London (Parliament Politics Magazine) – People often feel ambiguous about stuff that is not a complicated decision like do I need a business bank account? And even though the answer is quite simple, people have a hard time deciding. And if you’re one of them, then worry no more since you have come to the right place. Keep reading to find out more about it!
Business Bank Account
A business bank account is an excellent approach to maintaining your funds managed and distinct from your private funds. Find out how to pick the best one for you, even if you’re self-employed, in a contractual relationship, or manage a limited company.
Whether your company will be your filled-to-the-brim job, a part-time hustle, or a start-up aiming for global dominance, you’ll have to maintain your funds structured. Create a distinct bank account for your business to simplify the process. It all relies on how you run your company. In summary, if you are a sole proprietor, you do not require a business account, although possessing one might be beneficial.
If you manage a limited company, although, you must maintain a separate bank account for your business finances. Next, we go through the criteria for various company formats in further depth.
Freelancer
If you are a sole proprietor, you have the option of using a business account. One significant benefit of having a personal and business bank account is that it separates your activities from your professional payments. You can do your books with a spreadsheet or accounting program, but it’s much simpler to view your business income and spending when they’re in a distinct account.
Alternatively, you’ll have to look for commercial transactions somewhere between purchases for home bills, food shopping, random coffees, as well as other expenses. An additional benefit of having a separate bank account is that it will make you look more sophisticated.
Limited Company
Regardless of whether you are the sole member of a limited company, your firm needs to maintain a business and personal bank account. This is because the company is completely different from you, and you have to maintain your company’s funds apart from your private funds.
The whole of your company’s money should be put into the business account, from which you may pay your costs and yourself (and any employees, if you have any) out. Maintaining your company’s revenue and spending distinct from your funds enables you to reconcile your records and file your tax return.
Having a business account has an added benefit: if you handle your account correctly and make timely payments, you may develop a strong business borrowing score. This will be useful in the future if you have to obtain a loan or a line of credit for your startup firm
Read More: Standing Order Vs Direct Debit (Difference &ter Option Bet)
Partnerships
If your company is organized as a limited liability partnership (LLP), you must open a distinct LLP account. Since this company is a separate legal entity, each participant must keep their funds separate. If you are a general business partner, every member is required by HMRC to file a self-assessment tax return.
Furthermore, the partnership must be recognized for self-assessment. Because it has not been formed and hence is not a separate business entity from the partners, this kind of partnership does not require a separate business account. Nevertheless, one may be set up to store the firm finances in one location and aid in money management.
Although charities and community groups are not required by law to have a commercial bank account, it may be beneficial to have one to segregate your money from the organization’s profits.
Open a Business Bank Account
The steps required to create a business bank account will differ based on the accounts provider.
Many corporate bank accounts have stringent qualifying requirements. You may be required to arrange a consultation at a branch and produce proof of your revenue or trade history, like your yearly accounts or past tax return.
In comparison, certain account providers allow you to apply electronically or by mobile device. To create a business account with any provider, you must always submit proof of your identification as well as the name and address of your company.
Conclusion
Now that we are done briefing the whole context to you, hopefully, you are clear about the question: do I need a business bank account or not? It is a fairly easy process and is beneficial for the individual in many ways as it is regulated by the financial conduct authority. So make sure to follow the steps thoroughly.