You are beginning your venture into the world of start-up businesses, forming your own company, but depending on its legal structure you may – or may not – be legally obliged to start a business bank account – separate from your personal account. In this guide, from Smarta, we’re going to take a look at whether you really need to open a business bank account.
As a sole trader, you and your business are the same legal entity, so, if it encounters any problems – legal or financial – you are personally accountable. In terms of business banking, a sole trader is not legally required to have a business bank account, and so you can use your own personal account for business transactions, but this is not advisable. Here are some reasons why, as a sole trader, you should still set up a business bank account:
Whereas for a sole trader you are not legally required to have a business bank account, if you set up a limited company you must have a business bank account, as you and the company are separate entities. This will only help your business as you can keep personal and business transactions separate, and easily track your business’s economic activity. Moreover, you must keep records of your accounts for six years in accordance with HMRC, in case your company goes under tax inspection.
Setting up a business bank account
Upon setting up a business bank account, the process is fairly like opening a personal account. You will have to complete several applications required by the bank, as well as providing your company name, registration and possibly proof of its incorporation. The account signatories must also provide identification and proof their address, as well as the registered office address.
Furthermore, if you are an undischarged bankrupt, many banks may not permit you to open a bank account with them, and so first you must settle any outstanding debt you have with the courts. Remember to shop around for the best deals, and don’t just open an account with the bank your personally work with. On the other hand, you can set up a free account directly with Barclays through Smarta Formations.
You can set up a company with Smarta, and open a business bank account with our partners, Barclays or Lloyds Banking Group. We offer a company registration service powered by the National Business Register. You can search for available names then register a business name, or set up a company and/or register a trademark with us. You will receive a professional binder with all your official documents via post within 3-days.
Smarta Formations is the quickest and easiest way for you to register your limited company. All the hard work is handled for you.