Business bank accounts

[Poohbear17]

What benefits are there to me opening a business bank account as opposed to a normal current account if I am proposing to start a amall business?

They seem to impose charges & limits that normal current accounts do not.

Poohbear17

[PFA]

First things first -

Business bank accounts are expensive. Fullstop. There are three main categories you can fit into.

Small Business , Medium to Large , and Corporate Sector (I.e. Very large business)

PROS:- Your own business manager, Free deals for a year usually with most high street banks, Easy to manage and audit, Income tax and tax details can be done professionally without you having to disclose your financial habit to the whole world (i.e. the taxman) Business loans, liabilities and if things go belly up you still have a personal account that may have a few morsels left. On the other hand if you were to become a multi national - U have a good track record

CONS:- Not that I am aware of - end of the day if you need something you pay for it. Also beware that business charges are most of the time higher than personal charges - because as a business you are expected to take this into account as operational costs.

Personal Account:-

PROS:- Cheaper charges - No fees for cheques and stuff. But personally i would not recommend you do this.

CONS:- If things go belly up - you go with it!!, Liability is high, You could get away with it if you are planning a business that is not going to make more than X amount in turnover. BUT -->> Book keping is a nightmare and MOST if not all personal products have a clause that says excluding business goods / services (i.e personal loans and stuff unless stated otherwise on the terms and conditions) so u may incurr bad credit rating for your personal side of things as well. Moreover if you make more than X amount there is a very high chance that the inland revenue and fraud detection and money laundering will be sniffing around your personal accounts.

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[PFA]

If you argue long enough - it may emerge that using a personal bank account may seem a cheaper option but again as I said - you can get away with it for a couple of years till your business picks up - after that you SHOULD be shopping around for a good business account deal.

TOP  reasons why not to mix them (at least what i think it is)

1) TAX - This is a big thing and you could even end up in prison for tax evasion. Proving to the IR that the income is from business is going to be a nightmare without disclosing all your transactions including the lovely holiday you had a few weeks ago!!

2) LIABILITY - Limited liabiity - I.e. your business may suffer that does not mean that your personal side should suffer as well

3) Professionalism - I.e. if you were sell your business on - this comes into play - or if you grow large enough that you want to merge with another company - you get the picture.

4) Money Laundering - Fraud - Insurance is virtually hard to prove. Presuming you business needs an insurance policy.

5)Complexity and Proof - Audit, financial and balance sheet complexity. missing one payment deliberately may be overlooked by IR. Miss a couple of them and they are knocking on the door step.

Still unconvinced!  Go down to your local branch and have a word with a business banker - usually they need an appointment - they will give you free advice - beter still shop around other banks. Best deals are with your own parent bank because you can move money around quickly.

Happy Earnings Poohbear17

[stevie21]

One benefit which may be of no use to you whatsoever is that you can issue and receive cheques in your business name rather than "Jimmy McSporran" which is obviously your real name.
Also, I'd imagine that if your bank found out that you were using a standard personal account for business purposes they'd poke you in the eye and strongly encourage you to open a business account.
In some cases, paying lots of cash into a business account is completely normal (taxi driver) but on my account, I'd have cashiers scurrying about filling in Anti Money Laundering forms and reporting my account for people to nosey at frowningly.

Great benefits, eh?

Oh, just had a thought. You can get free business advice and if someone has given you an invoice saying "the balance of �10,000 which I owe you will be settled on or before the 14th June 2005" then a business account will sometimes allow you to spend against this guaranteed income (as a standard feature) whereas a personal account wouldn't without huge fuss.

Better?

[Sammy Snake]

All I have to add to the above answers is that your bank would, sooner or later, definately pick up on the fact that you were using a personal account as a business account.

Many people have tried it in the past.. some people have probably gotten away with it.  However, personal bank accounts are usually scrutinised pretty closely - if only to try and spot potential sales opportunities - so they would soon notice that the turnover on your account suggested you were operating a business through a personal account.  Number of cheques paid in per week, high volume of cash paid in, that type of thing.  Genuine personal accounts usually only have a weekly wage or monthly salary credited to their account. Anything more than this usually attracts suspicion.

They would usually write you you, politely at first, asking for your explanation.  They would eventually monitor your account so closely that you couldn't possibly deny it and then they would have you over a barrel - convert to a business account (and make the bank some money) or close your account and go elsewhere.

[Pinotage]

Abbey and Halifax both offer  free business banking accounts. I  opened an Abbey business account 2 years ago. There are limits (monthly max 100 cheques each deposited/drawn, max �3000 cash deposited) but they have never been a problem for me - see www.anbusiness.com

You must keep your business  finances separate from your personal account.