How to Get a Business Loan from BDC in Canada
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Business Trust Accounts in Canada
Who needs a business trust account in Canada — lawyers, real estate brokerages, property managers — the rules that govern them (LSO By-Law 9, RECO deposit insurance up to $200,000), and how CDIC insures trust money separately at $100,000 per beneficiary.
Applies in: across Canada
The path in one paragraph
If your business holds money that belongs to someone else — a client retainer, a home buyer's deposit, rent you collect for a property owner — a regular business account is not just the wrong tool, it is usually a breach of your professional rules. The path is: confirm your regulator requires a trust account, learn the accounting duties before you touch client money, open a properly designated account at an eligible institution, and run it with monthly reconciliations and records kept for a decade.
Step 1: Decide whether you actually need one
The trigger question is not what business you are in. It is: does money that is not mine pass through my hands? If the answer is yes, your regulator almost certainly requires a trust account. The classic cases:
- Lawyers and paralegals. If you receive any money that does not belong to you — client funds, retainers for work not yet done, disbursement advances, settlement money held pending conditions — you must operate a trust account. A lawyer who only ever gets paid after the work is done and holds nothing for clients may not need one, but that is a narrow exception.
- Real estate brokerages. In Ontario, every brokerage must hold deposits in a designated trust account, separate from operating funds. The buyer's deposit (commonly around 5% of the purchase price in the GTA, negotiable — there is no statutory percentage) is held in trust, usually by the listing brokerage, and can only be released on a signed mutual release or a court order.
- Property managers and landlords' agents. If you collect rent or deposits for property owners, that money is held in trust for the owners — the duties below apply even where your province has no property-management licensing regime.
- Accountants, estate trustees, investment advisors. Anyone acting as a fiduciary over client or beneficiary funds.
Do not open a regular business account and call it a trust account. Banks, regulators, and courts care about the designation: the account title must say it is a trust account, the bank's records must say the deposit is held in trust, and the records must name the trustee and the beneficiaries. That labelling is what keeps the money out of your creditors' reach if your business fails.
Step 2: Learn the accounting duties before the first deposit
A trust account is an accounting obligation wearing a bank account's clothes. The duties vary by regulator, but the pattern is the same across Canada:
- Absolute segregation. Client money and your money never share an account, even for an hour. Ontario's Law Society says money in a trust account belongs to the client, and licensees must ensure trust funds are not commingled with the firm's general account. The classic violation is paying office expenses from the trust account "just this once" — it is never just once.
- Monthly three-way reconciliation. For Ontario lawyers: every month, within 25 days of the month-end statement, reconcile the bank balance against the trust ledger balance against the sum of every client's individual listing. A variance gets investigated, not carried forward. Real estate brokerages reconcile monthly under RECO audit too.
- Never-negative client ledgers. No client's balance may go below zero — you cannot spend client A's money because client B's cheque has not cleared yet.
- Interest belongs to the law foundation or the client, never you. Ontario lawyers direct pooled-account interest to the Law Foundation of Ontario. Real estate trust money earns nothing by default under the standard Ontario deposit terms.
- Ten-year records. Ontario lawyers keep trust records for ten years plus the current year — longer than the CRA's six-year tax rule. Keep original monthly statements and cheque images; banks do not always retain records as long as the regulator requires.
These duties start the day the account opens, not the day you feel ready. The Law Society of Ontario runs spot checks — commonly reported every three to five years, often including a firm's first year — and they are designed to catch exactly the bookkeeping mistakes a new practice makes.
Step 3: Open a properly designated account
Trust accounts are opened at chartered banks, trust companies, or credit unions — the same eligible institutions everywhere. For an Ontario lawyer, By-Law 9 requires the account to be at a chartered bank, registered trust corporation, or credit union, designated as the lawyer's or paralegal's trust account in the licensee's or firm's name, and bearing interest at a Law Foundation of Ontario-approved rate with the interest directed to the Foundation. For an Ontario brokerage, the account is designated a Real Estate Trust Account at an Ontario institution.
