Managing your business’s funds and keeping track of its expenses requires that you establish a business bank account. This blog will discuss what a business bank account is and the benefits.
Business Bank Account: What is it?
A business bank account is an account that is used only for your company’s financial transactions. The opening of the account may be tailored to your company’s specific requirements, and it may come with several helpful services that are designed to make the operation of a company easier, such as the generation of invoices and the administration of tax returns.
Is a business bank account necessary?
A business bank account may be required by law, depending on the type of company you own.
The two most common business structures are limited companies and sole traders; let’s take a closer look at these two.
You must have a separate bank account for your business if you are the owner of a limited company and have registered your business with Companies House. It is against the law to use your bank account to pay for business expenses; for this reason, it is best to keep your finances separate.
There is no legal requirement for a sole trader to open a business bank account. You may do all your transactions from your personal account; however, we recommend opening a bank business account to better track your professional accounts. This benefit will make your self-assessment tax process simpler
Pearl Accountants are a team of specialist accountants that have experience helping sole traders and limited company formations, we can help you with a wide range of services including finding the right business bank for you
Business account pros
Administration is a Breeze.
It is much easier to file your taxes if you keep your company revenue and spending separate from your finances. You won’t have to go through your bank statements to figure out which purchases were made for business; you’ll have a separate account. It’s a great way to remain on top of your finances.
Build your credit profile
If you ever plan on applying for business loans or a credit card, you need to have an excellent credit profile. You may improve your company’s credit profile by opening a business bank account and paying business-related expenses on time.
Separating company spending from personal bank accounts might take some time for business owners. Using a separate business account specifically for these transactions can allow you to save time and put it to better use, such as finding new customers and expanding your business.
When can I open my account?
The length of time it takes to open a business account depends on the bank and the type of account. There are exceptions to this rule, but it may take up to four weeks to complete the necessary checks.
Good to know: Opening an account as a sole trader is fast and easy because there are fewer documentation requirements.
If you are looking for a bank that offers an account that would best suit your company’s needs, You can read our blog to help you decide which bank is best for you.
Our Conclusion on Business Bank Accounts
You should create a separate bank account for your business to keep a healthy separation between your personal life and the life you lead outside of work. Those interested in obtaining business loans will find that opening a bank account for their company is an effective strategy to improve their credit rating; choosing a business partner who is an expert in the same sector as your company might bring even more advantages.
Pearl Accountants provides varied financial and business advice to our clients. Our team have a wealth of experience and is dedicated to providing our clients with the most professional and reliable advice possible, get in touch today!
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.