There are many different situations that would warrant the need for a bank account, for both those who simply need to improve their business’s finances, to organisations that are legally required to set one up. Business bank accounts are necessary tools many businesses need to function.
Business bank accounts are built specifically to help manage an organisation’s finances, and so provide a service that can be invaluable to many different companies. It is therefore important to know exactly why this type of account may be needed, and therefore when a business should consider taking one out.
Why Do You Need a Business Bank Account?
There are many different reasons as to why business owners would need a business bank account. Companies that are legally seen as a separate entity from their business owners will be required to have a business bank account. Therefore, such business structures as limited companies will be obliged to set up a business bank account to operate their financial incomings and outgoings through.
You should always check whether the bank will run a credit check on you personally for opening the account too, as if they do, you will need to check whether they are running hard or soft searches and thus, whether there will be any impact to your credit score, affecting your ability to access finance in the future.
When Do You Need a Business Bank Account?
This will depend almost entirely on the type of business model chosen for a business. As previously touched on, any organisation that is seen as a legal separate entity from the business owner(s) (e.g. a limited company), will be required to set up a business bank account.
However, this is not the only time in which business owners should consider setting up a bank account. Sole Traders, whilst not legally obligated to take out a business bank account, may be able to reap the benefits from these types of account, helping them to grow their business further.
Not only will this type of bank account keep a business’s financial records secured and organised, it can also help to look professional and therefore more trustworthy of business with clients. Business bank accounts also come with a range of different benefits to help further along the business’s growth. One example of these features includes making transactions in multiple different currencies for businesses wanting to branch out on a global scale.
What Are The Benefits of a Business Bank Account?
Aside from those already mentioned, there are numerous different benefits to having a business bank account. With this type of account, businesses are able to properly organise and process their employees’ wages and salaries (source: Doddler.co.uk). In addition to this, business bank accounts will be able to accept both debit and credit card payments.
Another great feature available with many business bank accounts is that they enable you to conduct credit checks on the companies and suppliers an organisation is in business with. This can help to secure a business’s financial stability, ensuring all parties the organisation works with do not have a history of bad financial management, and are therefore more likely to be financially responsible.
By having a business bank account, your company may also be able to access more finance options with the account provider, for example, you may be able to secure a loan on a property with the bank providing the loan, as you will have built up a relationship with them, through having a business bank account.
Do Sole Traders Need Business Bank Accounts?
Whilst Sole Traders are under no legal obligation to take out a business bank account, as previously touched on, they do come with a large range of different benefits that can help a business to grow. In addition to this, Sole Traders may find it hard to find banks who will allow them to conduct business transactions through a personal account. Having your business expenses also mixed in with other personal incomings and outgoings can make it harder for Sole Traders to organise and separate out their business expenses from their personal ones.
Where Do You Find The Best Business Bank Account?
As there are different types of business accounts all accommodating for different types of businesses, the best account will depend entirely on the type of business. It’s best to firstly understand what the business will benefit from before then comparing different accounts via comparison websites.