Can an adult open a business bank in their name for a minor?

[kp14]

Hi.

I am 15 and I’ve been running an e-commerce/dropshipping business alongside a reselling business, but been paying all finances into my own personal bank.

Recently Halifax have caught on, and closed my account due to it being a personal account having business expenses paid in.

I have no clue on this, so I figured this would be the correct place to ask:

If I were to get an adult/guardian to open a business bank account in their name while I have complete control over the account, would this affect my businesses? Is it legal?

If it would affect my businesses, which factors would it affect? Would it affect the person names on the account? (paying more tax, etc.)

I thank you for all help in advance and hope to have an answer to this.

 

[fisicx]

Hi @kp14 and welcome to UKBF

The person named on the account is fully responsible for that account. If they pass on the account details and logins they are in breach of the bank’s terms and conditions.

So no, your suggestion is not legal.

Hopefully a financial expert will be along soon to advise on a solution but getting a business account is becoming more and more difficult as the banks are very risk averse and unlikely to consider any application until you are 16.

Could you not sell the business to your parents for a penny and they pay you a wage (ie: all the profit).

 

[MyAccountantOnline]

Hi.

I am 15 and I’ve been running an e-commerce/dropshipping business alongside a reselling business, but been paying all finances into my own personal bank.

Recently Halifax have caught on, and closed my account due to it being a personal account having business expenses paid in.

I have no clue on this, so I figured this would be the correct place to ask:

If I were to get an adult/guardian to open a business bank account in their name while I have complete control over the account, would this affect my businesses? Is it legal?

If it would affect my businesses, which factors would it affect? Would it affect the person names on the account? (paying more tax, etc.)

I thank you for all help in advance and hope to have an answer to this.

I'd ask a few of the banks directly.

Good on you for working hard and setting up a business.

 

[kp14]

Hi.

I am 15 and I’ve been running an e-commerce/dropshipping business alongside a reselling business, but been paying all finances into my own personal bank.

Recently Halifax have caught on, and closed my account due to it being a personal account having business expenses paid in.

I have no clue on this, so I figured this would be the correct place to ask:

If I were to get an adult/guardian to open a business bank account in their name while I have complete control over the account, would this affect my businesses? Is it legal?

If it would affect my businesses, which factors would it affect? Would it affect the person names on the account? (paying more tax, etc.)

I thank you for all help in advance and hope to have an answer to this.

To let anyone interested know: Me and my father got in contact with SumUp Business Banking. We are opening an account under my company name with his information which he controls completely, he will manage the online stores and reselling, and we came to an agreement that 20% profit goes to him and 80% to me.

Thank you @MyAccountantOnline and @fisicx for your help, it is much appreciated and if not for your advice given I probably would have just given up

 

[Paul Kelly ICHYB]

Is it a ltd co or are you self employed?

 

[eteb3]

Well done for being so enterprising: wish I'd been at your age.

+1 to Paul's question.

Presumably you know there's a question mark over the validity of contracts you enter into while under 18? The test is whether the contract is for "necessaries" - what you need for your livelihood. That's a question of fact in each case, afaik.

In a dispute that may work in your favour or against you, depending on whether you're defending or claiming. One workaround once you're 16 is to become a director of a company (or LLP) and do business through that: the contract would be the company's, but you're allowed to be a director even tho there would be no valid contract if you dealt with your suppliers (etc) personally. Whether banks would look on your age any more favourably, I don't know, but at least you'd be able to sue if you needed to.

 

[Paul Kelly ICHYB]

Well done for being so enterprising: wish I'd been at your age.

Agreed!

 

[Karimbo]

all the business bank accounts I've looked at require you to be 18+

I use mettle and ive found something that may work, do you own further research.

you can have your parent open a business account for you. in order to everything above board you'd need to be a ltd co and they would need to be a person of significant control in the company (owns 25%+).

You can form a ltd co with parent owning 25% of the shares and that will allow them to open a comany bank account with mettle, the bank account legally belongs to the company, crucially Any psc can open a mettle business bank account by themselves, it doesnt need to be co-signed by ALL pscs. just one is fine.

in order so your money is yours and you dont actually pay 25% to your parent (you could do if you want to). but to avoid it you simply avoud having retained profits and pay yourself all the profits in wages. which is an expense of the company. dividends aren't required.

