Business bank account for startups, partnerships and sole traders

Opening a business bank account

Choosing the right type of banking service is a significant opportunity to get the fundamentals of your business right from the start. While maintaining a separate account for personal and business transactions may be difficult, keeping your accounts clean is a smart idea. We’ll examine how to open a business bank account in the United Kingdom and the available possibilities.

When we decide to open a business bank account, we should explore the financial institutions in the respective areas nearby and explore their speciality by consulting with each of them. Some banks are small but good business specialists; others provide property loans. Therefore if we want safe and stable business banking, we can take recommendations from professionals or consult accountants before reaching a bank.

Why do you need to open a business or commercial account?

Now, in order to proceed, we must understand what documents or proof we must provide in order to open a business account. The process is straightforward and is divided into two sections based on the type of business: personal identity and professional documents.

Principal business account operators will be required to present proof of identity for both their business and any authorised persons or nominees added to their account. In most circumstances, if two or more directors exist, we must name a minimum of two company officials; but, in exceptional cases, if only one appointed company official exists, we must identify him/her. When it comes to individuals, we know that a principal controller or beneficial owner is the person who has the authority to govern a business directly or indirectly, but they are not always the account operator of that business.

Businesses are state-created legal entities that are subject to federal taxation. As a result, all banks that conduct business must get an employer identification number for each account. Apart from these, a bank application must be completed with the company’s official name and mailing address. The approved officers’ names and addresses will be included. Additionally, a formal signature card must be submitted, which will assist the bank in comparing and recognising any forged signatures, thereby safeguarding the account.

Setting up a business bank account for startup or new business

For a business startup you need to float a unique idea to be successful. But to legitimize your idea and to do a real business, opening a business bank account is a vital consideration for you. It doesn’t not only just serve to validate your new venture plan but also play an important role in your taxes. Moreover, making it tougher to keep a record of what to inform as income and expenses, by not segmenting business and personal finances, you could be costing your business money rather yourself by not taking benefits to items that can be allotted as write-offs.

That means your business account will allow you to keep track of all your expenditures, manage your employees’ payments, and plan your budget more precisely. Therefore, it’s very important to know how a business bank account can be created or what exact steps to follow. First of all, you need to select what kind of account you need.

It is essential to understand what kind of bank account is needed to avoid financial glitches. Creating one bank account for all purposes, likes income, payroll and taxes, is difficult to tackle. It is advisable to open separate bank accounts for different financial purposes, which may dependsupon the depth of your ventures. You should take the advice of any financial consultant for proficient proposals before going towards the bank.

Documents required for different business entities

As always, you should check with your bank to see whether further documentation is required, but the standard approach entails four straightforward steps: providing evidence of your identity and address, basic business information, financial information about your business, and some personal information. Each step requires the gathering of one or more documents.

1. Sole traders -

   If someone is a sole trader of a start-up - new or existing business, they needs to provide anyone of the following documents –
   1. You can register a sole trader or limited business account if your business is new, has revenue of less than £6.5 million, has an open and transparent business structure, and is domiciled in the United Kingdom.
   2. Verifying Your Identification and Address - Typically, one of the following documents is sufficient to verify your identity with your chosen bank.
      1. Your Passport.
      2. Your national identification card.
      3. Your permit to drive, i.e. Driving license.

      To verify your address, one of the following documents is required –

      1. Your permit to drive, i.e. Driving license.
      2. Bank or credit statement issued in-branch by your bank that is less than three months old.
      3. UK mortgage statement that is less than 12 months old and was not printed from the internet.
      4. A letter or payslip from your UK employer.

      If you are not a UK, EU, or EEA citizen, your bank may request further evidence to verify your identity and residence. Additionally, you cannot usually use the same document, such as a drivers license or passport, to verify both your identity and address.

2. Partnership -

   If you are a partner, you must include –
   1. Agreement of partnership
   2. Co-partnership contract
   3. Formation certificate
   4. Evidence of the trading address of the partnership

3. Limited Company -

   If you own a limited company, you must include -
   1. Incorporation certificate
   2. Companies house registration documents.
   3. Forms of registration for your directors, members, and, if applicable, the company secretary.

