How To Set Up A Business Bank Account For Your Small Business
Are you asking yourself if it’s worth having a business bank account?
Unsure of the answer?
My New Venture is here to give you credible and reliable answers to break down how to open a business bank account.
Setting up a bank account for your small business may feel like a daunting task, but with our guidance, we can help you understand how to set up your account, what services are out there and why this is a good step forward for your small business. In the simplest of terms, a business account ensures your business finances are separate from your personal finances. Why is this important? The range of business-tailored benefits means you can easily keep track of your:
Money owed to the business
Why Should You Set Up A Business Bank Account?
Having your own small business combines passion, hard work, and commitment. It’s vital to recognise tools and services that can help alleviate some of the pressure when it comes to managing and monitoring every aspect of your business’s finances. Exactly what a business bank account can help with.
Once your small business bank account is set up you can capitalise on services specifically designed to suit business needs rather than personal. Gone are the days of manually organising and processing financial records, as your business bank account not only helps, but accurately aids self-employed tax returns, helping you focus your valuable time on what’s important.
Pros and Cons of a Business Bank Account
When it comes to starting a small business, along with everything, there are pros and cons. Although there is no legal requirement to have a business bank account if you’re a sole trader, it is good practice to not blur the line between your business and personal finances.
A business bank account has several advantages:
Organise and track business-related transactions separately to your personal incomings and outgoings
Speed up your tax return process as your revenue and expenses are clearly outlined
A dedicated bank account improves your brand identity, building credibility with clients and partners
Access advice and support from your bank to help your business function efficiently - this could range from online advice to a personal advisor
Most banks offer a mobile banking app for making payments on the go
Increased fees for your account compared to a personal banking account
Longer tax process as you will need to file taxes for both your business and personal
Ultimately, separating concerns in the long-term will greatly benefit you and your small business.
What To Look For When Choosing A Bank Account For Your Business
So, what’s the best small business bank account?
It’s important to remember that the bank account you choose should align with your business’s needs, size, and goals. It’s best to start by creating a consideration selection process and asking yourself these questions:
How competitive are the bank account’s fees? Consider if the bank offers a period of free banking or if it doesn’t charge monthly fees but has higher transfer charges.
Does it offer tailored services for small businesses? Many banks offer small businesses perks, from zero transactional fees and 24/7 support to receiving payments in different currencies.
What is the tariff? Is it appropriate for the size of your business?
Check the account’s customer service.
Establishing a process such as this quickly eliminates accounts that do not offer your small business the right features to grow and succeed. We’ve made it that little bit easier to decide which bank is right for you and your small business.
Have a look at our account comparison table below to find the best perks for you:
How To Set Up Your Bank Account
The good news is that the process of setting up a business bank account can be straightforward. Once the bank has identified who you are and where you live, a credit and security check are carried out. You will then need to provide your chosen bank with the following information concerning your business:
Business address - For small businesses this can be your home address
Contact details - Mobile/landline numbers and email address
These requirements differ from bank to bank and change if your small business has partners or directors. In this case, you’ll also need to provide personal and contact information for each individual, to authorise their operation of the account.
What Do You Need To Be Eligible For A Business Bank Account?
When opening your business bank account, you will be obliged to carry out a personal credit check. It is worth considering your profile when selecting which bank to open your business account with.
Worried about bad credit history? Don’t panic, a bank will still consider your application if you provide a solid business plan. It pays to present a high-quality document that clearly outlines your financial reports and projected forecasts. Have a better chance of a bank confirming your application by demonstrating and planning your approach carefully and ensuring you have everything in place ahead of applying.
Struggling with creating a thorough and detailed business plan? This is one of the many areas My New Venture can support you with.
It’s also important to provide accurate credit history to avoid outstanding balances or credit negatively impacting your application.
Make sure you’re on the electoral register and registered with HMRC. Without this, your set-up process will become extremely long and difficult. Avoid this disappointment and ensure you’re registered with HMRC within three months of starting to trade. You can easily find the electoral register by following this link here.
What Documents Do You Need To Have?
After complying with the eligibility criteria, you will need the following documents:
Proof of ID - This can be your passport, national ID or driving licence
Proof of address - You can provide a utility bill or recent bank statement
Company house registration number
Approximate annual turnover
It is good practice to have this information to hand throughout your set-up process.
How Much Does It Cost To Set An Account Up?
Each bank account will have unique rates and fees which vary depending on your small business. Many UK banks do not charge a monthly fee, but a minimum deposit is requested to open the account. The range of minimum deposits solely relies on your chosen bank.
It is important to always select the right bank carefully and remember to check the small print to understand each account’s requirement before applying. This will save you time and energy in the long run!
How Long Will It Take To Set Up The Account?
The steps involved in opening a business account change between banks. This means for some banks the process may be fast and others slower. Usually, it takes 1 to 4 weeks to open a business account taking into consideration the security and identity checks of yourself, your business, and any partners.
Once your bank account is open, you are then free to use your local bank branch for any day-to-day tasks.
Opting for a digital bank may speed up the process due to their quick online process. A digital bank operates solely online with no branch locations or physical presence. This is something to consider when selecting which bank is best for you. Opting for a digital bank restricts your access to in-person meetings and customer service – a deal-breaker for some small businesses.
How To Make The Most Of Your Business Bank Account
Always remember that banks are keen to onboard and maintain new customers, to do this they’ll offer you competitive perks and features.
Take advantage of this for your small business!
Make the most of your business bank account and access the expert advice and guidance on hand to support and protect your small business. Your business bank account can be used to retain control of your employee spending and reconcile expenses, leaving you with more time to focus on other aspects of the business.
A business bank account also upgrades the overall function of your small business by integrating leading accounting software without personal hassle.
A top tip is to regularly remind yourself of the features on offer to ensure you continue to use your business bank account effectively.
Frequently Asked Questions
What is the difference between business and commercial banking?
Business and commercial banking are typically confused as the same. However, the term business banking is used to refer to small and medium enterprises. If your company has a small number of staff and moderate turnover levels, you are usually operating with business banking to help separate your business and personal expenses. Therefore, commercial banking caters for enterprises on a larger scale, with larger staff totals and annual turnover.
Is there a charge for a business bank account?
It can be difficult to compare overall costs between providers as each varies and changes depending on the account. One bank will charge you varying fees for different types of transactions. This is why it’s important to carefully select the right bank account for you, ensuring the small print is looked over and considered in your selection process.
A general rule is the more transactions you make on the account, the higher the charges are likely to be.
Can you have a business bank account without having a registered business?
You’re likely to discover that without your business being registered you will be unable to open a business bank account. To open the bank account, a licence to operate and an EIN (business tax ID number) that’s unique to your business are required. The EIN proves your business’s identity, something most banks will want to verify.
Which bank is the best for start-ups?
Thankfully, the UK provides a variety of retail bank accounts suitable for start-ups and small businesses. Whether you choose Barclays, HSBC, Santander or opt for new digital banks such as Starling Bank or Metro bank, always stay true to your individual wants and needs.
It is best to spend time and energy at the beginning of your selection process to avoid major problems or disruptions down the line.
Sign up to My New Venture and learn how to manage your new business finances.
Share it with others!