Forum Moderators: LifeinAsia
So I opened one this week at Barclays.
As an existing Barclays customer I have 18 months free banking... so I now have some time to think about whether I need a business bank account or not.
My question is this:
My principal reason for setting up a business account is to keep my personal and business finances separate. Also to make sure that I have a separate pool of cash from which to pay my tax at the end of the year.
However, I want to know what other benefits there are in having a business account, because right now, having just set one up, I can't see a single damn benefit. And 18 months from now, I don't want to be paying for the privilege of paying money in to the account.
So should I use the account for just a year and then set up a high interest account and then move everything across to the high interest account?
Of course, the main advantages come when you set yourself as as a business, rather than working as an individual. It does depend on the country you live in, but you get better protection, you can get professional indemnity insurance, and often you can claim tax breaks on business expenses (like no sales tax). What would happen if you were sued by a client - at the moment, wouldn't he have a claim on all your personal assets?
If you don't need to borrow and you are accumulating wealth, then you need to shop around for a better investment than leaving the money in a business account at 0.0001% interest - but keep the account with enough for the usual expenses plus a bit extra for the rainy days.
One benefit is that, if you read your terms and conditions for your personal bank account, it says quite clearly that you cannot use it for business purposes.
Dowt!
My credit union charges a $5 set-up fee and it is free after that. I think most credit unions are cheaper than banks.
If you intend on making some serious UK money, then you should want that to be covered under a separate legal entity, with a separate business bank account.
I have to think you have the cart before the horse a tad here. The first step should have been to form a separate legal entity....then open the bank account.
>My principal reason for setting up a business account is to keep my personal and business finances separate.
Yes, this is the right thing to be doing. But you also need to do this with a separate legal entity!
You need to form ronin, Ltd, or whatever is available that appeals to you. Then join this with the business bank account. Make sure that you as an individual are protected from whatever "ronin, ltd" does.
Then make a large amount of money, charge all your living expenses off to ronin ltd, and have some fun :)
Okay, that makes sense. I'm still operating as a sole trader at the moment, but I assume that if I ever turn my business into a limited company (or a limited liabilty partnership) then I will be able to maintain the same bank account for the business?
I begin to understand why the benefits of the business account were less than I had expected.
Barclays has a good relationship with the Princes Trust... but when I looked into the Princes Trust it seemed to be all about people who had a business idea and needed start-up funds - not people who were already running their own business.
I think I will still apply to Princes Trust in any case, since I would seriously value the advice of a mentor, but it seems that beyond that (and the free access to business seminars that Barclays provides) my advantage as a sole trader in having two separate accounts is more modest than I had foreseen.
Two years I had a loan with the Princes Trust (wouldn't give a grant) and the first time any mentor bothered to contact me, I had been in business for over two years. That's right - the loan had finished! I would not bother with the PT for any loans - only if they can get you a grant. With that set, Business Link can get grants for you also.
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Anyway, as a sole trader the best thing is to separate business and personal expenses as you stated. To mix, means the tax man can go through all your personal purchases and cash incoming should you get an inspection. Seperating these means this is much less likely to happen.
Keep them seperate - One thing I do is have a separate high interest personal account to put business money into. It is classed as my drawings - but then I put it back into the business account when I need to pay bills. This does not affect the amount of tax you pay (other than paying more tax in the extra interest).
The main advantage of a business account is being able to accept cheques in a business name - this looks far more professional. Bank transfers have your account name on the receivers account (the company name) and cheques going out also have your company name on them. Setting up credit accounts with suppliers is easier, getting a mortgage or remortgage for self-employed is difficult - but your bank manager can now be a reference for you. There are many small benefits that add up.
i am not an accountant but as far as i'm aware there are very few tax breaks available to companies that individuals can't claim, business expenses are business expenses wether you are limited or wether you are a kid working out of your bedroom at your mum's house!
as to the original question about bank accounts, the advantage of a business account is when you come to want to borrow money, otherwise the fees and charges are higher than a personal account. you do not need a seperate account if you are not a limited company. but as stated above it is technically not allowed to run a business on a personal account.
I know when I set up the company I specifically chose to be a sole trader from the outset rather than to have a limited company. I forget what the advantages were in not having a ltd, but there were some. However, my situation is now radically different from what it was 18 months ago.
As for loans etc. I really don't want any - my only interest in TPT is the opportunity to speak to a mentor (though I understand the mentoring is done on a voluntary basis). Apart from that, I'm not so bothered about it.
Right I'm off to dig out that NatWest small business book and read the chapter on benefits and disadvantages of being a sole trader vs. a limited company again.
So you think that a maximum liability clause covers your rear end?
I have a maximum liability clause, but I don't imagine for a second it has me covered. Attorney's feel free to chime in on case law!
As well, PLEASE do not use a personal credit card for business expenses or vice versa!
And yes, small businesses get over charged by the fat-cat bankers (which we call merchant bankers not without good reason).
A positive advantage of keeping the business account separate from the personal is the ease with which you can track the business finances. If business koney comes in and goes out through a personal account it can be more difficult to track and disclose.
Matt
bo*****s, completely untrue.
>>>>A positive advantage of keeping the business account separate from the personal is the ease with which you can track the business finances. If business koney comes in and goes out through a personal account it can be more difficult to track and disclose.
i disagree, i operate as a limited company and also as a sole trader (seperate businesses) - as a sole trader i have a business account, but also use a personal account, with which i use a debit card for all kinds of business expenses, it is not any more difficult to track, as long as receipts/vouchers are presented to make claims with.
>>>>I have a maximum liability clause, but I don't imagine for a second it has me covered. Attorney's feel free to chime in on case law!
ok missed your reply percentages, i am in no way a lawyer or qualified to give legal advice, but this thread was about britain and british bank accounts, and in that spirit i believe that liability in britain and the usa is a little different, especially when it comes to financial settlements.
additionally i would add that my oldest friend is a top litigation lawyer who makes his living suing other lawyers, he says that nearly always in these kind of cases it is because the contract was not drawn up properly. moral ... get a good lawyer not just any old lawyer - or sue your own lawyer for not drawing up a decent contract if you get sued.
