How to Choose a Business Bank Account: A Complete Guide for Small Business Owners

If you are self-employed or own a business, having a separate business bank account can simplify things by keeping your personal finances separate from your business finances. If you run a limited company, it is legally required to have a separate business account.

To help you choose a business bank account, this blog provides all the necessary details to consider. Sole traders and self-employed individuals who do not run a limited company may use their personal account for business payments and purchases. However, some banks do not allow personal accounts to be used for business purposes, so it's important to check your bank's terms. Having a separate business bank account can make it easier to manage and keep your business finances organized, as well as helping you avoid overspending or running out of money to run your business or pay your bills.

Understanding the difference between a personal bank account and a dedicated business bank account is important before making a decision. Business bank accounts normally charge a monthly fee, so it's worth shopping around for the best deal. Many banks offer free introductory offers, but then charge a standard monthly fee and additional charges for some transactions.

In addition to keeping your business transactions separate, having a business bank account can add credibility and professionalism to your business, help you apply for a business credit card or loan, process salary payments, and build a business credit rating. You may also be able to carry out transactions using foreign currencies.

To open a new business bank account, you'll need to provide proof of identification for all company directors, proof of address, and your business details, including the registered address and contact details of your business as well as the Companies House registration (for limited companies and partnerships).

When comparing business bank accounts, it's important to look for account fees, overdrafts, transaction limits, in-credit interest, convenience, and links to accounting software. Business savings accounts are also offered with business current accounts, which can help manage cashflow and separate corporation tax and VAT payment cash from day-to-day working capital.

In summary, although having a separate business bank account is not legally required for sole traders and self-employed individuals who do not run a limited company, it is an easy way to keep your business finances separate from your personal finances. For limited companies, it is a legal requirement to have a separate business bank account. When choosing a business bank account, it's important to consider account fees, overdrafts, transaction limits, in-credit interest, convenience, and links to accounting software.