What Is a Business Bank Account For Entrepreneurs
Business bank accounts ]are current accounts that are designed for businesses be it a start-up or a more established. They’re used for business transactions such as paying employees. The core functions of a business account are similar to current accounts except these accounts have some differences related to what is included.
How To Choose A Business Account
Different factors should guide your decisions when choosing a business account such as:
Offers– some banks will offer sign-up rewards which can last up to a year e.g. free banking.
Transaction charges – these are made when money is being moved in and out of the business account and normally includes physical transactions and automated payments (direct debits and standing orders).
Banking charges- some banks charge monthly or quarterly fees which could impact your decision. Some offer free bank accounts.
Interest rates – the higher the interest rate the greater the return on savings.
Branches– having a business account with a bank that has branches can be beneficial for depositing money from the business.
Why Do I Need A Business Bank Account As An Entrepreneur?
When embarking on an entrepreneurial career and establishing your own business ensuring that your finances are accounted for properly is essential.
Separating personal and business finances is even more crucial and there are some important reasons for doing so . The small print in a bank also prohibits opening a second personal account that is used for business purposes – if discovered your account could be closed.
An exception to this is if you run a general business partnership, you don’t have to have a separate business account in this case.
Limited partnerships and limited liability partnerships do require separate business accounts due to them both being registered separately with Companies House.
How Do I Open A Business Account As An Entrepreneur?
After you have picked the bank you would like to open a business account with, the process for opening a business account is simple. They can be opened either in a local branch or online. You may prefer a traditional high-street bank or opt for an app-only bank such as Revolut, Starling Bank or Tide. App-only banks are particularly useful if you’re wanting a free business bank account or if you’re making overseas transactions as they are fee-free.
The most common documents a bank will ask for are:
- Employer Identification Number (EIN)
- Business license
- Ownership agreements
- Business formation documents
What Are The Benefits Of A Business Bank Account?
Professionalism- having a business bank account is more professional, having the separation between a business and personal account means your accounting records are organised. The name on the account will also be your business name looking professional to suppliers and customers.
Tax Reporting- you’re required to file tax returns every year and having a business bank account means you can keep a securer record of business sales and expenses allowing your business to be more organised.
Credit checks – having a business account will allow you to carry out credit checks on businesses and suppliers you work with.
Payment processing – you can process salary payments with your business bank account and receive credit and debit card payments.
How Much Does A Business Bank Account Cost As An Entrepreneur ?
Cost for opening a business account differs some banks have no account fees others will charge monthly fees that could range from £4.90-£49. It’s important to do research on the different fees for business accounts because even business bank accounts that are initially free may charge more after a certain period of time.