At the bank, say the magic words out loud: "I need a designated trust account." Then confirm five things:
- The account title is exactly right. It should read as a trust account in your professional name or firm name — the Law Society's key trust account requirements spell out the designation wording.
- Interest is handled correctly. For a lawyer's mixed trust account, the bank must remit interest to the Law Foundation of Ontario; ask whether the bank handles the remittance automatically.
- You can see everything electronically. Monthly PDF statements, long-term archives, and historical cheque images — Law Society auditors routinely ask for cheque images from transactions that happened years ago, and branch visits for every request are a compliance risk.
- Transfer records are permanent. Trust-to-general transfers get heavy audit scrutiny; confirm the bank retains confirmations, wire records, and internal transfer receipts.
- Electronic payments are supported. Most practice now moves money by electronic transfer; confirm the bank's platform supports trust-designated electronic payments with proper authorization trails.
Step 4: Run it with the discipline the regulator expects
The account works if the money discipline holds:
- Reconcile monthly, on time. The three-way reconciliation is the single most important habit. Do it within the regulator's window (25 days after month-end for Ontario lawyers) and investigate every variance immediately.
- Move money only on instructions. Client money moves when the client or the transaction instructs it — never on automation. Ontario lawyers are personally accountable for every trust movement under By-Law 9, and no software should move trust funds unsupervised.
- Handle unclaimed money properly. If trust money sits because you cannot identify or locate the rightful owner, Ontario's Law Society Act lets you transfer unclaimed trust funds to the Law Society's unclaimed trust fund after two years — the owner can still claim them there later.
- Tell the bank who the money is for. The CDIC coverage that protects your clients' money — up to $100,000 per beneficiary, separate from your own coverage — only works if the bank's records state the deposit is held in trust and identify the trustee and beneficiaries. Treat the bank's annual disclosure reminder as a to-do, not junk mail.
- Plan for the deposit insurance limits. For real estate, RECO's consumer deposit insurance responds to fraud, insolvency, or misappropriation up to $200,000 per claim — a separate protection from CDIC. Know both, because they protect different failures.
And the rule that underlies all of it: the money is not yours. Every temptation the account offers — the float, the "borrow until Friday," the tidy-looking surplus — ends in the one outcome the whole regulatory apparatus exists to prevent. Treat the account as a vault you guard, not a wallet you spend from.
Outside Ontario
British Columbia: lawyers are regulated by the Law Society of BC. Its Rule 3-58.1 is a bright line. A lawyer or law firm must not permit funds to be deposited to or withdrawn from a trust account unless the funds are directly related to legal services provided by that lawyer or firm.
Alberta: lawyers are regulated by the Law Society of Alberta. Its Trust Safety department oversees the management, accounting, and safeguarding of funds entrusted to firms. Lawyers must safeguard, segregate, and account for trust money and property. A Responsible Lawyer is accountable for the firm's trust account, including losses caused by firm members.
Quebec: notaries are regulated by the Chambre des notaires du Québec. Their trust accounting follows the Regulation respecting trust accounting by notaries (N-3, r. 5). Client funds go into a general trust account opened in the notary's name as soon as possible after receipt. Where the client's interest requires it, or the client asks for the income, funds move to a special trust account in the client's name. Notaries reconcile general and special trust accounts monthly. They may not deposit personal funds in a trust account.
In every province, the designation and reconciliation duties differ. Confirm the current rules with the regulator before opening or relying on an account.
Related guides
- How to Open a Business Bank Account in Canada — the regular business account for your own money: documents, verified 2026 fees (BMO $5/mo, Scotia $6/mo), and how to open one online or in-branch.
- Best Business Bank Accounts for New Businesses in Canada Compared — the 2026 fee comparison: Big Five entry plans vs $0 digital accounts, e-Transfer allowances, FX markup, and the decision framework.
