Sole Trader - Juggling between Personal and Business Account

MARIONLEH

Hello,

I am a small trader and have a personal account (for my own use) with First direct, and Set up an account with HSBC for my biz use. HSBC has started charging me every time I cash a cheque or deposit cash in my account. Being a sole trader, I was wondering if it is possible to deposit the cash using my personal FD account, and then transfer it to my HSBC account so that I don't have to pay any fee. Is this ok or completely illegal?? I have no clue.
Thanks in advance!

zygurat789

Banks charge for business accounts because of all the work involved. Personal accounts are, typically, one transfer per month and automated payments going out, not much work. If you start banking cash in your personal account the bank will notice and, quite rightly, consider it to be a business account.
If you write your books up properly it is OK to bank less cash and not, therefore, to need to cash cheques.

Savvy_Sue

And shop around for a better deal for your biz account: work out what you need, do you HAVE to deposit / withdraw cash? If not, then you don't need to use a branch, which opens up the choice a bit.

InsideInsurance

MARIONLEH wrote: »

Is this ok or completely illegal?? I have no clue.

Are you a sole trader or an incorporated entity?

Assuming you are a sole trader then there is only you and so LEGALLY you have no need for separate accounts or anything like that.

CONTRACTUALLY a bank can prohibit the use of a personal account for a business and so whilst you wouldnt be breaking the law you may break the terms of your bank account and they can close your account as a consequence or try and charge you business rates if they have a business proposition (which First Direct dont)

If you are incorporated (eg a limited company) then matters are different because the company is a legal entity in its own right. You still have the contractual issues but MAY have some legal issues as technically its not your money.

MARIONLEH

THanks a lot for your answers! I am a sole trader, and I do lots of markets/fairs/events, that's why I have cash to deposit on a regular basis. I am going to check whether FD will allow me to deposit cash on my personal account then! Have a good evening!

Savvy_Sue

OK, banking cash: some banks will let you deposit cash elsewhere, eg at the Post Office. I am not sure which these are these days for biz accounts, but if you have a friendly local PO I'd go in and ask if they know!

Also if it's a postal / internet bank then they may allow you to make an arrangement for cash dealings.

leveller2911

I have run my business (Sole trader) for over 20 years using a personal account. No need for a business account and the banks cannot force anyone to have a business account.
Every sole trader that I know (20 or so) all run their businesses from personal accounts.

I think Ltd companies have to run from a business account.

Business accounts are just a way that banks can increase their profit margins.

InsideInsurance

leveller2911 wrote: »

No need for a business account and the banks cannot force anyone to have a business account.

Of cause they can, they can close your personal account for breach of the terms and refuse you a new account.

In reality most small time small traders wont be caught but that doesnt mean banks cannot do anything about it

Aquamania

leveller2911 wrote: »

I have run my business (Sole trader) for over 20 years using a personal account. No need for a business account and the banks cannot force anyone to have a business account.
Every sole trader that I know (20 or so) all run their businesses from personal accounts.

I think Ltd companies have to run from a business account.

Business accounts are just a way that banks can increase their profit margins.

From the First Direct terms & conditions (bottom of page 2)

The product/service you have with us should not be used for business purposes

http://www2.firstdirect.com/content_static/pdf/account_terms_0114.pdf

All personal bank account terms I know about have similar terms. FD does not cater for business users at all. Other banks often do cater for them (including HSBC, the parent company of FD), and if a customer is found to be using a personal account for business purposes, the bank often changes the account to a business one meaning all transactions, including personal ones, are charged at the business tariff (or as Inside Insurance says, they may opt to just close the account entirely). I do not think FD will transfer any customer to an HSBC account in such instance as they are handled as two separate businesses.

I suggest you and your 20 or so business aquaintances consult your own terms that you have agreed with your bank. Note that terms are often revised by banks, particularly over a 20 year time span you allude to.

Aquamania

MARIONLEH wrote: »

THanks a lot for your answers! I am a sole trader, and I do lots of markets/fairs/events, that's why I have cash to deposit on a regular basis. I am going to check whether FD will allow me to deposit cash on my personal account then! Have a good evening!

Yes, you can deposit cash into your FD account at any HSBC branch or Post Office.
(Some post offices may limit you to cash deposits of £1000 or less)

But see my previous post.