Whether you’re a sole trader, limited company or business partnership, a business bank account can make managing company finances easier and simplify matters when it comes to the end of the tax year. In the third of our series on running a small business, we look at how to set up a business bank account.
Choose the bank account that’s best for business
Shop around when looking for a business bank account: don’t assume the financial institution you use for your personal banking will be your best option. Take a look at price comparison sites and speak to friends or peers in a similar position. Also think about location: should you need to go into a branch, is this going to be convenient based on where you live or work?
If you are switching, the industry-backed Current Account Switch Guarantee ensures your current account will switch on a day of your choice, your payments will be automatically transferred and redirected to your new account and, in the unlikely event anything goes wrong with your switch, your bank will refund any interest and charges (incurred on your old or new current accounts). The switch will take up to seven working days.
Be aware of fees and charges
Some banks offer a period of free banking for new businesses and new switchers. Once this free period ends, you will typically have a choice of tariffs that you can move onto.
Each bank has their own set of fees and charges depending on the type of transaction, and can range from charges for paying in cheques, to fees for standing orders, cash withdrawals and internet banking payments. Take some time to do your research and think about how these will affect the type of business you run now and how you plan to grow in the future: this will help you decide on the right account for your needs.
And don’t forget - as mentioned in our previous article - all banking fees and costs are allowable business expenses, so they’re tax deductible.
Use UK Finance’s check list and gather the right documents
When you’ve chosen the business current account you think would be best, find out what documents the bank needs. You’ll need to answer questions about yourself and the business, and supply documents proving your identity and your business’s registered information.
Having all the right documents ready will speed up your application, so make sure you check out the UK Finance guide to opening a business current account: it’s a simple questionnaire helping you identify what documents and information you will need to provide.
Be aware of potential pitfalls
Unfortunately, if you’re not a UK resident, you may not be able to open a business bank account in the UK. However, if your business has more than one company director, and one is a resident in the country, then you may be in a better position to apply successfully.
In addition, if you have a poor credit rating, this may also affect your chances of a successful application.
Look to the future
Once you have your business current account set up, you might also want to consider a business savings account - a great way to keep your corporation and dividend tax to one side. And, as your business grows, you might also look at applying for a business credit card, or taking out business loans, finance options or an overdraft facility.
Setting up a business bank account puts your company in a good position to better manage its cash flow and finances. Do your research in advance, gather all the relevant documents before starting the process, and always get in touch with your bank should you have any queries.
Other articles in the series on ‘Running a small business’: