A business bank account is important as it enables business owners to track the cash inflows from business activities. They can achieve this better than they would if they used their own personal bank account to receive funds as personal accounts would have mixed personal and business income. This provides a good platform for automating accounting processes where accounting tools can be used to determine profits or expenses for the month through the bank statements from the bank. Some accounting programs will be able to compute the net income for the business for a certain period by using the records on the bank statements and manual cash entries for payments made in cash.
A business bank account also consolidates cash flows from all the business activities to enable accurate tax computation as well as revenue forecasts that are crucial for business planning. Lastly, a business bank account enhances credibility with new customers. This is because they would rather pay to a business account when buying goods or services. This is especially true for businesses that trade online as first impressions play a huge role in determining if a consumer will be loyal to your company.
Steps to Opening a Business Bank Account
The main steps would involve to provide certain documents, that depend on the type of business you run, proof of identification and proof of address. One can open a business account in the United Kingdom as a sole trader, a limited liability company or a partnership. Here are the steps you should follow when opening a business bank account:
Do your research
It is important to find a bank that will serve your needs. You can acquire all the crucial information from the internet. Given that the United Kingdom is also home to the big four high-street banks which are Barclays, HSBC, Lloyds and NatWest, you will be spoilt for choice. Those who would require easier access to their accounts through other ways other than internet banking can choose Barclays Bank which has 1500 branches in the United Kingdom. NatWest follows closely with 1400 branches. Lloyds has 1300 branches and HSBC has 1100 branches. You should also keep watch of the banks that charge
monthly fees on business accounts. It is worth noting that some banks may charge account opening fees.
Book an appointment with your preferred bank
Once you have identified your preferred bank, it is important to physically visit the bank. This will give you a chance to get a face-to-face session with the account opening supervisors or your account manager, and they will answer any questions you may have. Physical presence is also required to sign off on any sensitive document as well as to enable the bank to physically meet its client for photographs, biometrics, and submission of passports or identity cards.
Most banks have provisions for opening bank accounts online. Some banks may reject your account opening application based on your credit report. But this is not the end of the world for you. There are still other options you could pursue. For example, you could open an account with banks in the lower tiers. But in the end, physical presentation will be a requirement for verification purposes.
Filling in the account opening forms
To open a business account with any bank in the United Kingdom, you will be required to fill out the particulars of the company’s directors and the particulars of the company in an account opening form. The forms have predetermined requests for information such as the names of the directors, their addresses, their telephone numbers, and the mode of operation of the account (whether either director to sign for withdrawals or all of the directors to sign for withdrawals). These forms are also used to capture the signatures of the directors which will be used going forward.
Proof of identification
Upon registering a company, you will get a certificate of incorporation. This certificate is what brings the company into existence as a legal entity. The name appearing on the certificate would be the one appearing as the account name. Along with the account name which is the certificate of registration, the applicant would also need to show their proof of identification, as well as the proof of identification of the other directors of the company. This can be in the form of passports or national identification cards. The directors of the company will also be required to present their passport photographs or to have the bank take their photos. This is to fulfil the know-your-customer rule in banking. This rule helps the bank to prevent cases of misrepresentation in the future to reduce the chances of fraud.
Proof of address
To prove the addresses of the directors, you may be required to produce utility bills, recent personal bank statements or council tax statements, credit card statement sent to your address, and valid driving license. This step is crucial to prevent misrepresentation in future.
Submission of board resolution, memorandum of association or articles of association
Some banks may specify that the directors of the company should come up with a board resolution that would expressly state their intention to open the bank account to absolve the bank from any impropriety. The banks may also request the business to file their articles of association and/or memorandum of association where the company is co-owned by many directors. This enables the bank to understand how the directors interface with each other and with the business. The banks will also require a mandate that would specify who among the directors would be allowed to sign for withdrawals as authorized signatories. This is usually indicated within the account opening forms.
After submitting all the requisite documents personally, and after dully completing the account opening form, the account opening personnel will open the account for you as you. This process takes a few minutes. After the account is opened, most banks may require you to make a deposit. Some will issue you with the debit card and PIN before you leave while others will opt to mail the credit card and PIN to the address listed in the forms. Some banks may
reject your account opening application based on your credit report. But this is not the end of the world for you. There are still other options you could pursue. For example, you could open an account with banks in the lower tiers.
The steps of opening a business bank account in the United Kingdom are fairly simple. This can be attributed to the cut-throat competition among banks as they seek to woo customers through more simplified and less cumbersome processes. Given the benefits, it is worth it to set aside a little time to open your business account.