There are many benefits to having a dedicated business bank account. It allows you to track your business’s financial performance, gives you projections, makes budgeting more accessible and can provide a clear overview of your finances to prevent issues during tax time.

Luckily, setting up a limited company bank account in the UK is relatively straightforward. There are a few differences and procedures that make it slightly different from opening other types of banking accounts, but we’re here to talk you through it all. 

In today’s post, we’ll discuss everything you need to know about setting up a limited company business bank account and how your company can take advantage of all its benefits.

Already set up your business bank account? Why not check out our important Startup Advice for next steps. 

What is a limited company? 

Before we explain the benefits of having a business bank account- you may be wondering, ‘what is a limited company’? A limited company, short for limited liability company, refers to a company organisational structure where the company functions as a separate legal and financial entity to its owner. This means that the business owner’s liability, what is owed by a person or business, is limited to the amount they put into the business. If, in the worst case scenario, the company goes under the business owner’s personal assets are protected as they are separate. 

There are of course other benefits to choosing a limited company structure, and setting up a limited company requires certain information from the business owner(s). 

Why You Need a Business Bank Account for Your Limited Company

Opening a business bank account is a crucial step for any limited company. A limited company is a legal entity in its own right, with its own legal obligations and finances. So, opening a separate bank account helps maintain clarity by differentiating between company transactions and your own private banking. It also benefits your piece of mind, with a dedicated business account, there is little chance of confusing your personal finances with the business’ finances. 

A business bank account also offers several advantages, including:

• Improved record keeping: A business bank account can help you keep better records of your company’s finances. This makes it easier to stay on top of your budget and avoid any potential financial issues.
• Greater financial protection: Business banks can also give you greater financial protection for your limited company. This is because your personal and business finances will be separate, which can help you avoid potential legal issues.
• Enhanced credibility: A business bank account can make your company more credible to customers, suppliers and partners. This can help you build strong relationships and grow your business.
• Improved cash flow management: Business banks also help you manage your company’s cash flow more effectively. This is because you’ll have a clear overview of your company’s income and expenses, which can help you make better financial decisions.
• Easier access to credit facilities: A business bank account can give you easier access to credit facilities, such as loans and lines of credit. This can be helpful if you need extra funding to grow your business.

Not having a bank account for your business can also lead to serious problems. For instance, you may have difficulty getting paid by clients or suppliers, as most will want to pay into a business account. You may also struggle to access credit facilities or loans from banks and other financial institutions.

It’s also worth noting that using a personal account for business transactions can lead to issues with the HMRC. It can make filing your taxes more complicated and time-consuming and may even result in penalties if the HMRC deems that you’ve deliberately tried to avoid paying taxes.

Managing finances can be hard for new business owners, luckily we have an quick stop guide to get you started.

Setting Up Business Bank Accounts for a Limited Company in the UK

The process of setting up a business bank account for your limited company can be shortened to five steps:

1. Find the right bank or building society for your business: When you’re looking for the right financial institution for your limited company, it’s important to compare banks and building societies to see which one offers the right mix of features, benefits, and customer services for your business.
2. Decide on the type of account you need: The type of account you need will depend on the nature and size of your company. The most common accounts for limited companies are current accounts, business savings accounts, and merchant services accounts. Online banking is an option worth considering due to its ease and flexibility.
3. Open the account and deposit funds: When you have all the requirements, you can open your account and deposit funds. Some banks require a minimum deposit, so check with your chosen institution before opening the account to prepare the necessary amount.
4. Start using your account: Once the account is ready, you can use it for all your business banking needs. Remember to keep track of your transactions and monitor your account balance to ensure you don’t overdraw.

Set Up a Limited Company Bank Account

A business bank account is essential for any limited company that wants to operate in the UK.

That’s where we can step in. Here at Companies MadeSimple, we’re committed to helping start-up businesses grow and succeed. We’ve partnered with various bank providers like Cashplus, ANNA and  Tide to ensure that your limited company can have the perfect banking account for its needs.