Business Bank Account Needed for Partnership?

[tharsos]

Hi all,
I found this forum through Google and it seems it has a lot of useful information.

Anyway, I am thinking about starting a business partnership with my wife (another option would be that each of us would be sole traders, but we want to split the profits 50/50 so partnership may be better). I heard various opinions whether a business bank account would be needed in case of such a partnership or would simply a regular joint bank account suffice as long as we only used it for the partnership and would have no personal expenses there.

I am not sure if this is the best place to ask, but I thought that on this forum there are definitely people with a lot of experience so someone may be able to give some advice.

 

[MyAccountantOnline]

The only issues you have when using a private account are -

1. You will probably breach your banks terms and conditions, and

2. You may have difficulty paying in cheques (if you are paid in that way) made out in the business name.

It doesnt matter from an accounts/tax point of view - but I do highly recommend keeping a separate bank account solely for the business use as you mention.

 

If the bank suspect you of running a business through a private account they may close it which could give you a headache

A business account is always advised on the gorunds that (a) it allows better control of cashflow and (b) there is less chance of problems with HMRC if any queries arise

 

[Emilyirene]

Hi all,

I have a related question. I have just established a straightforward UK partnership and am considering the best option for business savings.

We already have a business current account (no interest) and the best the bank offers in terms of a savings account is about 1 %. As I understand it there is no legal distinction between mine and my business partner`s money and the business money, so would it be OK to open a joint savings account at a much higher rate?

From what I have read above I think not, but that raises another question. We are just starting out and have not taken any money yet so all expenses are being paid through personal funds. At what point does this become a problem? Say, we paid ourselves one month but then had to put some/all of that money back into the business later... is that a problem?

It is all a bit confusing, and I would really appreciate help on this!

Thank you,
Emily

 

You are correct about personal funds and business funds having no distinction as it is a partnership. But you should still have a separate business account. Keep business and personal separate.

With regards to putting money into the business you can draw it out without any tax effect . This is known as "drawings" from the business. The money out in is called "capital account" .

Pay expenses from the business account BUT put in money from your personal account first. Any other way and you'll regret it

 

[Emilyirene]

Thank you for your reply, but I`d like to clarify things so I`m sure I understood correctly:

By regretting it, do you mean I would regret it if I payed an expense from my business account prior to adding the funds from my personal account if the alternative was going into an overdraft instead or incurring debt on the business another way?

It is very reassuring what you say about `drawings`, as I was worried that withdrawing and depositing money regularly between business and personal accounts would mean me paying tax multiple times on the same amount and/or make my personal self assessment more complicated!

Thank you,
Emily

 

[jon.jenkins@smartaccounta]

I would just add that make sure that whichever route you decide to go down that you seek personal referral to a bank and get a decent relationship manager.

Most banks offer an initial period free of charge and other bits and pieces which vary by bank but do not be fooled but what appears to be the best deal as it is the charges that apply afterwards you want to be wary off.

Getting a good relationship manager is the crucial bit so talk to other business owners to see which bank they would recommend. I would recommend NatWest or HSBC but the banks do vary quite a look depending on location.

 

[Emilyirene]

Response to: jon.jenkins...

Thank you, we are with Natwest and have met with our business bank manager a couple of times now and he is very helpful. I will stay wary of bonus rates for sure! We have free banking for two years and nearer the time when this is due to end I will be sure to reassess and decide if we should move to another bank for a better deal.

Thanks!
Emily

 

In a partnership you only pay tax on the profits , regardless of how much you pull out (or put in).

What I mean is that you will end in a complete muddle over how well the business is doing , only to be exacerbated by the fact that there are 2 of you in this business

 

[Emilyirene]

Thanks, that`s cleared that up. I`m new to this and that was very helpful indeed.

Emily

 

[Raymond Richards]

Dear Forum, Just a quickie, is there any law on who signs the cheques in our small company. can we give this post to our company secretary, and is this legal. Thank you so much. kind regards. Raymond Richards.

 

[money24seven]

You definitely need a seperate business account. Always use it only for business transactions and pay yourselves from this account. Do not use the account for any personal expenses or it will possible come back to bite you with a vengance if the tax find out.

 

[Scalloway]

A cheque signatory can be anyone authorised by a minuted board meeting.

 

[spicetheice]

Hi all,
I found this forum through Google and it seems it has a lot of useful information.

Anyway, I am thinking about starting a business partnership with my wife (another option would be that each of us would be sole traders, but we want to split the profits 50/50 so partnership may be better). I heard various opinions whether a business bank account would be needed in case of such a partnership or would simply a regular joint bank account suffice as long as we only used it for the partnership and would have no personal expenses there.

I am not sure if this is the best place to ask, but I thought that on this forum there are definitely people with a lot of experience so someone may be able to give some advice.

Keep a separate account solely for use with your business. If you are a start-up then there some really good banks like HSBC and Barclays which do not charge anything for small businesses throughout life. Best part is, they even encourage online transactions.

 

[tharsos]

Keep a separate account solely for use with your business. If you are a start-up then there some really good banks like HSBC and Barclays which do not charge anything for small businesses throughout life. Best part is, they even encourage online transactions.

When it comes to Barclays I noticed that the only free business account is Business Account for Start Ups, but it is only up to 2 years. Is there some other free account available in Barclays? I checked that both HSBC and RBS offer free business accounts if a person just needs to bank online or by phone.

 

[jon.jenkins@smartaccounta]

When it comes to Barclays I noticed that the only free business account is Business Account for Start Ups, but it is only up to 2 years. Is there some other free account available in Barclays? I checked that both HSBC and RBS offer free business accounts if a person just needs to bank online or by phone.

I too would be interested to know if Barclays and HSBC provide free banking for life. Every client I have with Barclays gets 12 months then £5.50 per month std fee. I have put together a table of the main high street accounts with deals for start ups.

http://www.smartaccountancysystems.co.uk/general/which-business-bank-account/

 

[StevensOnln1]

HSBC do a Business Direct account which is free for life if it's only used to electronic payments. The start charging for any cash/cheques after 18 months.

 

[tharsos]

HSBC offers Business Direct which does not have a monthly fee and the same goes for Royal Bank of Scotland as they offer Business Banking Direct.