Parent would just be a shareholder and a silent partner in practice and wont be a paid employee of the company. OP will be the paid employee and draw all the wages from the profits.

you will probably need to open the business with nominal funds. but make sure you get something in writing where you can buy back shares from parent at their purchase price when you turn 18.

but this shouldnt be taken lightly, you should get proper advice on this before forming a ltd co and getting shareholders involved. because there are bookkeeping and company filing costs. which could vary from £300 to £900 a year.

 

[Newchodge]

all the business bank accounts I've looked at require you to be 18+

I use mettle and ive found something that may work, do you own further research.

you can have your parent open a business account for you. in order to everything above board you'd need to be a ltd co and they would need to be a person of significant control in the company (owns 25%+).

You can form a ltd co with parent owning 25% of the shares and that will allow them to open a comany bank account with mettle, the bank account legally belongs to the company, crucially Any psc can open a mettle business bank account by themselves, it doesnt need to be co-signed by ALL pscs. just one is fine.

in order so your money is yours and you dont actually pay 25% to your parent (you could do if you want to). but to avoid it you simply avoud having retained profits and pay yourself all the profits in wages. which is an expense of the company. dividends aren't required.

Parent would just be a shareholder and a silent partner in practice and wont be a paid employee of the company. OP will be the paid employee and draw all the wages from the profits.

you will probably need to open the business with nominal funds. but make sure you get something in writing where you can buy back shares from parent at their purchase price when you turn 18.

but this shouldnt be taken lightly, you should get proper advice on this before forming a ltd co and getting shareholders involved. because there are bookkeeping and company filing costs. which could vary from £300 to £900 a year.

The hours that anyone under the age of 16 can be employed are very strictly controlled and require the employer (the limited company) to be licensed. That would be an issue.

 

[Karimbo]

The hours that anyone under the age of 16 can be employed are very strictly controlled and require the employer (the limited company) to be licensed. That would be an issue.

Is there any exemption if the under 16 is the owner/director of the business. There are exemption for NMW, company isn't legally obligated to pay director private pension contributions.

 

[DWS]

Is there any exemption if the under 16 is the owner/director of the business. There are exemption for NMW, company isn't legally obligated to pay director private pension contributions.

Can you be a Director if under 16?

 

[fisicx]

Can you be a Director if under 16?

No. Minimum age is 16.

 

[Newchodge]

Is there any exemption if the under 16 is the owner/director of the business. There are exemption for NMW, company isn't legally obligated to pay director private pension contributions.

No. It is about child protection, so very unlikely.

 

[eteb3]

I imagine the OP is probably long gone, and this is a stale thread. But since April have done some further reading and thinking, so in case useful for someone reading later:

A straightforward option would be for minor and parent to form a partnership. This is legally sound by case law - an advantage for the OP being that while legally entitled to their share of they profits, they can't be sued for the partnership debts (that falls on the adult members). Assuming (big assumption) that banks are happy to look no further than the adult member of the partnership for their reassurance, this may be a solution. As long as the parent has some share of the profit (which can be nominal) it will be a valid partnership agreement (tho worth remembering the rebuttable presumption that family agreements don't create legal relations: make sure it's absolutely clear that a legal relationship is what the parties intend, or find a non-family adult for the task).

There's also no reason why the OP shouldn't form an LLP with a parent. Unlike in companies, there's no lower age limit to be a member of an LLP (even tho the fiduciary duties of members to the LLP are similar to those of directors to their company). The bank will presumably take a personal guarantee from the members, and this will be binding on the adult. It can also be binding on the minor (even if s/he repudiates the guarantee when reaching the age of 18, which legally s/he can) but there's enough litigation risk there that I imagine the bank will treat the guarantee as worthless.

The hours that anyone under the age of 16 can be employed are very strictly controlled and require the employer (the limited company) to be licensed.

Both these solutions get around the employment problem. A partner cannot (as a legal impossibility) be an employee of their partnership*. There are similar provisions for LLPs - section 4(4) of the Act, since you're dying to know.

Hope the OP is coining it in somewhere, no longer needing this advice.

*The rules in Scotland may be different, since there a partnership is a legal person distinct from its members.

 

[Karimbo]

Hopefully they've turned 16 now, or will do so very soon so they have more options .

 

[James Reckons]

Hi.

I am 15 and I’ve been running an e-commerce/dropshipping business alongside a reselling business, but been paying all finances into my own personal bank.

