Another factor that makes Buy to let more expensive is the risk involved. With a buy to let you are dependent on finding a tenant that will keep regular payments. if the property is left empty you need to finance the mortgage yourself putting you under financial strain and raising risk. Also as Chis mentioned they are regarded as a business enterprise, If the mortgage was to be taken by a business that would be very high risk for a bank as the business could dissolve leaving the bank out of pocket. Because of this it can be very difficult to get a buy to let through a business unless you are moving from a personal portfolio. For a regular mortgage these risks don't exist so this is reflected in lower interest repayments. It's because of these differences in risk that banks created buy to let so they can better manage those risks. "Credit unions require you to open an account because of their history. A credit union is just that: a union. Only instead of a union of workers collectively bargaining for better pay or worker's comp, they are lending each other money. They are chartered to offer their services to members of the union, rather than the public at large.  For that reason, credit unions historically had targeted niche memberships (ie, employees at a specific company, or property with a specific hobby such as fishing). Most credit unions these days attempt to skirt the issue, by claiming to serve members of a specific geographic area. Anyway, membership is defined a owning a stake in the union, which is usually termed a share. By opening the account and ""purchasing a share,"" you are becoming both an owner and member of the union, and are eligible for their services. That's why the account is required before you can have a loan." This is not a supply side issue (bank), but a demand side (small business) and there is simply no demand.  Bank CEOs have been repeating that there is just no interest in borrowing right now, they would love to lend, but businesses are not taking the loans.    Businesses are trying to firm up their balance sheets and with concerns of a recession looming most small business owners don't want to borrow and risk defaulting. "For a newly registered business, you'll be using your ""personal"" credit score to get the credit.  You will need to sign for the credit card personally so that if your business goes under, they still get paid. Your idea of opening a business card to increase your credit score is not a sound one. Business plastic might not show up on   your personal credit history. While   some issuers report business accounts   on a consumer's personal credit   history, others don't. This cuts both ways. Some   entrepreneurs want business cards on   their personal reports, believing   those nice high limits and good   payment histories will boost their   scores. Other small business owners,   especially those who keep high running   balances, know that including that   credit line could potentially lower   their personal credit scores even if   they pay off the cards in full every   month. There is one instance in which the   card will show up on your personal   credit history: if you go into   default. You're not entitled to a   positive mark, ""but if you get a   negative mark, it will go on your   personal report,"" Frank says. And some further information related to evaluating a business for a credit card: If an issuer is evaluating you for a   business card, the company should be   asking about your business, says   Frank. In addition, there ""should be   something on the application that   indicates it's for business use,"" he   says. Bottom line: If it's a business   card, expect that the issuer will want   at least some information pertaining   to your business. There is additional underwriting for   small business cards, says Alfonso. In   addition to personal salary and credit   scores, business owners ""can share   financials with us, and we evaluate   the entire business financial   background in order to give them   larger lines,"" she says. Anticipate that the issuer will check   your personal credit, too. ""The vast   majority of business cards are based   on a personal credit score,"" says   Frank. In addition, many issuers ask   entrepreneurs to personally guarantee   the accounts. That means even if the   businesses go bust, the owners promise   to repay the debts. Source" "This is unfortunately the truth, and I spend a lot of time with my clients trying to help them through this process.  One of the key metrics that banks judge themselves on is ""products per household.""  The more things you have attached to them, the less likely you are to leave, and they deliberately tie you in with more and more services, e.g. direct deposit, billpay, debit cards, credit cards, etc.  If you want to switch but are held back by the daunting task of all the stuff you need to do, it's easier than most people think, and bankers at those smaller banks who are getting your accounts should be more than happy to do about 80% of the work for you.  *The other 20% can only be done by you personally due to privacy laws, but your banker can guide you through that too.  A prime example:  A customer of mine wanted to switch, but he didn't want to go to the old bank to actually wait in line and go through with the nonsense of actually closing the account. I see that anxiety over confrontation a lot, by the way.  