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If you want to operate as a limited company then you will need to have a separate business bank account. This is because company money needs to be distinguishable from the personal finances of the directors and shareholders, as a limited company is considered a completely separate entity. Any money that comes through the business has to be accounted for and easily traced if necessary.
Applying for a business bank account is a straightforward process, but finding the right bank and the most appropriate account for you can be more complicated. It is important to work out what features you will make most use of, the kinds of transactions that you are likely to be processing and whether you are likely to expand your business in the future. You will need to compare interest rates, facilities and the level of service that you want from your bank.
It may be tempting to use the bank that you use for your personal banking for your business account because it is the most convenient option. However, not every bank provides equally good services to their business customers as they do to their personal account holders, and there are ways to save yourself money and avoid spending more than you need to on services you won’t use.
The kinds of transactions you will be handling through your business bank account will usually include:
Most of the high street banks offer business bank accounts, but there aren’t any specialist providers of accounts designed specifically for contractors, so you will need to compare those available to find one that suits you. Below are some aspects to take into account when you are considering your options:
Some banks don’t charge fees for everyday banking, but most do impose charges for business activity such as processing debit card payments, withdrawing cash and paying in cheques. Most of these functions are free on personal accounts and so these costs can be easy to overlook. It is recommended that you calculate what you could be spending on your banking so that you can work it into your budget.
Money laundering regulations in this country mean that there are minimum requirements for proving your identity and financial history when you open a bank account, therefore you will be subject to some checks when you apply to open your business bank account. You will need all your company registration documents, such as your certificate of incorporation, copies of your memorandum and articles as well as details of any shareholders you have. The bank will also require proof of identity such as your passport in order to open the account.
The mandatory checks banks have to carry out such as confirming your identity and that of any other directors means that the application process can take a while. Sometimes an account can be open in as little as a week, but often they can take up to a month or longer to open.
If you need any help opening your bank account, from choosing one which meets your needs to provide any of the financial details they ask you for, then your accountant will be able to help you with whatever you need.
As a limited company director, the money in your business bank account doesn’t belong to you personally but can be withdrawn through a director’s loan. A director’s loan is the money you take from the company which doesn’t fit into either of the following categories:
A director’s current account is a record of any of the money that you borrow from your company. It’s not a real account, but rather a record which exists in your accounting records.
At the end of the company’s financial year, you will either owe the company money or the company will owe you. This will be recorded in the balance sheet of your annual accounts.
Most providers won’t let you open a business bank account online, but you can start the process on their website before you meet with a representative in one of their branches.
To open a business bank account, it’s likely that you will need the following information:
All businesses need a bank account, so to assist you with this task we have a facility with Metro Bank, to open bank accounts for our clients.
The above package is exclusive to Nixon Williams clients only.
You are of course free to open a business bank account with any bank of your choosing, however, if you do not opt for Metro Bank, we cannot assist you with the opening of the account.
To open your business bank account, please contact a member of our new business team on 01253 362062.