Business Bank account

[Herbie]

I have a new business starting out and just wanted your help on Banking. If the business is in my name, e.g Smith, is it ok or wise I use a personal bank account as the business bank for the time being until I reach the VAT threshhold or.should i just open a business bank account. The reason is opening a bank account is time consuming and my partners personal credit may not be all that good.

 

[Eagle]

Under Banks' normal terms, you can't process business payments through a personal account. I'm confused as to why you think the VAT threshold has anything to do with it?...

Just open a business account - it's quite straightforward.

 

[bwglaw]

If you are actually registered with the HMRC as self-employed, or have not registered yet but have started to trade (must register within 3 months) then you should have a seperate business account.

You mention a 'partner' - do you actually mean a business partner, or your partner (spouse). I am assuming a business partner.

You mention your partner's adverse credit. This should not have a major detrimental effect on your intended business account unless your business partner has serious CCJ's or has been bankrupt etc.

If your partner has adverse credit rating then many high street banks may reject your partner, depending on the seriousness of the credit rating. If the high street bank rejects you can contact Natwest Direct Business Banking who will accept those with adverse credit. Not the best of banks but they seem to have accounts for anyone.

Jonathan

 

[pseudonym]

you might want to check out anbusiness.com abbey national offer a free business bank account as long as you stay within the limits which are quite generous. The only disadvantage however is if you handle a lot of coins, all cash transactions have to be dealt with through the cashpoint and cashpoints dont tend to like coins

 

[MyNI]

If you are actually registered with the HMRC as self-employed, or have not registered yet but have started to trade (must register within 3 months) then you should have a seperate business account.

Just to clarify, being self-employed it is not essential to have a business account, where you say he should have a 'separate business account' I think what you are saying is he should have a separate account for the business, but not necessarily what we would define as a business account. Put simply, he should either have a business account or a separate personal account used explicitly for business.

 

[bwglaw]

That is a matter for the bank to clarify as some banks offer a 'personal account' for the business or they offer a 'business account' which will state John Smith t/as Smith Plumbing.

It can be called either since there is very little physical difference between the two because a sole-trader is acting in a personal capacity anyway. However, I suspect the original poster is trading as a Partnership so a business account would be needed because a Partnership cannot operate from a 'personal account' per se

Jonathan

 

[MyNI]

There is actually a difference between the two in terms of fees, business accounts being more expensive. But most banks offer fee free banking for a period of time. Alliance & Leicester offer 2 years free, I think HSBC offer 18 months.

 

[bwglaw]

Yes but they appear to be a Partnership and should operate from a proper business account. The original poster has made reference to a 'partner'.

I'm not a banker but the bank is the best place for advice on the most appropriate account.

 

[MyNI]

Agreed, go get yourself an appointment with the Bank Manager Herbie. No doubt one of the clerks could advise you just as well, but it never hurts to improve your relations with the Bank Manager.

 

[ZARMarketing]

Hi,

Having just opened a business bank account i have to say that it was pretty painless. I went with the BoS as I have used them for years and the give new customers free Business banking for the first 12 months. Account was opened within a couple of days after checks and ID verification.

If I were you, I would try to get one. At least let your chosen bank answer any Qs regarding your partners credit rating ( It may be less of a problem than you think). For the purposes of applying for grants or funding, a business account is needed.


Good luck!

Zoe

ZAR Marketing Consultants Ltd

 

[Eagle]

...it is not essential to have a business account...

From a bank's point of view it is. If you process business transactions through a personal account, the bank would be well within their rights to charge associated fees - and even backdate them if they saw fit.

That could work out quite expensive in the long run.

 

[MyNI]

That is nonsense, if you are operating as a sole trader then you are well within your rights to use a separate personal account.

 

[Eagle]

Are you quite sure about that? Got any links? I'll stand corrected if that's the case.

(And I'll be changing my account type as well!)

 

[Joyous]

That is nonsense, if you are operating as a sole trader then you are well within your rights to use a separate personal account.