So I have saved on my desktop a form letter is a simple request by the customer to close their account at 2B2F bank.  They sign it, I notarize it, and send it off to the branch.  The branch of receipt has to close the account per the request.  Before we send that letter, we get everything set up with the new bank, draw the old one down to $10 or so, and give instructions to the old bank to remit a check payable to the customer and mail it to me.  Then the old account is closed, and I just deposit that nominal amount into the customer's account.  The customer literally never has to set foot in the old bank again.   The unfortunate thing is that not everyone knows that these kinds of things are even possible: that your banker should help you with this stuff, or that you can do pretty much everything remotely.  Plus, if you look at the smaller banks and CUs these days, they have eliminated the need or ubiquity (i.e. ""but their ATMs are everywhere!"") because a good bank or CU will never allow you to get charged to get your money, they will give you the direct line and email address of your branch manager, and a lot of places have mobile apps that allow you to deposit checks remotely." I've had all my account with the same bank for all my life. Generally, the disadvantage is that if I want some kind of product like a credit extension or a mortgage, I have the one bank to go to and if they don't want to help me I'm out of luck. However, occasionally there are also perks like the bank spontaneously offering you increased credit or even a whole line of credit. They can do this because they have your whole history and trust you. "From the banks point of view the point of a current account like this is to get you as a regular customer. They want to be your ""main bank"", the bank you interact with the most, the bank you turn to first when you need financial products and services, the bank whose advertising you see every time you log into online banking or walk into a branch. The bank knows that if they just offer the unprofitablly high interest rate or other perks with no strings attatched that people will open the account and dump a bunch of savings in it but won't actually move their financial life over, their old bank will still be their main bank. So they attatch strings like a required minimum deposit, a minimum number of direct debits and similar. These have minimal effect on people actually using the account as their main current account while being a pain for people trying to game the system. Of course as you point out it is still possible to game the system but they don't need to make gaming the system impossible, they just need to make it inconvianiant enough that most people won't bother." I don't think this is a French thing.  It's like this everywhere.  Banks always want people to open accounts of every type.  A person with a checking account should be easy to sell on a savings account at the same institution. Given that it does not appear that they will have any chance to recover the money they spend to get customers to open these accounts (there are no fees and they have to pay out the interests, even if very small) Oh, they recover it.  Banks make money by having deposits that they can use to lend out.  They do pay interest on deposits, but not as much as they earn on your money.  If they persuade you to have a savings account in addition to your checking account, then you might find it convenient and then move your money out of a different institution into their savings account.  Or you might stop hoarding it under your mattress.  Or whatever.  More money in their accounts means more profit for them. I don't know whether banks make more profit per dollar in savings or checking accounts.  I see banks pushing for both.  I think they simply view more accounts as a good thing because it can lead to more total savings in their institution.  That's how they make money. "Like most forms of insurance, health insurance is regulated at the state level. So what is available to you will depend greatly upon which state you live in. You can probably find a list of insurance companies from your state's official website. Many states now provide ""insurance of last resort"" for individuals who can't get insurance through private insurance companies. You can try looking into professional and trade associations. Some offer group insurance plans comparable with COBRA coverage, meaning you'd get a group discount and benefits but without the benefit of an employer paying 30-80% of your premiums. As a software developer you may qualify for membership in the IEEE or ACM, which both offer several forms of insurance to members. The ASP also offers insurance, though they don't provide much information about it on the public portions of their website. These organization offer other benefits besides insurance so you may want to take that in to consideration. The National Federation of Independent Business also offers insurance to members. You may find other associations in your specific area. Credit Unions, Coops and the local chamber of commerce are all possible avenues of finding lower cost insurance options. If you are religious there are even some faith based non-insurance organizations that provide medical cost sharing services. They depend upon the generosity and sense of fairness and obligation of their members to share the burden of medical expenses so their definitely not for everyone."