Basic information about your business

While banks can occasionally obtain information about your business on their own, you can save time by providing the following information to your bank –

1. Business name -

   When you first begin trading, you should supply the legal name of your business. If you have changed your business name in the past, you should notify your bank.

2. Other Business Names or Trademarks You Have Registered -

   If you have registered additional business names or trademarks for your business, you should inform your bank. For example, you may operate your firm under the name Startup’s of London yet register it with Companies House as Startup’s of London Ltd.

3. Company registration number -

   Your company registration number can be found in the documents provided by Companies House.

4. Date of Incorporation/Formation -

   If your business is a limited company (incorporation) or a partnership firm, you must inform your bank of the date of incorporation (formation).

5. Country of Incorporation/Formation -

   If your company was not previously registered in the UK, you should provide information about its country of incorporation/formation. This is only applicable if you have a limited liability company (incorporation) or partner in a partnership (formation).

6. The Date You Begun or Will Begin Trading -

   Your bank will want this information in order to determine your banking activity.

7. Business Address -

   This could be your home address if you are self-employed as a sole trader or a limited company, as well as your rented or owned office space if you are self-employed.

8. Business correspondence address -

   This can be the same as the business address. You may choose to provide your home address so that your bank can send correspondence to you directly.

9. Registered address -

   If you have a limited company, this is the address you registered with Companies House.

10. Contact Information -

    This section contains your personal and business email addresses, phone numbers, and other methods of communication with your bank.

11. Previous Banking Information -

    This is not always necessary, but demonstrating alternative sources of capital might help create trust.

Financial information about your business

Some of the financial information requirements for your business may include information that is not yet available, such as your employee numbers if you are a sole trader or a breakdown of businesses with which you do business outside the UK. If you are unable to provide information regarding any of the following items, we recommend that you consult an accountant or a bank –

1. Main business activity -

   You should define your primary business activity in order to illustrate how the business account will be used. This may be straightforward for some activities, but the nature of some services is more complex. As a result, you must ensure that your bank understands what youre doing. Additionally, you may be required to demonstrate that you possess the proper license for certain operations.

2. Number of employees -

   You can employ individuals even if you are self-employed, but you must notify HMRC and your bank.

3. If trading outside of the UK -

   If You Do Business With Businesses Outside The United Kingdom, You Will Need A Breakdown Of Their Locations And Their Approximate Share Of Your Turnover Or Amounts Per Customer.

4. Estimated turnover -

   Your expected turnover should be realistic and well-calculated. If youve been trading for a year or more, you can scale your estimation depending on your previous years turnover.

5. Business investment -

   If you have invested in your business or intend to invest in it, you should disclose the source of your funds.

6. Expected Amount Of Money You Will Deposit Into Your Account -

   Your bank will use this information to compare expected and actual activity on your account in order to identify any unusual activity.

7. Tax Status -

   Depending on the information you provided and the nature of your business, your bank may be required to tell authorities of your tax status.

8. Expected Ratios Of Your Income Sources -

   You must include projected percentages of your revenue sources, including product and service sales, donations, copyright, subscription feesand intellectual property rights.

Personal information

If you need to use mobile banking, the bank will need your personal information to authenticate your identity and authorise you to run your account. You must submit your

1. Legal name
2. Preferred title
3. Birthplace
4. Date of birth
5. Present home address
6. Nationality
7. Citizenship
8. Country of residence
9. Moving date to your current address
10. The account’s other authorized information, such as -
    1. Name
    2. Birthdate
    3. Home address
    4. Nationality

After gathering all of your documentation, you should schedule an appointment at a branch of your bank. While the majority of big banks do not accept online applications through their websites, there are a few exceptions. Additionally, we recommend that you conduct some study to see whether other products or services, such as chequebooks, credit and debit cards, online and mobile banking, maybenefit your business.

How long does the account opening process take?

A business bank account can be opened in as little as one to two weeks. A sole trader account is very basic, but banks must conduct their routine due diligence before completing any requirements.

However, if time is critical, one should choose the bank where you usually do banking. Because in this situation, the banks investigation will be minimal, as they will already have your information, which will expedite the official procedure of opening a business bank account. However, you must present your fresh ID to open it.

In case you have any queries or want specialist advice on "Opening a Business bank account”, kindly book a call with us.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.