Business or Personal Account?

Quarkrad

My son is setting up his own (small) business and there is conflicting advice re opening a business account. Some on offer have 18months free fees so there is time open one and think about it. It appears to me it is not mandatory to open a business account - what is the best option or is not that easy to decide?

henm2

Your son will find that amongst all the banks their T & Cs mention that business transactions can not be paid into a personal account. So yes he will need a business account. Each bank generally has a free banking offer for business start ups.

Quarkrad

But on the web it appears a lot of small businesses say they do not have a business account - why pay the fees? They admit it is a little work/pain to separate their various payments (business v personal) in the one account for accounting purposes but they feel a personal account is the best. So how do they advise this/use this method if the T&Cs say they have to have a business account?

pvt

It'll depend on how obvious it is that he's running a business with the account. For example if he has a dozen transactions a day being paid into his personal account, all from different payees, then they will quickly get miffed that he's running a business from a personal account.

If there are very few transactions then, at best, they won't notice. If they do notice then they might invite him in to discuss opening a business account. The worst case scenario, though most unlikely as a first contact, is that they will send him a letter telling him they are closing all his accounts and don't want him as a customer.

Zanderman

Quarkrad wrote: »

But on the web it appears a lot of small businesses say they do not have a business account - why pay the fees? They admit it is a little work/pain to separate their various payments (business v personal) in the one account for accounting purposes but they feel a personal account is the best. So how do they advise this/use this method if the T&Cs say they have to have a business account?

How you would separate your business/personal transactions isn't the primary point, though the obvious way to deal with this, if you want to go down the personal account route, is to open a second account just for business. Or just keep a good spreadsheet of what's what.

But the essential point is that it's against T&C to use a personal account for business - and if a bank suspects an account is being used for business they may close it, without warning. This does happen.

Some business transactions may not be noticeable as such, and a lot depends on volume. If you regularly pay in a load of cheques, some from commercial clients, or even most from personal ones, it does look a bit odd - and suspiciously like a business. Or even a load of cash regularly every day or every week. Again, that would look like a business. Online transactions can also look business-like if in quantity.

One way round this, depending on the business, is to use paypal for a lot of transactions, preferably with a paypal business account of course! But this only suits businesses that do a lot online, and does, of course, incur fees as well, in this case a paypal fee per transaction.

Basically it's your/your son's call. There's no right answer. There are risks in running a business on a personal account - but taking those is up to you. There are fees for business accounts, but no risks.

There are free trial periods for most business accounts (and you can switch at the end of those to another trial with another bank).

And a business account can make the business look much more professional, simply by having a business name. It doesn't need to be fancy but even 'Bill Smith Associates' looks more professional than just 'Bill Smith'.

Archi_Bald

alltranstraining wrote: »

It is really stressful to find out a best advisory..................

:spam: :spam:

InsideInsurance

Quarkrad wrote: »

My son is setting up his own (small) business and there is conflicting advice re opening a business account. Some on offer have 18months free fees so there is time open one and think about it. It appears to me it is not mandatory to open a business account - what is the best option or is not that easy to decide?

Assuming you are a sole trader.....

It is not "mandatory" to have a business account. It is against the rules of personal bank accounts to use it for business purposes. So based on those two elements the only legitimate options are either (a) use a business bank account or (b) dont have any bank account for the business activities and deal with it all as cash only kept in a box under the bed

In practice many people fly in the face of the rules on personal banking and use it for their business anyway. Some do it out of ignorance, some claim their bank know and are turning a blind eye and others realise they are chancing it

If you are a Ltd then its a whole different matter.

Its up to you/ your son to decide if they want to do things legitimately or try and fly under the radar.

Quarkrad

Thank you all for your replies - very helpful. I will suggest he take out a business account (two large banks offering 18 months free) and see how the (new) business goes.

yeesha04

Good day all, Again am on an enquiry with regards business account. I need to open a business account and I went to my day to day bank where I hold my current account. This has been declined due to poor credit rating, is there any advice on where and how I can get one opened please

10pence

yeesha04 wrote: »

Good day all, Again am on an enquiry with regards business account. I need to open a business account and I went to my day to day bank where I hold my current account. This has been declined due to poor credit rating, is there any advice on where and how I can get one opened please

Santander use to do a 'basic' business bank account for poor credit scorers, and if I recall correctly Nat West use to as well. Don't bother with HSBC if you have low credit ratings.

If you haven't looked at your credit report it might be worthwhile to see if anything untoward is present. I'd probably do this first unless you know what is causing it: defaults, form of insolvency.

yeesha04

Thank you very much.
I have taken that step now to see my credit status before the next stage.