Penalities For Being A Ltd Company With A Sole Trader Bank Account

EfficientEnergySolutions · Dec 17, 2008

Hopefully a nice and simple question.

I started off as a sole trader and now I'm registered as a Limited company.

My bank account is still a sole trader account and I just wanted to know if I am required by law to change to a Limited company bank account.

Zeno · Dec 17, 2008

There are no penalties as such.

Very technically, as the sole trader account will be in your own name this basically means that the bank account forms your directors loan account which has implications if the account is overdrawn or becomes so in the future.

Is there some reason your bank won't change your account?

EfficientEnergySolutions · Dec 17, 2008

Haven't even asked my bank yet.

I'm thinking that it will save me time and hassle of changing the account name.

I know that I won't be going overdrawn, at least not in the next 12 months, so I think I'll just leave it as it is.

Zeno · Dec 17, 2008

EfficientEnergySolutions said:
Haven't even asked my bank yet.

I'm thinking that it will save me time and hassle of changing the account name.

I know that I won't be going overdrawn, at least not in the next 12 months, so I think I'll just leave it as it is.

It really would be best practice for you to get the company a proper bank account as soon as possible.

There are other considerations to be aware of such as credit records, limited liability protection (If the account is in your name then the company's limited liability will not extend to this although the bank will require a personal guarantee over any overdraft anyway).

If you do require an overdraft it should not be much hastle to change (although banks are liable to make a meal out of the most simple requests).

Simon-M · Dec 17, 2008

When your personal life is so entwined with your business life the taxman may look at you a little harder than when your business bank and private bank are different entities.

Chris Ashdown · Dec 17, 2008

Confussing poor image to your suppliers one moment you ask for trade terms as a ltd customer and then pay by sole trader cheque, gives every impression of being a dodgy setup

Go down the bank and change it about 10 mins work

EfficientEnergySolutions · Dec 17, 2008

Chris Ashdown said:
Confussing poor image to your suppliers one moment you ask for trade terms as a ltd customer and then pay by sole trader cheque, gives every impression of being a dodgy setup

Go down the bank and change it about 10 mins work

Definitely agree with you there Chris, but my business is based around invoicing UK gas and electricity suppliers, who are happy to pay into a sole trader account.

I don't purchase any goods - my service is like consulting so I don't require any terms with suppliers.

I also have a feeling that it's more than just a 10 minute job - I recall asking the bank while setting up my sole trader account what would happen if I were to change to a Ltd company, and their reply was that a new account would have to be registered.

AlanR · Dec 17, 2008

EfficientEnergySolutions said:
I also have a feeling that it's more than just a 10 minute job - I recall asking the bank while setting up my sole trader account what would happen if I were to change to a Ltd company, and their reply was that a new account would have to be registered.

I applied to Alliance & Leicester online, really straight forward. They wrote to me asking for information Company Registration Certificate was one of them i seem to recall, but that was it. Took, all told, perhaps 2 weeks.

Alan

MikeH · Dec 18, 2008

With your finances do not mix business with pleasure. It is also likely that you are in breach of your banks T&C. Bank accounts can be opened in a couple of days. 2 weeks is quite slow but it is certainly not unheard of.

fergusmum · Dec 18, 2008

I changed from a sole trader to ltd co at my bank, just needed a 10 min meeting, they transferred all direct debits etc, no hassle to me, but i now pay more in banking fees, so im sure they wouldn't be happy if they found out, they might think you were trying to pull a fast one.

EfficientEnergySolutions · Dec 18, 2008

Thanks for all your input, much appreciated.

MikeH · Dec 18, 2008

fergusmum said:
I changed from a sole trader to ltd co at my bank, just needed a 10 min meeting, they transferred all direct debits etc, no hassle to me, but i now pay more in banking fees.

Switch accounts then. Bank charges are money straight out of your profit. You must be very close to your bank manager or very very heppy with them to keep paying fees. All our bank accounts are free except for one that we need for international bank transfers.

Banks rely on complacency. They are like that man on TV adding to the Chrsitmas party fund

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Penalities For Being A Ltd Company With A Sole Trader Bank Account

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