One of the key functions of a small business is a business bank account. However, there are many business owners who think it will be easier / cheaper to operate from a personal account, mixing personal and business expenses. Whether you are a Limited Company, Sole Trader or a Partnership it is advisable to have a separate business bank account.
Avoid tax troubles
It’s essential to separate your business and personal expenses, not only to save confusion but for when it comes to your self-assessment. Unless you want to pay more tax than you need to, you’ll need to be able to prove what your business expenses are. Not only will it take time to go through a confusing mix of transactions, but you might miss important deductions you’re entitled to.
Separating a business from a hobby
You can only deduct business expenses if you are a business. Using a personal account could give the impression that your business is just a hobby, meaning you’ll have to convince the government that you are actually running a business.
Maintaining a professional image
Having a business bank account and business credit card will make you look more professional. Using bank details to write cheques from your personal account or having your personal account on your invoices can look unprofessional and untrustworthy.
Applying for a business loan
Whether you’re a sole trader, partnership or limited company you won’t be able to apply for a business loan unless you have a business bank account.
Your banks terms and conditions
It’s likely in your banks terms and conditions that it will state that your account should be for personal use only. If they realise that you’re using the account for business (which they could spot by your transactions and money going through) they could close your account.
Whether you’re new in business or you’re running a business through a personal account, these are all things to consider when it comes to your business banking. Although it isn’t a legal requirement, it could bring many benefits to your business.
If you have any questions relating to expenses or business banking, speak to us today on 0800 690 6355.