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Opening a business bank account- how and why you should do it?

When you start a business in the UK, you should consider simplifying things. Choosing the banking service is important to maintain the financial records of your business.

Whether you have a growing business or are a sole trader, you need a bank account.

Opening a business bank account- how and why you should do it?

What is a business bank account?

The business bank account helps to maintain the financial record of your business. It helps to ensure that the financial activities of your business are separate from your ones. You need to have a business bank account when you register as a limited company or sole trader.

Limited companies need to have a business account to maintain the transactions. If you have a limited liability partnership, make sure to open a different account for the business. This is mainly because you and your business are two different entities.

However, sole traders do not legally need to have a business bank account, and they can work efficiently using their accounts. Nonetheless, they must consider opening a dedicated business account to manage business finances.

Why do you need a business bank account?

You must know that you and your business are two different entities. Therefore, you must open a business bank account to manage your finances.

Here are some of the prominent reasons why you need to have a business bank account to maintain your finances:

A personal adviser

You get a personal adviser who will understand the business with a business bank account. This helps to add a personalised touch. You can always work with them to discuss their personal needs.

Telephone support

When you open a business bank, you can consider getting telephonic support that will help you overcome the challenges. Sometimes it can be tough to reach out to someone with technical problems. However, if you have a business bank account, you can connect with your adviser.

Low charges

When you have a business bank account, you need to pay monthly charges for maintaining the transactions. Nonetheless, it is advisable to research to understand which bank will provide you with the most value.

Foreign transaction

If your business deals with foreign clients, you need to have a business bank account that helps you maintain the currency transactions.

How to open a business bank account in the UK?

When you plan to open a business bank account in the UK, you need to ensure that you submit the necessary documents. However, you must meet the eligibility criteria before you open the account.

Here are some of the documents that you need to submit for opening a business bank account in the UK:

  • Proof of personal address in the UK such as council tax statement or bank statement.
  • Annual turnover of the project.
  • ID proof such as passport, ID card and driver's license.
  • Proof of address of the business in the UK with documents such as HMRC correspondence, rental agreement or utility bill.
  • Contact details like email address, phone number for business and personal.
  • The registration number at the Companies House and the incorporation proof that you are conducting the business.
  • The tax status of the business. Please mention the Unique Taxpayer Reference number if you are a sole trader.
  • Proof of the number of employees at the business.

Depending on the bank from which you open the business account, you may need to submit an identity verification document. If you have partners in your business, you may need to submit the document.

In certain situations, the bank will also ask you to provide information regarding the status of business functioning. If your business is active on social media, you may need to provide proof of registration.

Who can open a business bank account in the UK?

As per the eligibility criteria set by the banks, you may either belong to the limited liability partnership criteria or sole trader. If your business is registered with the Companies House, you will be eligible to open a business bank account.

Nonetheless, it is necessary to note that every provider may have different requirements, and many banks will also set the company's maximum and minimum turnover limit. Before you apply to the provider, you need to check if you are eligible for the same.

Many banks have specific accounts only for sole traders. Therefore, you must understand your business structure to find a provider who suits your needs.

How long will it take to open a business bank account in the UK?

The time to open a business bank account in the UK will depend on different factors. When you provide all the documents accurately, they will be processed fast. However, if you do not give any information accurately, the process will either become invalid or incomplete.

Many businesses have a complex structure. Therefore, opening a bank account in such a case is difficult. Opening a bank account for these businesses would be time-taking. No company should work on determining the exact time they will need to open a bank account.

If you opt for opening a business bank account from a digital bank, the process may be simpler and faster. In many cases, these companies can also help you with the same-day account opening process. Nonetheless, the process may be extended slightly if the provider requires you to submit additional documents.

Can a non-resident open a business bank account in the UK?

Yes. According to the laws, you do not have to be a resident of the UK to open a business bank account here. Nonetheless, the process may become difficult if you don't live in the UK. As per the Department for International Trade, you must submit your business and personal address proof.

The application process is the same for limited liability companies and sole traders. You need to pay the taxes through self-assessment to open a business bank account in the UK quickly. Nonetheless, this may vary from provider to provider. It is advisable to reach out to your provider and stay updated with the latest information.

Conclusion

The process of opening a business bank in the UK requires assistance, and therefore, you need the help of professional accountants. The paperwork and other aspects are easy if you have the documents ready.

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