How to open a business bank account
There’s no law that says a company must have its own bank account. But a limited company is legally separate from you. So it really does make sense to have a separate bank account.
Why a business bank account is a good idea
It keeps your personal money separate, and so stops you being in the awkward – and illegal – position of dipping into the company for cash without a formal loan agreement. It also keeps things much simpler if there’s an HMRC tax check, so you won’t need to explain every single transaction to the taxman.
One of the main draws of being a limited company is that any debts the business runs up belong to the company and not the shareholders or directors (in other words, you). Again, this suggests it’s a good idea to have a clear line between business and personal finances.
If personal and company money sit together in one account, that distinction gets blurred. And, if your business hits the skids, the lack of a business bank account could make it harder for you to avoid being personally responsible for its debts.
So, where do you start with finding a business bank account?
Find a bank that offers a business account tailored to your needs. You’ll need to do some research here. You might already have a good relationship with the bank where you have a personal account. But you might need a bank that offers a service just for small businesses, a generous overdraft or your own account handler.
The process of opening a business account varies slightly from bank to bank. But one thing’s for sure – you’re going to need to give a lot of information, whether it’s form-filling or supporting documents (so fire up the photocopier).
Proof of ID and address
You’ll have to prove your identity (a passport, driving licence or national ID card will do the trick) and your address (choose from a recent bank statement, utility bill, or a council tax bill).
If your trading address is different from the personal home address of the sole trader, partners or directors, you’ll also need proof of that. You’ll need any of these:
- a recent utility bill for the business at the trading address
- a recent lease agreement addressed to the business
- registration documents from a supervisory body confirming the trading address
- a current trading licence from a local authority.
This is why organising paperwork can take up so much of your time…
You’ll also need your business’s certificate of incorporation (the document you got when you registered your business – the one with the impressive coat of arms). Also, you’ll need your Companies House registration documents and registration forms for any recently appointed directors or company secretaries. If you’re VAT-registered you may also need your VAT number.
…and more details
The bank is likely to be interested in what kind of business you are. So be prepared to answer questions about its main purpose, and any products or services you offer. They might also want to know about the number of employees, any investments the business has made, and what turnover you’re expecting for the next 12 months. And expect them to ask roughly how much money you expect to come into the business account, the countries you operate in, your unique tax reference number (UTR) and where your income comes from.
Business owners, directors, company secretaries and partners
You’ll also need to give some general information (names, address, dates of birth, nationality) about anyone with more than 25% of the company’s shares or voting rights. The same goes for anyone who might be able to access the bank account on your behalf.
Business bank account in a nutshell
Even though a business bank account isn’t compulsory, it makes a lot of practical sense to have one. OK, there’s a lot of paperwork involved, but it’s worth it. It keeps your personal and business finances separate and, if you’re a limited company, it keeps you from being personally responsible for unsecured business debts.