Business BankingA business bank account is one of the first things any business will need.
If you are a sole trader, there is no distinction between your money and money that belongs to your business. Therefore, it is actually possible to use your own personal bank account, or a second account in your own name, for your business.
However, this not recommended as it makes it harder to track the financial position of your business. It also causes more work when it comes to preparing business trading accounts and calculating tax liabilities.
Similarly, if two people are in a partnership, they can use a joint personal bank account for their business. But again, this is not recommended for the reasons outlined above.
A limited company, being a separate legal entity, must have its own separate business bank account.
Unlike personal accounts, most banks levy charges on business bank accounts even when the account is in credit. A typical business bank account will attract a monthly standing charge and will also incur charges for each individual transaction.
The transaction charges on business bank accounts vary from one type of transaction to another. Paper-based transaction, such as paying a cheque into or out of your business account usually attract a higher charge than electronic transactions such as BACS credits and direct debits.
All of the big four high street bank – i.e. NatWest, Barclays, Lloyds TSB, and HSBC – offer business bank accounts and they will usually offer new business customers an introductory 12-18 months of free banking. After this time, charges will apply, although there is sometimes room for negotiation depending on how well your business is doing.
The big four banks all offer help to new businesses and will usually be able to arrange for you to see their small business adviser who will talk you through some of the things you need to consider when starting your business.
Abbey (formerly Abbey National) offers all businesses free banking for life, subject to certain conditions. The main drawback of their service is that you have no branch access and have to do all your banking by phone or internet. However, if you are prepared to sacrifice some of the personal service in return for indefinite free business banking, this can be an option worth considering.
A free banking option is also offered by Alliance & Leicester.
As well as business current accounts, most banks also offer savings accounts for businesses. These can be useful for putting money aside for future bills (such as VAT and corporation tax) and earning some interest for your business in the process.
Some banks may be more willing to offer you additional facilities such as a business overdraft, business credit cards, or foreign currency accounts.
When deciding on which bank to use for your business bank account, it pays to shop around to get not just the best deal in terms of features and charges, but also to establish which bank is going to offer you the most appropriate levels of customer service for the needs of your particular business.
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