Not true. Whether you are operating as a limited company or a sole trader you are still running a business and as such should open a business account. Banks do tend to get a bit upset when they find out that a business has been run through a personal account because they miss out on their fees. It's certainly possible to run a business through a personal account but if the bank finds out.... well don't say you weren't warned.

Regards

Joy

 

[MyNI]

It isn't a legal requirement, the only reason you should open a business account (and by the way my opinion is that you should) is if you require the additional features and the obvious feature that people send money/ make cheques payable to YourCompany rather than Mr. Smith. If however you are for example a window cleaner and you operate under the name A. Smith Window Cleaning then it is completely appropriate to stick with a personal account and have cheques made payable to you personally.

As for them punishing you for it I don't know, it would vary from bank to bank, but they won't be too happy when you decide you aren't going to use them at all anymore and find yourself another bank. Anyway this argument is pointless with so many banks offering up to 2 years fee free banking, and don't be afraid to negotiate once your 2 years is up...afterall they still want to use your money...so ask for an extension.

 

[Eagle]

You're correct in that it isn't a legal requirement - certainly not from the Inland Revenue's point of view. However, a bank will doubtless charge you if it finds out.

For info: if you have a business account you can pay cheques in whether it's made out to yourself or the business name. With a personal account, you can only pay cheques written out to your name.

I stand uncorrected.

 

[bwglaw]

That is nonsense, if you are operating as a sole trader then you are well within your rights to use a separate personal account.

myNI, you keep forgetting that it does not appear the original poster is a SOLE-TRADER but a PARTNERSHIP. Banks may open personal accounts for a sole-trader but I cannot see them opening a personal account for a partnership.

If the original poster is trading as a Partnership then my advice would be for them both to open a business account and file the Partnership Agreement with the bank. The Bank will then be able to accept any instructions in accordance with the filed Partnership Agreement and/or Mandate.

Eagle is quite right that is TWO persons are 'trading' and wish to set up a personal account the Bank will reject this and insist on a Business Account, which does not belong to either Partner but both jointly and severely.

I have traded as a Partnership before and I could only open a business account. The charges may vary to an account dedicated for a Limited Company and this is a matter for shopping around for the best deal.

Jonathan

 

[Faith28]

My bank manager thought that business transactions dealt in a personal account was ILLEGAL! I actually told him he was talking non-sense...but that I accept that banks do frown on this.

 

[lexxx]

I dont the banks have a right to insist anything

 

[MyNI]

You're correct in that it isn't a legal requirement - certainly not from the Inland Revenue's point of view. However, a bank will doubtless charge you if it finds out.

For info: if you have a business account you can pay cheques in whether it's made out to yourself or the business name. With a personal account, you can only pay cheques written out to your name.

I stand uncorrected.

You stand uncorrected because everything you have just said is a rewording of my previous posts. Who was it that said a business account wasn't a legal requirement? Me. Who stated that one of the features a personal account lacked was the ability to write it out to a business? Me. So how can I correct something which I already said? And I would imagine the point of this forum was to help people by offering two sides of a coin...not to come out the winner of a debate.

Handsongroup, it is unclear whether or not the original poster is in a business partnership or whether he was refering to an emotional partner. The topic found its way on to Sole Traders and so that is why I am talking about them.

As for the value of this topic, it no longer seems to have any value to the original poster Herbie, as he hasn't bothered to respond to any of the replies, so there is no reason why we cannot talk about Business Banking in general, I certainly don't think it is off-topic.

 

[daveashton]

Er re the partnership. Sorry that is Tosh

I had a joint account with a pal due to needing a big holiday fun for racing cars in the Alps and Norway. No problem at all getting it and doing a few business transactions i.e. being paid by cheque to David Ashton.

As for the banks getting angry. Move bank. It is no big deal and many people even carry ( with permission form the bank) due to the banks being desperate for business.

Either way, opening a business bank is v easy and is free for at least 2 years, if you are high tech or IT based I would look at HBOS or RBOS (Lloyds are making an effort as well in this space) otherwise it does not matter who you bank with as long as it is free.