When running a business, there are many important details to remember for both sole traders and limited companies. Managing your finances at the early stages and making sure you are following all legal procedures is important so that you can successfully get your business off the ground. A commonly asked question amongst business owners when they are first starting out is “do I need to open a business bank account?” There is no straight answer for this question, as this will depend on the type of business you own and its structure. Allow us to explain further…
What is a business bank account?
- There is nothing unique about a business account when compared to a personal current account. It works in exactly the same way in that you are able to withdraw and pay in money at your discretion. The only difference is that it should be used exclusively for business transactions.
- If you choose to open a business account, there are multiple different options available to you that will allow you to create invoices or run payroll through it.
- You can also apply for a business credit card or overdraft depending on your financial circumstances.
- It is important to remember that despite many banks offering this for free, when you open a business account, you will likely be subject to monthly fees.
Can I use my personal account for my business?
Whether you can use your personal bank account for your business will depend entirely upon the structure and type of business that you operate. If you are a sole trader, freelancer or contractor that does not operate through a limited company, you will not need to open a business account. This applies to jobs such as hairdressers, journalists, and designers. You should check that this complies with your banks terms and conditions before doing this. If you have set us as a limited company and registered your business with Companies House, this means that your business is a separate legal entity and will therefore require a business account.
Should I open a business account?
Even if you are not legally obligated to open a business bank account in the UK, we would still recommend that you do so, as there are a number of ways this can benefit you:
Tracking your finances
Keeping your personal and business finances separate can make your life a lot easier when it comes to tracking your business expenses or income. By having a separate business account, you will be able to see all the important figures in one place, so if you need to submit tax returns or other important documents to HMRC and Companies House, this will become a much more straightforward task.
Building your credit rating
Having your own business account and managing it effectively will allow you to build your business credit history. This can be important further down the line if you want to apply for a credit card or business loan to help you grow your venture.
Following terms and conditions
Some banks will specify within the small print if you are allowed to use your personal account for your business, so you should check the terms and conditions of your bank before beginning to use your personal account for company transactions.
If you are unsure on the best options for you or require further guidance on managing your finances whilst attempting to grow your business, our team at Bells Accountants are here to help. We can provide our advice and assistance to your start-up business to take your first steps and keep your books in order. To speak to a member of our team, call now on 020 8468 1087 or email so that we can better understand your requirements.