- Business Bank Account for Sole Proprietors in Canada — the sole-prop specifics: SIN vs BN, the operating-name document piece, and why clients paying your business name forces the upgrade.
- How to Open a Canadian Business Bank Account as a Non-Resident — the foreign-founder version: which banks accept non-resident owners, the document pack, the in-person interview, and the GST/HST rules that surprise newcomers.
- How to Start Building Credit in Canada — the personal-credit side that matters as much as any account when lenders size you up.
- How to Get a Small Business Loan in Canada — the real routes to financing: the CSBFP government-backed loan, Futurpreneur for founders under 40, and BDC.
- How to Start a Property Management Business in Canada — where trust accounts meet rent collection: BC and Alberta licensing, Ontario's leasing boundary, and monthly reconciliation.
The path to a compliant trust account
- Confirm the triggerDoes someone else's money pass through your business — client retainers, buyer deposits, rents for owners? If yes, your regulator requires a trust account
- Learn the accounting duties firstNo commingling, monthly three-way reconciliation, never-negative client ledgers, interest to the law foundation or the client — all start on day one
- Open a designated accountAsk for a 'designated trust account' at a chartered bank, trust company, or credit union; confirm the exact account title and interest remittance handling
- Reconcile monthly and keep recordsThree-way reconciliation within the regulator's window; retain statements, cheque images, and transfer records for ten years
Key numbers to know
| CDIC trust-deposit coverage | $100,000 per beneficiary, separate from own-name coverage |
|---|---|
| RECO consumer deposit insurance | Up to $200,000 per claim |
| Ontario lawyer reconciliation window | Within 25 days of the month-end statement |
| Ontario trust record retention | 10 years plus the current year |
Protections differ by regulator and scenario; the prose above explains each figure.
Questions people ask
What is a business trust account in Canada?
A bank account where the money belongs to someone else — clients, not the account holder. A law firm's trust account holds client retainers and settlement funds; a real estate brokerage's trust account holds buyer deposits. The account holder is the trustee: they control the account, but the money is not theirs, and regulators require it to be kept strictly separate from the business's own operating money.
Who needs a trust account in Canada?
Anyone who holds other people's money as part of their business. In practice that means lawyers and paralegals (required by their law society), real estate brokerages (required under the provincial real estate regulator), property managers who collect rent for owners, some accountants, and estate trustees managing a deceased person's affairs. The common trigger is simple: if money that is not yours flows through your business, your regulator almost certainly requires it to sit in a trust account.
Is a trust account the same as a business bank account?
No, and the distinction matters. A business bank account holds your business's own money. A trust account holds other people's money in trust, and it carries legal duties a business account never has: no commingling with your own funds, designated trust naming, prescribed record-keeping, and in Ontario, lawyers must direct the interest to the Law Foundation of Ontario and reconcile the account three ways every month.
What is the no-commingling rule?
Trust money and your own money must never mix. Regulators in every province treat commingling — putting client funds in the firm's general account, even briefly, even by accident — as one of the most serious professional breaches. Ontario's Law Society of Ontario states it plainly: money in a trust account belongs to the client, and licensees must ensure trust funds are not commingled with the firm's general account. Never borrow from a trust account, even for a day.
Do I earn interest on money held in a trust account?
Not for yourself. In Ontario, lawyers hold client funds in a mixed (pooled) trust account, and the interest earned must be remitted to the Law Foundation of Ontario, which funds legal aid and access-to-justice programs — the lawyer informs clients upfront that no interest will be paid to them. When one client's funds are large enough to earn meaningful interest on their own, lawyers typically open a separate interest-bearing trust account just for that client, and in that case the interest belongs to the client.
What are Ontario lawyers' trust account duties?
