Personal Current Account / Business Account Confusion

DaveG2007

Hi All,

I was wondering if any of you could help me make sense of a typically confusing conversation I have had with HSBC?

I am a self employed plasterer, sole trader that has recently started out by myself, advertising under a company name.

I have recently been paid a cheque by a customer to my companies name, but as I don't have a business account (I have always had cheques made payable to my name) I couldn't cash it in.

I called HSBC, just to check and see if their was any way around this and they said I would have to open up a business account to clear it, so I spoke to somebody in their business department to see what deals they could offer me.

After almost falling off of my chair when they told me how much they would charge me to access my own money, I asked them what benefits their would be to me, for opening such an account and the girl couldn't come up with anything.

She did however inform me that as I was a sole trader I had to have a business account and that HSBC would shutdown or freeze my personal account if they found out what I was doing!

I have never been told anything about this before, by HSBC or by my Accountant or even the Inland Revenue.

Does this sound plausible to anybody or does it just sound like a heavy handed tactic by HSBC to get me to open up a business account with them?

Cheers

Lavendyr

That sounds very odd. The company I worked for was operated by a sole trader until last year, and while the MD did have a separate business and personal account, I don't believe this was a legal requirement. As a sole trader any profits (and, conversely, losses) are your own.

It may be an HSBC t&c that you may not use your personal account for any business-related purpose, however. Have you checked your T&Cs?

Edit: more support for the fact that legally you do not have to have a business account to operate as sole trader:

http://www.bytestart.co.uk/content/taxlegal/9_11/small-business-bank-account.shtml


1. You must set up a business account if you're starting up as a Limited Company, Partnership or any other key business structure. Sole Traders can use their own personal accounts (or via a new business account - John Smith trading as XYZ).


2. Don't necessarily choose a business bank account simply because you are a personal banking customer. You may well feel more comfortable with a bank you already know personally, but they may not offer the best deal for your business.

gt94sss2

Does this sound plausible to anybody or does it just sound like a heavy handed tactic by HSBC to get me to open up a business account with them?

HSBC (and I presume other banks) have been reviewing accounts as a 'fraud prevention measure and that accounts were being used for the reasons given by customer at the time of opening' (i.e. anti-money laundering) even if its not a legal requirement for sole traders to have separate accounts - otherwise they are potentially liable to large fines.

The BBC Working Lunch programme did a story on it some time ago

I don't know how many cheques/month you are talking about(?) but personally, I would probably open a HSBC Business Direct account for any cheques you receive in your company name (totally free if less than 10/month) rather than your 'personal name'

An advantage of using HSBC for both personal/business accounts is that transfers of cleared funds would be immediate between them.

Regards
Sunil

samnsteve

Most cheques are now crossed 'acc payee only' so the name on the cheque must be the same as the account name, loads of banks do free business accounts with low or no charges even if only introductory period. Just go onto banks websites see what they offer, maybe look at x building societies ie Abbey, Halifax, Alliance & Leicester they tend to get forgotten and certainly do offers from time to time.

Mark7799

It's not a LEGAL requirement but most banks take this policy towards businesses. They regard the 'free' personal banking as a loss leader and argue that business customers are paying the economic rate (see the bank charges boards for many arguments about the 'true' cost of 'free' personal banking)

DaveG2007

Thanks for all of the advice guys. It was a real eye opener when they told me that, the trouble is I'm a few weeks away from buying a flat for the first time and am very reluctant to open up any new accounts so as not to upset my credit record. That and I am moving back in with my parents so don't want to have register anything new to their address until I move into my new place.

I did check through HSBC's terms and conditions and couldn't find anything in their that said I couldn't use my current account for my business.

I will open up a business account as soon as everything goes through and just hope that in the meantime they don't try and stop my account.

jonesMUFCforever

Opening a business account (with any bank) will not upset your credit record!
If you knew that you did not have an account in the business name why did you not ask for the cheque to be made out to you?