Recently Halifax have caught on, and closed my account due to it being a personal account having business expenses paid in.

I have no clue on this, so I figured this would be the correct place to ask:

If I were to get an adult/guardian to open a business bank account in their name while I have complete control over the account, would this affect my businesses? Is it legal?

If it would affect my businesses, which factors would it affect? Would it affect the person names on the account? (paying more tax, etc.)

I thank you for all help in advance and hope to have an answer to this.

Funnily enough my bank wrote to me recently to say I'm paying business transactions into a personal account.

I argued that whilst I'm a sole trader, how does the money paid in for work done differ to the money paid to bank staff into their personal account for their job done? They replied that no further action is needed and I can continue using the account as before.

 

[kp14]

Hi everyone. I'm back and 16 now!

I "gave" my company to my uncle and he hired me as an accountant and social page manager
When I turned 16 i applied for a sole trader account with Starling as they had 16+ on the page, but i was declined.

Now, I would like to start again completely so I'm bringing the thread back. I see some solutions being opening a LTD company, so I have looked for an accountant to help out with it.

A straightforward option would be for minor and parent to form a partnership. This is legally sound by case law - an advantage for the OP being that while legally entitled to their share of they profits, they can't be sued for the partnership debts (that falls on the adult members). Assuming (big assumption) that banks are happy to look no further than the adult member of the partnership for their reassurance, this may be a solution. As long as the parent has some share of the profit (which can be nominal) it will be a valid partnership agreement (tho worth remembering the rebuttable presumption that family agreements don't create legal relations: make sure it's absolutely clear that a legal relationship is what the parties intend, or find a non-family adult for the task).

by @eteb3

Would this be a good solution and does it absolutely have to be made with a parent? Me and a friend who is 19 have been brainstorming and looking to start a new venture.

Thank you all for your previous help, it didn't go unnoticed.

 

[Karimbo]

you will come across hurdles still. Many will require you to be 18+ because they cannot create contracts with a "minor".

I do not recommend you open a ltd company because getting a ltd co bank account will be even harder. Because you as the "director" of the company are it's legal guardian. You cannot be a legal guardian if you are under 18.

Not a legal issue but likely a company policy.

This is not the correct "legal" thing to do. But I think you should just keep trading under a personal bank account as a sole trader and try and keep things a little discrete. I did this with HSBC bank account when I was a student at uni reselling things from china. I send international payments to hong kong, had paypal deposits and all sorts without issue with the HSBC account. You may just need to try again with another bank who isnt going to be so fussy.

Though when I did it, it was a long time ago. Banking regs have really tightened up now. before anyone can do 3rd party deposits on someone elses bank account, Now you need to pay cash in with a card & pin into your own bank account only.

If you're trading a lot, maybe spread out your transactions across multiple bank accounts so it slips under the radar a bit.

Again this isn't the "right" legal advice, but this is how I would play it if I was in your shoes. Keep things discrete and then do things properly after you turn 18.


----
Also just in case, have you phoned up every bank and asked to opening a business account as a 16 year old? You need to do this first. A paid bank account from a high street might be a little bit open to allowing you to open a sole trader account.

 

[eteb3]

Hi, I'd probably favour @Karimbo 's advice as being based in experience.

But for the legal reality,

does it absolutely have to be made with a parent? Me and a friend who is 19 have been brainstorming and looking to start a new venture.

Any adult will do: a partnership is formed just by going into business together, but the banks etc will want to see a signed partnership agreement.

If banks are still resistant given your age (partnership law is probably not your average KYC clerk's forte), your 19-yo partner can open a sole trader account for the partnership to use, and the money in it will be your shared money even though outsiders don't know that. The private agreement will of course be hard to enforce if he does the dirty on you, but read up through this forum and the advice is nearly always, "don't sue, just learn and move on".

From the pov of tax, HMRC should accept that it's partnership money (and so not tax him for the whole profits) - especially if your partnership agreement / a side agreement specifies that partnership funds will be held by the 19yo on trust for the both of you.

 

[Karimbo]

just got confirmation from someone who worked at a bank, they let people do small trading activity through personal account, Approximately £5K on a rolling 12 month calender, then they will ask you to get a business account.

Though I think on a childs bank account even £5K would possibly be a lot more than normal, the bank would have extra duty of care over a childs account. If they see a lot of outgoings they might be liable for money taken out by coercion by bullies. Hopefully OP is a little older now.