Is business account a legal requirement?

Eldrax

This question is for two reasons, same question though as above - is a business legally required to have a separate account? If it isn't, then why might one choose not do so and instead have a second personal account where you carry out business transactions?

This is for myself, to consider for my own business (hopefully in near future) but also because I hired a contractor for work on house and they want payment to bank account in their name, rather than the business name - seems dodgy?

Petriix

It's pretty common for sole traders to use a personal bank account. If they were operating a limited company with multiple employees then it would be pretty dodgy. For a one man band it's pretty standard.

People will warn you about breaching the terms and conditions of your bank account but you're unlikely to have any problems if you're just receiving a few bank transfers and paying a few bills.

jonesMUFCforever

I think a Limited company needs its own account as it is a separate legal entity.
Is there a legal requirement for a sole trader - probably not - BUT all the banks' terms and conditions prohibit the use of a personal account for business purposes. A lot on here will say that they have been doing this for years and get away with it - IMO they have been lucky.
If you read the posts where accounts have suddenly been frozen or closed will show the inconvenience this may cause you if caught.

As for your builder it is par for the course - probably the business account is up to its overdraft limit or they are trying to avoid tax by putting some funds through a personal account.
I suppose it depends on how good a job they are doing - if you need to take legal action further on down the line you need to have paid the right account. Who has invoiced you?

Eldrax

Hi, thanks for your replies. 
For the guy doing work on my house? Seems to be quite busy from what he's said, so I doubt it's just a few transactions
JonesMUFCforever, this is my concern actually, as I have doubts on whether the work on my house has been done correctly. He's completing the work today or early next week. No invoice.  The quote for the work was on company letterhead with just bank account details, and he then emailed to let me know a/c name in his name for the deposit. 

TBH I had a feeling something was off for this reason and other small stuff - even contacted CAB and they said the contract was made and there could be legal repercussions of I backed out.
I'll query the company about the account, though it seems legally I can't enforce anything in that respect.
Probably good idea to head over to consumer rights part of the forum.

Sandtree

You should know the legal entity you are contract with.... irrespective of who/what that entity is they are entitled to use trading styles/names but ultimately anything on a letter head should somewhere stated Bob Smith t/a Builder Bob or Winchester Builders Limited t/a Builder bob (unless the letter head was in the name of Winchester Builders Limited).

The contracting legal entity should have a bank account, be that Bob or Winchesters, as money paid is his/its.

The law doesnt differentiate significantly between personal and business bank accounts however the T&Cs of bank accounts do. If he is a sole trade he should have a "business account" but to the outside world you wont be able to tell if an account is business or personal as both would be in his name. In reality small time sole traders often use a personal account as they're free and the low volume of transactions means they're not spotted but it is really by the by.

Eldrax

Thanks Sandtree, that's helpful.  I've checked the quote again (which is actually the invoice too) and it just has the company name, with his email address (his surname).  His name isn't on there apart from the email with his surname and he signs it with his first name.  Also, the company name itself is slightly different to the one they have on the van/facebook - the first bit is the same, but the invoice is 'xxx Property Maintenance' and the van/facebook is 'xxx Pointing Specialists'.  Now I'm more worried.  
Any idea on what I need to do to establish the legal entity I am in contract with? 
If it is the company, is it ok to pay to the owner's account?
I'm thinking that I need to get an email from them confirming the name of the company, and where he confirms that he is trading as that company.  Do you agree, or do I need something more?
I paid the small deposit to his bank account, the one provided on the invoice.

jonesMUFCforever

How big is this job - is he charging VAT?

Eldrax

The price quoted/accepted for the work was £4,600, he's done £4,300 of that plus a few extras gratis (e.g.cutting a concrete path near the house so it's not up against the wall) . No VAT on the invoice.

oldbikebloke

does the "company" name have the word Ltd or Limited at the end of it?

if not, then he is a sole trader using a trading name.
It is not illegal to call yourself "'xxx Property Maintenance" or "xxx Property Maintenance & Co", but it is illegal to trade as "'xxx Property Maintenance Ltd" if you are not a limited company - the invoice must in the latter case list the company registration number and company's registered address (if different to the invoice address)

He is going to produce an invoice so that in itself implies he is not a cash in hand tax evader, so what is you actual concern?

are you looking to sue him for poor / incomplete workmanship?

noitsnotme

As above, does it say 'ltd' or 'limited' anywhere?  If it does then try looking it up here - https://beta.companieshouse.gov.uk/
If it doesn't then it's not a 'company', it is a 'business'.

Eldrax

Hi, he's a sole trader, not limited company.
I'm hoping not, but potentially yes I may need to sue on some parts of the work.  It's the sort of thing that can take time to manifest any problems so not straightforward 
My concern is that he could evade any legal action by having different company names/payment made to himself rather than the company.