Self employment, registering a business and bank accounts...

[ZillaBoom]

Hey all,

So I think I'm at that point where I'm ready to go self employed and actually start trading as a business. The whole process of actually starting seems really scary though and I haven't a clue what I actually need to do or where to go.

My plan was to register as self employed, then register a company in my name and then open a bank account in the business' name. But I was wondering, is it worth setting it up as a "business" bank account or would I get away with just a current account? I'm seeing a lot of negatives with opening an actual business bank account and since it'll just be me taking money out of it ( paying myself a wage but keeping a vast majority of the money in the account ), would it actually need to be a business account or will a current account do?

Any advice is welcome and much appreciated

 

[japancool]

My plan was to register as self employed, then register a company in my name

So are you going to be self-employed, or trading through a company? They are two different things.

 

[japancool]

I'm seeing a lot of negatives with opening an actual business bank account

Such as?

 

[DontAsk]

Most current accounts forbid their use for business. It also look bad.

For sole trader open a business account in the name Joe Bloggs Trading as XYZ. You will need a new account if you incorporate as a Ltd company.

 

[DontAsk]

My plan was to register as self employed, then register a company in my name

That's pointless unless you are planning on being a sole trader for a year or two, for example. You don't need to register as self employed if you are starting a Ltd company.

 

[Socio South West]

It will help if we have some idea of what sector the business is in, and what level of investment in the start up you will be making.
Are there premises involved?

 

[ZillaBoom]

Sorry, didn't know there were replies here. I had no idea you didn't have to register a business too if you're self employed so that helps, thanks

As for startup, there is no startup money involved, I'll be working online doing 3D graphics and yearly income is looking like it'll be around £50-100k. If I'm working for myself and I'm the only person taking profits, can I use a currently account to get paid into and then pay myself out of that? ( I assume since it'll be my money either way I won't need to pay taxes twice, it's more just so I can put most of that money back into something else. )

 

[Socio South West]

Thanks.
At the level you indicate a business current account is a good move.

Incorporation is a two edged sword - it does commit you to certain administration, and some small traders dislike the loss of privacy, although there are ways to ameliorate that by using third party addresses. However, some larger entities will only deal with registered companies, and you / your accountant may be able to make use of any advantages that Corporation Tax offers against Income Tax that a sole trader doesnt have recourse to.

At the upper end of your income figure VAT will become something you will need to look at, although immediate registration is not mandatory: Again, it can be a two edged sword, depending on the VAT status of your client base.

All things better discussed with an accountant: You are well advised to invest a little time with an accountant before you set out.

 

[WaveJumper]

There was a pretty good article written back at the beginning of this year by Tim Adler can be found here, also look at the .GOV website on the process for going self-employed. Personally I would also recommend having a chat with a local accountant and make sure you get the foundations right as you come out the starting gate, they should also give you a very good steer on what maybe you have already spent your hard earned cash on and need to bring over / be claiming for in your accounts

https://smallbusiness.co.uk/a-small...F2LhJfWz7HlkIqZtmOAVYZe3VEP-QmRMaAiU0EALw_wcB

Set up as self-employed (a 'sole trader'): step by step - GOV.UK

What you need to do if you set up as a sole trader - check your employment status, understand your obligations, and register for tax.

www.gov.uk

Best of luck

 

[Mark T Jones]

On the initial information given, my inclination would be to get rolling as self employed and use your personal bank account @DontAsk is technically correct, it does breach the terms, but unless volumes are very high, its extremely unlikely they will do anything (its easier for them to maintain personal accounts than business ones).

in terms of perception- it depends what you are trying to be. If its just you doing graphics (or whatever) noone will care.

this is a short term vie, to get up and running with minimum fuss. Take an overview every 6 months as business grows

 

[Joyous]

My plan was to register as self employed, then register a company in my name and then open a bank account in the business' name.

You don't have to register a company in order to start or run a business. Unless there are compelling reasons to do so, you might be better off testing your business model as a sole trader and then incorporating if it's advantageous to do so.

Regarding the bank account, the main thing is that it is a SEPARATE account from your personal everyday banking. Strictly speaking it should be a business bank account and a number of banks offer free banking for the first year. I have seen people run a business from a personal account but typically they've been trading in their own name and don't have a huge volume of transactions so presumably the banks haven't noticed.

Other than fees, I don't see the neagtives that you say you're seeing with a business bank account. Even if for credibility reasons alone you should certainly consider it.

Finally, if you do form a limited company then you'll have to get a business account as the company will need an account in it's own name.

 

[paulears]

Remember that as a sole trader - the business money is your money - so you take drawings. In the software I use, if I go to Tesco and use my business bank account - that's OK too, if you record the tranasction as drawings - which I do in the software. If you put money into the account, it's recorded as exactly that = personal funds going in. It's important to make sure the costs of running the business are in the accounts - and it is possible to allocate a proportion. At one point I had numerous computers and other equipment running at home, and I claimed 50% of my electricity bill against the business. It was, my accountant thought, 'reasonable'. Working from home made this kind of thing more common.