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Should I have a separate business bank account?

Posted 13/06/2019

If you are planning to set up a Limited Company, the answer is always yes. You should always have a separate bank account in the company name as it is a requirement; your company is a separate legal entity. It is ideal to get your chosen name registered with Companies House first so you know what name the business bank account will need to be opened in. One way to check the availability of your name ideas is to check with Companies House beta website, searching the name and reviewing the results. Once you have your name registered you can apply for the account at your desired bank.

If you are a sole trade then there’s no requirement to have a separate bank account, but it is recommended that you do set one up for the following reasons:Most accounting software will ask for a bank account feed, which should be linked to the business account so that personal items do not get muddled up in the information. This makes it easier to track the business’ actions and see how well it is performing rather than shifting through information of which some would not be relevant. If you have a bookkeeper, then the use of a sole business bank account makes it easier and quicker for them to enter and reconcile the bank transactions. There is a risk with a personal account that business expenses are missed due to uncertainty in the transaction or being missed among the transactions in the bank statement.

If you use a phone app to check the balance of your bank, then a bank account being used for both business and personal use can portray a false figure of what really is available for you to use for either the business or for yourself. Using the two to manage your separate bills and expenses can give you a clearer idea of how much is available in each case. Of course there is nothing to prevent you from transferring money between the two accounts to prevent either from going in to an overdraft if you need to so you do not have to feel like the money is restricted.

It can appear more professional on your invoices if you have a separate business bank account, especially if your business name does not have anything in common with your personal name, and it can help prevent your customers from worrying that the money they are transferring is being sent to the wrong person.

Some banks have stated in their terms and conditions that personal accounts should not be used for business transactions; you should either check these conditions or enquire with the bank directly if you are unsure on what is permitted to go through the personal bank account. Failure to comply with these conditions may result in the bank deciding to close your personal account down.

Tags: expenses, bank accounts, business set up, limited company, sole trade

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