Choosing a business bank account when setting up your company

how to choose a business bank account

Whether you are setting up as a sole trader, a partnership, or a limited company, one of the first things you will need is a business bank account. The question is, with so many options available, which business bank account is best for you and your business? Here, IN Accountancy talks you through how to choose a business bank account that truly meets your needs. 

Why should you open a business bank account? 

Clients often ask us, “do you have to have a business bank account?” The short answer is: it depends. If you are setting up a limited company, it is a legal requirement for you to open a business bank account. This is because your company is a separate legal entity to you and will need to be run separately from your personal finances. However, if you are a sole trader or a partnership, setting up a business bank account is not mandatory. 

Having said that, setting up a business bank account can benefit every small and medium-sized business. Here are three reasons why choosing a small business bank account can ultimately pay dividends for your business:

  • To keep finances separate – A business bank account enables you to keep your private finances separate from your business dealings. Using your personal account for business transactions is not only messier for bookkeeping, but if HMRC decided to investigate a tax return, they could request access to your account. 
  • To qualify for a loan – Another advantage of opening a business bank account is that many banks provide flexible loans to their business banking customers. Therefore, if you could benefit from a cash injection to help accelerate the growth of your business, having a business bank account can help to unlock finance streams.
  • To enjoy banking perks – Starting a business can be a lonely and intimidating experience. It helps to have as much support as possible to guide you through the process. Most business bank accounts will give you access to advise, whether online, in-app, over the phone or even face to face with a personal adviser.

8 things to consider when choosing a business bank account

Now you know “why” you should set up a business bank account, let’s take an in-depth look at “how” to choose a business bank account that ticks all the right boxes for you and your business needs. The following eight factors are well worth considering when choosing a business bank account for your fledgling business:  

1. Company size

The size of your business can have a major bearing on the type of business bank account you choose. For example, if you are a solopreneur or a smaller entity, you probably won’t want or need many bells and whistles. In this case, a fintech banking service, like Tide or Monzo, might work for you. However, if your company is larger and handles payroll, you may prefer the additional support of a traditional bank that you can visit in person.

2. Company type 

If you are launching a start-up or a sole trader enterprise, you may want to get started as quickly as possible with minimal overheads. In this case, a fintech product may be perfect. If you are incorporating a limited company, you can also benefit from using a “challenger bank” e.g. Starling bank. However, you may prefer the reassurance of using a well-established high street bank that you can visit and may even provide you with a personal adviser.

3. Fees & Requirements

Many business bank accounts offer free banking for new customers over a limited period (usually 12-24 months). This can be helpful when managing your initial costs but check whether there is a minimum balance required or transaction limits involved. It is also useful to check what monthly fees you can expect to pay once the free introductory period ends. Monthly fees can vary significantly, so research the market to avoid any nasty surprises.

4. Transaction limits

You may also notice that many banks limit the number of transactions and cash deposits you can make during a given period (per month, for example). Therefore, choosing a business bank account that most closely aligns with your anticipated usage is important. For instance, if you run a customer-facing business that mainly deals in cash, you will likely need a business bank account that allows you to make more transactions and deposits.

5. FSCS Cover

Arguably one of the most important aspects to consider when choosing a business bank account is does the bank offers FSCS cover. This is a free, government-backed scheme that protects your money if your bank or building society ceases trading. It gives you automatic protection for up to £85,000 and you’ll normally get your money back in 7 days.

As the saying goes, ‘cash is king – so it’s important for this protection to be in place. As not all challenger banks offer this.

6. Services provided by the bank

We have already discussed that many banks offer a personal advisor. However, the list of preferential services often doesn’t end there. For example, some banks can even take care of specific HMRC filings, provide business insurance and support for imports and exports, and automatically handle certain statutory payments, like sick pay and maternity pay. So it pays to shop around to find the best fit for you and your business.

7. Online banking & accessibility

A business bank account that delivers accessible, reliable online and/or mobile banking is now pretty much expected. However, thanks partly to the rise of challenger banks, many banks are now offering more flexibility through their digital products. For instance, most banking apps now allow you to freeze a card if it is stolen or lost. So if you plan to do much of your banking on the go, look for a solution that gives you plenty of control and options. 

8. Customer Support

Things can and do go wrong, particularly for a new business. If something goes amiss with your business bank account, you want to ensure adequate customer support is available to rectify the problem as soon as possible. Research the market thoroughly to learn more about the standard and availability of customer service your shortlisted banks provide. Check review sites like Trustpilot to gauge what other customers think.

9. Nearby Branches

According to LINK, the UK’s largest cash machine (ATM) network, more than 200 branches of high street banks are due to close by the end of 2022. The main driver for the closures is the increasing shift towards online banking. Therefore, if you would like to open a business bank account with one of the bigger, established banks, be sure to check the location of the nearest branch. The last thing you want is to have to travel miles to visit your bank.

How to open a business bank account

If you want to know how to open a business bank account, it is relatively straightforward. Depending on the type of bank you choose, you can open an account in person, online or through an app. You can even open a business bank account if you have a bad credit score through one of the numerous guaranteed business bank accounts. However, you will need the following details and documents to hand to get the application process started:  

  • Proof of identification – Passport or driver’s licence details. 
  • Proof of address – A bank statement or utility bill. 
  • Business details – Registered business address, relevant contact details, Companies House registration number (for limited companies), and your expected annual turnover.

Conclusion

Unless you are setting up a limited company, you are not obliged to open a business bank account. However, as we have seen, opening one has many advantages – no matter what type or size of business you are starting. Not least is the advice and guidance that often comes with it. The more, the merrier as a new business owner! So why not add another layer of support for your up-and-coming business by enlisting the expertise of IN Accountancy?

Not only can we provide impartial advice about the best business bank account for your needs (saving you a great deal of time and potentially money!), but we can also offer a wide range of other invaluable services to help give your business the best possible start. From setting up a limited company to filing tax and VAT returns, bookkeeping, payroll services, and accountancy software, we have all the tools and skills you need to succeed. 

For more information about setting up a business bank account or to book a free consultation call, please get in touch with the IN Accountancy team. Contact us today on 0161 456 9666 or email askus@in-accountancy.co.uk for advice, quotations and help with your accountancy services.

Let’s start a conversation 

    Subscribe me for updates and news from In Accountancy

    Related articles

    time to pay arrangement
    Limited Companies

    Time to Pay Arrangements: A Lifeline for Owner-Managed Businesses

    Are You Struggling to Meet Your Tax Obligations?

    More than 30,000 UK businesses were involved in some kind of insolvency action in 2023, which was an increase of more than 50% compared with 2021 according to an article in the Guardian earlier this year.

    And the economic outlook would suggest that despite the fact that we are no longer in recession, 2024 and 2025 will be a challenging year for UK small business.

    With this in mind we have prepared the following guide and associated video to help you understand what your options are with regards to agreeing what is known as a ‘Time to Pay’ arrangement with HMRC.

    Read More »

    Find out how we can help?

    Lectus scelerisque a donec tincidunt litora per eleifend eget ut sagittis conubia pharetra scelerisque dui ultricies duis parturient auctor adipiscing.

     

    Let’s start a conversation 

      Subscribe me for updates and news from In Accountancy

      IN-ACCOUNTANCY

      Search