Though the subject of setting up your business banking doesn’t seem as if would take up an entire blog post, it’s surprising how many queries pop up online. It’s kind of reminiscent of the dilemma: which comes first, the chicken or the egg? Here instead, we see questions like: Do I have to open a business bank account before I can rent a commercial space? Can I incorporate without a location address? How can I qualify for a rental without a registered business name?
Believe it or not, there is a method to the madness, and it’s not as complicated as it may seem at first. To break it down for you, we’ve outlined what you need and when you need it. And, we’ve added a bit of advice on how to decide which bank you want to handle your business.
Please note that the following information applies solely to business accounts, and that partnerships and limited companies are the entities required to have them. Sole traders should consult with an expert in UK business laws to see if a business account is recommended over the personal account they are allowed to have.
What the Bank Wants from You
In order to open a business bank account in the UK, they will need to know that your business is properly registered, and that you are either a resident of the UK (see documents required), or have a legal right to be here. Be aware that there are very recent changes in immigration reform forcing the banks to take additional steps in making certain you are not in the UK illegally (over and above the current check against illegal databases).
To open a business bank account, here’s a general list of the details and documents you will need to have available:
- Contact details – phone, fax, email
- Business address (if not yet established, you may use your residence)
- Business name
- Nature of business
- Legal start date of business
- Legal status of business – is it registered and active?
- Incorporation details – if a Limited Company
Personal Details (for Partners or Directors)
- Address for 3 years
- Current bank account details
- Date, city and country of birth
- Country of nationality or residence
- Photo ID – passport, driving licence or National Identity card
- Proof of current address – recent utility bill, council tax bill or bank or credit card statement (mobile phone bills are not sufficient)
Which Comes First – Bank Account or Location?
1. Register your company with HMRC
If you are opening a limited company, you must first establish your business identity and then register your business with the HMRC. If the firm will be a partnership, you will need a partnership deed. If you are a sole trader, register as self-employed –use your own name in lieu of a business name if you wish.
In order to register, you must select a unique business name and give an address (you may use your home address as the registered business mailing address to get things started, and then revise this later).
2. Create a bank account for your business
Self-employed individuals can generally use a free personal account, but check with your bank to be sure. Mixing your personal funds with those from self-employment is never a great idea, so be sure to at least set up a separate account for just business income and expenses. This will enable you to keep your records straight for paying taxes later.
Limited companies must use a business account, and will have fees to pay. Banks will have a variety of account types, which will be based upon a number of factors; such as minimum balances, number of transactions, number of cheques processed, etc. Generally there will be a savings or money market account attached to handle any overdrafts.
3. Proceed with leasing a commercial space
Once you have a bank account set up in your business name, now is the time to proceed with leasing a commercial space. Afterward, you can easily update your banking and the HMRC with the official business address.
Though an anxious landlord may allow you to sign before a business is officially set up, any corporate lawyer worth their salt would advise that this is a poor idea. Being too hasty could easily interfere with your liability protections in the future.
Considerations for Choosing Your Bank
There are dozens of choices offering special Startup Accounts for business – just type ‘startup banking UK’ in your browser’s search box. Watch for the bottom line, as the initial discounts may give way to higher rates in the future.
It’s not a bad thing to create a little competition, by splitting your accounts between two banks. Treating banks more like a supplier instead of a partner is what a savvy entrepreneur would do – after all, the bankers aren’t the ones working day and night at your company, are they? If you make certain each bank is aware of the other, it will definitely get their attention and encourage them to work harder (and give you better deals) to win more of your business.
Checking testimonials and reviews is something we do every single day, whether it’s to locate a great restaurant, or to find the best bargain for a designer sofa. Shouldn’t it be something you do before handing your money over to a bank for safe keeping?
British Banking Insight, a project sponsored by the British Chambers of Commerce and the Federation for Small Businesses, offers a powerful tool to help you select your bank. They’ve asked thousands of UK SMEs for feedback about their current banking experiences. Free and impartial (it is independent of any bank), the site is updated every six months – and you won’t be sold anything for visiting.