Opening a business bank account

It is not a legal requirement that you open business account – but there are several reasons why it is a good idea.

Firstly, it helps keep your business and personal expenditure separate, and this can make things a lot easier when you are trying to balance your cashbook.

And if you are going to use an accountant it will probably reduce the amount you have to pay, as it will be simpler for him or her to sort out your records.

‘Most banks now pay credit interest on business accounts, following the recommendations of the recent Competition Commission report.

Choosing a business account will also make the ongoing management of the account simpler,” comments Mike Harding, senior manager, customer recruitment at Lloyds TSB.

For example, if the business grows and you want to allow someone else to sign on the account, it will be a much more complex process if you are using your personal account.

Harding adds that most banks give a period of free banking at the start.

If you don’t open a business account, you will not have a business manager looking after your account.

As Harding points out, business managers can be an invaluable source of advice when you are starting out in business – and if you want to borrow they may well be able to be more flexible with your request, or perhaps advise you on different ways to borrow.

‘If you operate your business through a personal bank account, you will be deemed to be a personal customer and will be covered by the personal banking code for personal customers.

You won’t be covered by the business banking code,’ continues Harding.

While it is not a legal requirement that you cannot use a personal account to run a business, a bank might insist you open one, or close the personal account – and they are likely to be able to do this under their account terms.

“This is especially true if, for example, you are paying in a lot of cash to the account. As this is costly for the bank to deal with, they will want to charge you for this, which they cannot do if you are paying it all through a personal account,” concludes Harding.

Accounts for international businesses

If you’re doing business internationally, there may be a cheaper, more convenient alternative to opening an overseas bank account – that doesn’t require a local address. TransferWise is a multi-currency account that lets businesses send and receive money in over 40 currencies without high fees or poor exchange rates. The account comes with your own US, Eurozone, UK, and Australian bank account details, which means you can receive and hold payments in USD, EUR, GBP, and AUD for free.

It also can be activated online – so you don’t need to travel abroad to get it opened. And with no setup or monthly fees, it can be up to eight times cheaper than your bank. Rest assured, it’s regulated by the FCA and used by over 3 million customers to move £2 billion a month.

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