The Business Bank – Is it Essential?
Any business, big or small needs a system to manage its money. One of the first steps to own and run a business is opening a business bank account, in addition to a personal bank account.
Many think that having different bank accounts for personal and business is inconvenient to manage, but the reality is you shouldn’t use a personal account for your business finances as it can affect your legal liability.
It is not that difficult to open a business account. In this modern world, there are many easy ways to open one. You can go to the nearby branch of your choice of bank and customer service advisors will help you to choose the right account for you. Or you can go online and shop around for the right bank that offers all the services you need. All you need is proof of identity and address, and other documents in connection to your business such as a sole trader or limited company. You should be over 18 to open a business account.
Business accounts are used to track your cash balance, what you owe to your business, suppliers and your employees.
The main purposes of having a proper business account are that you can keep things clear and transparent for HMRC. For year end tax returns you need to declare how much you have earned and spent. Having just one account for personal and business will make it difficult to make these calculations accurately.
It also makes your business look more professional, as clients can make payments through various ways into your designated accounts for business purposes.
I have a limited company: do I need a business bank account?
The short answer is yes. If you’re a sole trader, there is no legal requirement for you to open a business bank account. You can use an existing bank account in your personal name. But if your business is trading as a partnership or a company, then it must have a separate bank account for taxation purposes.
Just like personal accounts, a business bank account can offer cash and cheque handling, a debit card, and an overdraft facility. It also paves the way for your business to borrow money, get a business credit card, and take card payments from other clients as well.
Most business bank accounts charge a monthly fee and then some additional fees for certain transactions like depositing cheques or arranging for an overdraft. However, many banks offer No Fee Services initially over a period of one to two years, when you first open an account with them. Some banks even offer loyalty rewards as a token of appreciation for banking with them for a longer period.
SO if you haven’t had a business bank yet, don’t wait anymore. Shop around and get into the right one.