Business Account vs Joint Current Account

[Thufz]

A friend and I are opening a business together. We have registered the company as a private limited company and one thing that confuses me is what type of bank account to open for the business. We have already established that we need a seperate bank account just for the business. Also the business will have a rather limited number of customers, therefore a limited number of payments each month consisting of both cash and bank transfers. So, we don't really need an account with a lot of extensive features.

Researching a little online, especially on this forum, I have seen a difference of opinion on this matter. Hence my question, is it required to have a business account or can we just open a joint bank account (similar to current account just has two owners). I'm really confused on this matter as I don't know what the difference is or which one is more advantageous over the other.

Would really appreciate some guidance and insight into this matter.
Thank you

 

[Scalloway]

If you are operating through a limited company the company must have its own bank account. Using an account that doesn't belong to the company can cause legal and tax problems.

 

[Thufz]

If you are operating through a limited company the company must have its own bank account. Using an account that doesn't belong to the company can cause legal and tax problems.

Yes. I understand the business needs its own bank account which is separate from our personal accounts. But which type of account do i choose; will a joint current account suffice or should I open a business account. That is what's confusing me as I do not know what exactly the difference is or which is better.

 

[arnydnxluk]

Yes. I understand the business needs its own bank account which is separate from our personal accounts. But which type of account do i choose; will a joint current account suffice or should I open a business account. That is what's confusing me as I do not know what exactly the difference is or which is better.

Any personal accounts, including joint accounts, will be in your own name(s) rather than the limited company - so no, these won't suffice as the limited company is a separate legal entity to yourself. You need to open a business account in the name of your limited company. From there you can treat it as a joint account, adding any directors etc who need access as required.

 

[Scalloway]

A business account will allow you as many signatories as you need.

 

[Thufz]

Any personal accounts, including joint accounts, will be in your own name(s) rather than the limited company - so no, these won't suffice as the limited company is a separate legal entity to yourself. You need to open a business account in the name of your limited company. From there you can treat it as a joint account, adding any directors etc who need access as required.

Okay, that makes sense, Thank you. So a business account is definetely required. Looking around I've noticed that a fee is required with business accounts; does anyone have any recommendations on which bank is the best for business accounts.

 

[Clare@ClarityTaxation]

Most banks offer free business banking for a year, so shop around. You can then swap after a year if you want free banking elsewhere! I would also recommend you set up a business savings account that can be used to save for Corporation Tax. As a rough estimate if you put 15% of each invoice into your savings account you should have enough to pay the CT when it falls due (which isn't until 9 months after your year end, long enough away that it's easy to forget about any profit that was made and spend the funds on other things if you're not careful). Your accountant should be able to prepare management accounts to check your tax position, or you'll find it on packages like Freeagent or Xero.

It really can't be stressed strongly enough that you must keep the company separate to you, otherwise you can get into tax difficulties later on. The bank account belongs to the company, and any money you withdraw must be wages/dividends/loans - never assume you can use company money for anything other than company expenses.