A survey conducted by the Enterprise Research Centre in 2017 revealed that, at the time, there were 1.1 million micro-businesses in the UK alone. Since then, additional businesses have been registered with a ratio of 1:10 people owning a business in the country. This proves that many UK people are in the business of making profits thus, requiring somewhere safe to bank their income.
It is not necessarily a legal obligation for companies and individuals to open business bank accounts. However, to track financial progress, one needs a bank account. There are several options for business banking in the UK but mostly, you need to understand your requirements as a business before you go for your ideal option.
Opening a Business Bank Account and Its Requirements
There are three major types of businesses in the UK. Each of them requires certain documents when opening a business account. Your requirement in opening an account will majorly depend on the type of business you run, the number of directors and whether or not you have a foreign entity.
As you visit your bank for business bank account registration, do not fail to carry your employer’s ID or social security number, personal identification, your business’s licence, the DBA, a signed partnership agreement where relevant, all documents filed with the state and every month’s credit card income where relevant.
These are businesses owned by one person. In other cases, the family might be involved in running the business. It is the easiest form of business to launch, and opening a business account will require the least documents. The owner will be asked for their ID and address. He or she will also need to present the business’s details, such as its name, address, registration number and estimated turnover per year.
The other form of business in the UK is a private limited company. Shareholders and board members basically manage this type of entity. To open a business account, one will require all board members’ identifications and addresses. Other requirements include the company’s address and postcode, registration number, estimated income and company’s house address or registration number.
A partnership is a company formed by two or more individuals. They then choose board directors and eventually have shareholders apart from themselves. The requirements for a business bank account are almost similar to those of a private company. One difference is that, instead of registering it as a private company, it is registered as a partnership and all partners have access to bank records. The partners provide their ID and address numbers, the partnership’s registration number, estimated turnover per year, and, in some cases, a record of each partner’s financial standing in terms of credit scores.
A Foreign Entity
If you are a corporate entity with an international identity, you might not be able to open a business account with a UK bank directly. However, you can inquire from your domestic bank if they have UK accounts. This is possible with international banks that have banking relationships with British banks. Alternatively, you can apply with UK banks for international accounts.
International accounts are the best options for companies with no documentation to prove that they belong to the UK. Some of these accounts can be opened online with banks such as Lloyds, Barclays, NatWest and HSBC. Sadly, these too have downsides.
In many cases, for international accounts, you will be required to make an initial deposit of a certain sum and then commit to making monthly deposits of at a stipulated amount. Also, you might be required to pay other monthly fees on top of the monthly deposits. In the long-run, this may be an expensive choice for your business, especially if you are only starting. You might be allowed to switch to accounts with desirable terms, but this is only after a certain period.
If you find this too expensive, you could utilise financial services that offer borderless accounts. They allow international entities to open borderless accounts for free. Their systems are also centralised, meaning you can operate your account from whichever country you wish. You can also convert currencies as per your preference.
What if Your Application is Rejected?
There are cases where the bank refuses to consider a business bank account application. This may be where you have a reputation of undesirable overdrafts or unpaid bank charges. If these do not apply for you, you could talk to the bank to review your application. Otherwise, to avoid such situations, make sure that your business has been registered 24 hours before you apply for a business account. While writing down your company’s details, counter-check the 8-digit registration number and make sure that you enter details in the same way they were registered with the Companies House.
Opening a business bank account for UK residents is easy, and if all documents are available, it will only take a few minutes. Only make sure you keep good individual and company credit scores to have a healthy business bank account.