There are a number of differences between a personal and a business bank account although they both serve financial purposes.
A personal account will hold an individual’s personal money and will likely offer various different features to help manage this. A business bank account by comparison will hold and organise your finances, either in the form of a limited company or a sole trader.
Whilst limited companies are legally required to operate their finances through a business bank account, a sole trader is not. For those who are not legally obliged to get a business account, it is important to understand how this type of account differs from a standard personal current account.
Understanding these differences can help those considering a business account to properly assess whether they need one at all, and hence, whether this will be beneficial or a detriment to their finances.
How do these types of accounts differ?
- You will usually have to pay various different fees for a business bank account. This is not the case for personal accounts.
- A business account will both hold and manage money made solely from within a business, whereas a personal account holds the exact opposite.
- A business account is a legal requirement for limited companies, whereas many banks won’t allow businesses to manage their money in a personal account.
- A business account can only be used for business-related use, and a personal account (more often than not) will only allow account holders to manage their personal finances within it.
Which banking option is best for me?
A business bank account is a legal requirement for a limited company as it is necessary to have a totally separate entity from its owners’ personal finances.
Having a business account can be of great benefit to those running a business, as it helps to separate out an owner’s personal finances from their business’. This can help make the process of organising taxes and other financial responsibilities much more straight forward than having them all in one account, which can get confusing to manage.
What about sole traders?
Sole traders are not legally required to conduct their business finances through a business bank account; however, many banks will insist that their account holders do not use their personal accounts for business-related purposes. Therefore, if you are a sole trader, it may be a lot easier to organise your business through a business bank account.
How do I apply for a business bank account?
There are many different business bank account options out there for anyone running a business. As no two businesses are the same, it’s important to assess your organisation’s finances in order to choose an account that is right for you. There are a number of comparison websites and companies which can help you choose the best account for your specific business and its circumstances (source: Business Reviewed).
For example, some business bank accounts will offer an initial fee-free period. This can be great for startups who are just getting off the ground and want to reduce their expenditure in the initial phases of growth.
Other business bank accounts may allow transactions to and from the account in different currencies. These accounts are great for more global companies who frequently make such transactions.
When looking for the best business bank account for your business, it is best to search via a comparison site, as this can help you find the best deals on the market for your specified business account requirements.