The visceral importance of business bank accounts for startups revealed
Do You Need a Business Bank Account? Let’s Find Out
Regardless of whether you are currently the owner of a Limited Liability Company (LLC) or a sole trader, managing a successful and profitable business is not easy. There are a plethora of different considerations that must be taken into account, particularly in relation to the legal prerequisites and financing elements of your business.
Below we will discuss the prolific benefits that are associated with having a business bank account for startups in a legal context.
What is a Business Bank Account?
Similarly to your personal bank account, a business bank account will enable you to both: make payments, and withdraw capital whenever you need and want to. Unlike your personal bank account, however, a business bank account can only be used for transactions that solely relate to your business.
Some of the best business bank account options allow users to attain additional functionality as well; such features include: a) the ability to create your own invoices, and b) the ability to significantly expedite card payments.
It should be noted that even though most banks advertise their business bank accounts as being entirely ‘’free’’, this is seldom the case. Most commonly, such accounts are subject to monthly fees, and entail additional costs when certain financial transactions are made.
Can You Use Your Own Personal Business Account For Your Business?
Whether you are legally permitted to use your own personal bank account for your business depends entirely on what type of business you are managing. For example, whereas LLCs are legally obligated to have a separate bank account for all business-related expenditure and generated revenue, no such prerequisite exists for sole traders.
Having said that, whether it is a legal requirement or not, most strategy consultants and field analysts generally overwhelmingly recommend opening up a business bank account as it provides a very large pool of benefits for a relatively small opportunity cost.
Aspiring business owners should also thoroughly check their current bank account’s terms and conditions. As these often include terms that preclude certain (personal) accounts from being used for business purposes without prior authorisation.
Does a Freelancer Need a Business Bank Account?
For all legal purposes, freelancers are defined as sole traders. This means that (unsurprisingly) there is no legal requirement that stipulates that a separate business bank account must be created. Of course, the ample benefits of having a business bank account apply to freelancers as well. So it still undoubtedly remains the most highly recommended option.
Choosing the Right Business Bank Account
The majority of ‘’high-street’’, prominent banks offer business bank account options. As do the vast majority of online-only banks (such as Monzo).
Having said that, you should always ensure that you research what the best type of business bank account is for you thoroughly. Before making a final decision, this can often depend on the nature and state of your business.
Indubitably, it can often be quite tempting to simply go for the cheapest option available. However, there are other essential factors that arguably need to be taken into account first.
For example, you may want to consider how close your bank’s nearest branch is to your home or business office. Also, consequently how easily you will be able to access it in person. This is particularly the case if you plan to make regular cash deposit payments.
You may also want to choose a business bank account that comes with a mobile app; this will allow you to make your business transactions ‘’on the go’’, enabling you to work more flexibly.
How do Business Bank Accounts Work?
Business bank accounts operate in a very similar way to personal bank accounts; the only reason difference is that (generally speaking) business bank accounts tend to include quite a few more administrative and monthly fees.
Most business bank account providers require a fixed monthly fee to be paid. This is in order to create your business bank account.
Business owners may also be charged additional fees for any card transactions made; while these are usually extremely small and rather insignificant in the long run, they should be taken into account when starting out. Particularly if you have a very limited pool of available capital or funding.
Overall, the advantages of having a business bank account are widely acknowledged. Especially with most business owners benefiting significantly from incorporating it into their daily operations.
We hope you enjoyed reading.