How to open a business bank account
Now that the pandemic’s days look to be numbered, business banking activities have resumed. After a freeze in operations, banks are now opening new accounts for small businesses.
If you’ve just started a business, you’re thinking about launching a new venture, or you’re looking to hire employees, it’s wise to open a separate bank account to the one you use for your personal finances.
Although there’s no legal requirement to open a business account if you have a limited company—despite the fact that any revenue belongs to the company and not the director—operating without a business bank account can make trading difficult.
Though it may seem to sole traders that it’s fully possible to manage both your personal and business finances within one bank account, as you become busier, it will become difficult to record your finances accurately and ensure they’re fully traceable. Not only will it be confusing to you, it could also delay the calculation of your tax liabilities and reports to HMRC.
Therefore, to avoid any possible confusion, it’s fully recommended that you keep your personal and business bank activity and accounting separate.
How to open a business account
You should first identify which bank is most likely to cater to your business’s needs. Usually, major banks don’t offer the option to fully open a business account online; however, you can typically begin your account application via the bank’s website before meeting a representative in person.
That said, there are some banks that allow you to open a business account online, such as Tide, which offers free business banking. And you can manage everything through their online portal or a mobile application.
What do I need to open a business bank account?
As far as account requirements are concerned, every bank has its own criteria. However, in general, banks usually demand at least two documents: one to prove your identity and the other to prove your address.
Examples of the documents you may need:
Proof of ID: identity card, passport or driving licence for each company director
Proof of address: mortgage statement, tenancy agreement, recent utility bill, recent bank statement, current council tax bill
Proof of business address with postcode
Projected annual turnover
Companies House registration number (for limited companies and partnerships)
Considering that there were a record 835,000 new businesses launched in 2020, there’s no wonder that banks have thawed their freeze on opening business accounts. It may seem that there’s a huge emphasis on verification and documentation, compared to banking procedures of years gone by; this is simply in response to the laws introduced over the last decade that reduce any opportunity for fraud.
Successful businesses have a recognisable structure to them, and they follow clear processes and operations—their financial activity, no exception. When starting out in business, this may seem like overkill, but if your ambition is to grow your business as much as possible, it will save so much time and stress if you set everything up properly from the outset—which includes your bank account and book-keeping practices.
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