Under Law Society of Ontario By-Law 9, a lawyer's trust account must be held at a chartered bank, registered trust corporation, or credit union, be clearly designated as a trust account in the lawyer's or firm's name, and bear interest at a rate approved by the Law Foundation of Ontario, with interest remitted to the Foundation. The lawyer must complete a three-way reconciliation — bank balance, trust ledger balance, and the sum of every client's listing — every month, within 25 days of the month-end statement, keep each client's ledger current and never negative, and retain trust records for ten years plus the current year.
How do real estate trust accounts work in Ontario?
Under the Trust in Real Estate Services Act and Ontario Regulation 567/05, a brokerage's trust account must be designated as a Real Estate Trust Account, kept at a bank, loan or trust corporation, or credit union in Ontario, and kept separate from the brokerage's operating money at all times. Deposits a brokerage receives in trust must be banked within five business days, and the trust account is reconciled monthly and subject to RECO audit. Every registered brokerage also carries consumer deposit insurance: if trust money is lost to theft, fraud, insolvency, or misappropriation, coverage responds up to $200,000 per claim.
Is trust money protected if the bank fails?
Yes — and separately from your own money. The Canada Deposit Insurance Corporation treats trust deposits as their own insurance category: up to $100,000 of coverage per beneficiary, separate from any coverage on the trustee's or beneficiary's own-name deposits. At a CDIC member institution, a law firm holding money for five different clients can get each client's portion covered up to $100,000. The catch is disclosure: the bank's records must state the deposit is held in trust and identify the trustee's and each beneficiary's names and addresses, so keep that information current every year.
What happens to trust money if a professional dies or the firm closes?
Properly segregated trust money is not the firm's property, so it should not be available to satisfy the firm's debts or its trustee's creditors. For law firms, the Law Society of Ontario maintains an unclaimed trust fund: if a lawyer holds trust money for two years and cannot identify the rightful owner or cannot locate them after reasonable attempts, the funds can be transferred to the Law Society's unclaimed fund, where the rightful owner can still claim them later.
Can I open a trust account online like a regular business account?
Usually not. Banks typically require trust accounts — especially lawyer and real estate trust accounts — to be opened with extra documentation and the account title explicitly designated as a trust account, which usually means a branch visit or a call with the bank's business banking team. Expect to bring your professional licence or brokerage registration, your business documents, and, for a lawyer's account, the Law Society's designation requirements. Ask specifically about automatic interest remittance to your province's law foundation and long-term statement and cheque-image retention, because auditors ask for both years later.
Sources
- Law Society of Ontario, Audit Report.pdf) — the By-Law 9 requirements as the Law Society states them in its audit checklist: trust-account designation (s. 7(1)), the monthly trust comparison (s. 22(2)), and record retention (s. 23).
- Government of Ontario, O. Reg. 567/05: General — the Real Estate Trust Account rules under the Trust in Real Estate Services Act, including the designated Real Estate Trust Account (s. 15) and the five-business-day deposit rule (s. 17).
- Real Estate Council of Ontario, 2026 Insurance Program — Frequently Asked Questions — the three-part insurance program (Errors and Omissions, Commission Protection, Consumer Deposit insurance), the TRESA participation requirement, and the program's published $200,000 per-claimant and $4 million per-occurrence limits.
- Canada Deposit Insurance Corporation, Deposits held in trust — trust deposits as a separate insurance category, protected up to $100,000 per beneficiary when the trustee meets CDIC's disclosure rules on the member institution's records.
- Law Society of British Columbia, A bright line rule: Rule 3-58.1 — Trust account only for legal services — Rule 3-58.1(1) quoted in full: no funds in or out of a trust account unless directly related to legal services provided by the lawyer or firm.
- Légis Québec, N-3, r. 5 — Regulation respecting trust accounting by notaries — client funds into a general trust account as soon as possible after receipt (s. 7), no personal funds in a trust account (s. 2), and the monthly reconciliation report (s. 28).
- Law Society of Alberta, New Firm: 9.2 Regulatory Requirements — the Responsible Lawyer designation and Trust Safety department approval required before a firm operates a trust account.