Business bank accounts are bank accounts that offer companies specific services, functions and features that are specific to the needs of organisations as opposed to individuals.
They need to be opened in the name of the business in question and along with a series of paperwork. Business bank accounts can make operations more effective and efficient for both employees and companies, providing a solid means of financial management.
But, how exactly do you go about opening a business bank account and what does that entail?
The process will be slightly different from one business to the next, depending on the type of company, the country in which it’s based, how big it is and a few other important factors. But ultimately, there are some general steps that need to be followed and requirements that need to be met when opening a business bank account.
Who Can Open a Business Bank Account?
It’s not particularly difficult to open a business bank account, but there are certain criteria that need to be met, including who is actually eligible to have a business bank account at all.
- Business Owners: From owners of big Limited Liability Companies (LLCs) to sole proprietors and partnerships, business owners with registered businesses are entitled to have a business bank account. They’ll need to show proof of ownership as well as a business license and possibly other agreements and paperwork.
- Pre-Authorised Representatives: Business owners or directors may give specific individuals authorisation to open a business bank account on behalf of the company. The authorisation involves legal documents.
- Charities Non-Profit Organisations: Representatives of charities and non-profit organisations are allowed to open business bank accounts. They’ll need to provide proof of the organisation’s non-profit stats as well as documents explaining their role in the company.
- Freelancers and Contractors: Freelance professionals and contractors are often allowed to open business bank accounts under a sole proprietorship, helping them separate and manage personal and business finances.
But no matter which of the above categories you fall into, anybody opening a business bank account will need to show proof of identity, business licenses, tax identity and more, although the specifics of each requirement will differ slightly in each case.
Things To Consider When Opening a Business Bank Account
The use of a business bank account offers plenty of features and extra services, but there are still things that need to be considered before you go ahead and move all your funds.
A few things to bear in mind include:
- Types of Accounts: There are a few different types of business bank accounts to choose from depending on your situation, including a business checking account, a business savings account or a merchant account. Each option aligns with a specific set of needs. For instance, a checking account is ideal for day-to-day transactions and savings accounts are good for earning interest.
- Minimum Balance Requirements: Many bank accounts have a minimum balance requirement, and if you drop below that, you’ll pay a fine or penalty fee. So make sure you check up on that and see whether or not it’s feasible for your type of business.
- Limits: Some business bank accounts have a limit on the number of transactions you can make a month before you have to start paying an additional fee. So, if your company makes loads of transactions as part of regular operations, this will be important for you.
- Fees and Charges: All accounts charge some kinds of fees and bank charges, but they can vary. This may include wire transfer costs, transaction fees, withdrawal fees and so on. Make sure to consider how these fees will affect your business before choosing and a business bank account.
- Online and Mobile Banking Options: Being able to work from your phone is an integral part of modern business, so it’s important to check on the bank and the account’s mobile banking features. This includes things like mobile check deposits, bill payments, real-time balance monitoring and possible integration with accounting software.
- Merchant Services: If your company needs to be able to accept and process credit card payments, make sure to check whether or not the bank account offers merchant services.
- Branch and ATM Locations: It’s always a good idea to double-check whether or not there are branch locations as well as ATMs near where you’re based in case you have issues in the future.
- Loan and Credit Options: One of the top functions of a business bank account for many account holders is the good old bank loan. However, not all banks offer business loans and the requirements and parameters differ from one bank to the next.
- Customer Services: If you start using the services of an important corporation that will be holding your finances (that is, a bank), it’s important to know for future purposes that they have a good customer services department. That way you’ll be able to have peace of mind.
Different businesses will find things features more or less appealing than others based on specific features and services, so make sure to have a proper look at these issues before going ahead and opening an account.
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How To Open a Business Bank Account
So, the question is, how do you actually go about opening a business bank account? Other than making sure you’re eligible and finding the right account for your business and your particular situation, there are certain steps that need to be followed in order to successfully open an account.
1. Choose the Right Bank
Based on the types of accounts and specific offerings that are on the table, select the bank that appeals to you and your business’s needs the most.
Some of the top options for business bank account options in the UK include:
- Virgin Money
- Starling Bank
- Monzo
- HSBC UK
- Barclays
- NatWest
- Tide
- TSB
- Royal Bank of Scotland
- Ulster Bank
These are just some of the best and most established banks in the UK that offer solid, reliable business banking options that are worth considering for your company.
2. Select the Appropriate Account
Choose the right type of account, whether it’s a merchant account, a savings account or a checking account.
3. Prepare the Necessary Documents
Other than the obvious like proof of identity, check with your bank which documents you need to submit based on the type of business you own the account you’re opening.
4. Visit the Bank/Apply Online
Complete your online registration for the business bank account or alternatively, go visit the bank in person and do it from there with all your paperwork in hand.
5. Make an Initial Deposit
Once everything’s set up and the account is open, you’ll need to make an initial deposit to make the account active. Different banks and different accounts will have varying minimums.
6. Modify Account Features
Check out all of the account features, including spending limits, withdrawal limits and more. Figure out what you need and are comfortable with in terms of these limits and make the modifications that are necessary.
7. Constantly Monitor Your Account
Once everything’s set up and your account is active and working, make sure you’re always keeping an eye on it, even if you have a finance department running your day-to-day activities. This will help you avoid potential issues like accidentally dropping below the required minimum balance and so on.