Business bank accounts offer plenty of benefits to companies, especially those dealing with regular (and/or large) financial transactions, intending on taking loans, or businesses in need of bookkeeping services, and more.
It’s not a legal requirement for organisations, companies and startups to use business bank accounts specifically; indeed, many small companies choose to continue using personal private accounts instead of switching over. It all depends on the company in question, especially its size, the industry in which it operates, its intentions regarding scalability and more.
But, for companies who do utilise business bank accounts, it’s possible that at some point, its account may need to be closed.
Whether it’s because the business has been sold, the owners are switching to a different bank or the entire company has gone under, closing a bank account can be a complex procedure and closing a business bank account requires even more attention.
Business bank accounts to consider include:
Reasons for Closing a Business Bank Account
Just like in the case of personal bank accounts, business bank accounts can be closed for a variety of reasons, but the reasons that motivate business owners tend to be different to those of individuals.
Here are some of the main reasons why business bank accounts are closed by account holders:
- Switching Banks: Business owners may choose to switch banks, whether it’s due to promising offerings of the new bank or dissatisfaction with the old bank
- Bank Fees: If bank fees are considered too high or don’t suit the company in question, the business may choose to close its account
- Mergers and Acquisitions: If the business has been purchased/acquired or is merging with another organisation, it may need to open a new bank account, hence the previous account needing to be closed
- Security Concerns: If the account holder is concerned about security issues, including things like fraud and privacy measures that are too lax, they’re likely to close their account and move their funds elsewhere
- Business Relocation or Restructuring: Changes in business operations can lead to a need for a new bank account, whether the company is relocating to a different country or is being completely restructured
- Failure to Comply: It’s possible that non-compliance, on behalf of the account holder, may result in the bank requesting the account be closed. Although it may be phrased as a request, this is generally more of a courtesy, as it will be forcibly closed if the request isn’t adhered to
- Business Closure: The most final and straightforward reason for a company to choose to close its business bank account is if the business closes altogether
Clearly, there are plenty of different reasons why business owners may choose to close their bank accounts, but no matter the motivation, the actual process of closing the account involves several important steps.
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The Process of Closing a Business Bank Account
Whether the account is being terminated because the business owner is unhappy or simply has no choice, there are several things that need to be done when a business bank account is closed.
Review the Terms of the Account
Account policies may be different depending on the bank and the specific business bank account in question.
Before making a firm decision, it’s essential that business owners review these policies, specifically looking out for things like notice periods required procedures that need to be followed.
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Check For Outstanding Payments
Before going ahead, ensure that there aren’t any outstanding payments that are still being processed and that any incoming transfers have been reflected in your account.
Also, make sure you take not3 of any debit orders so that they can either be completely cancelled or moved to a different bank account, depending on the situation.
Cancel Any Linked Services
Since business bank accounts offer a variety of different services, including bookkeeping, payroll and more, it’s important to make sure you’ve cancelled them and made alternative plans (if necessary) before closing the account completely.
If you leave these services open and operational, it’s likely to make the whole process more complicated than necessary, and it may prevent you from being able to do it at all until the services have bee dealt with.
Collect the Necessary Documents
To close a business bank account, the account holder needs to go through a specific process which includes submitting a collection of documents.
Some banks (and accounts) may differ slightly, but normally, this includes identification, written instructions signed by authorised signatories and if the business is being closed, a copy of your business’s Articles of Dissolution.
Transfer Funds
The most obvious thing that most people are unlikely to forget to do is to transfer any and all funds to another account, whether it’s a personal account or a new business account, depending on the situation.
Submit a Formal Request
Once everything is in order from the perspective of the bank account – including things like outstanding payments, services, funds and so on – the account holder can go ahead and submit a formal request for account closure.
Some banks allow this to be done online, while others require the account holder to go into the bank in question.
Confirm That the Account Has Been Closed
Once a formal request has been submitted along with all the necessary paperwork, the account holder and signatories will eventually receive notice that the account has officially been closed.
Normally, this is done by means of an official letter that is emailed to the recipient, but other times, it may be done in person or over the phone depending on the case. Whatever happens, it’s essential to ensure that your business has an official written declaration of the closing of the account for future business records.
