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Contents

  1. 1. Table of contents
  2. 2. What information do I need to set up a business bank account?
  3. 3. Business bank account mistakes to avoid
  4. 4. Summary
  5. 2. What information do I need to set up a business bank account?
  6. 3. Business bank account mistakes to avoid
  7. 4. Summary

What's needed to set up a business bank account?

October 6, 2021
Whether you’re a business owner, small trader or entrepreneur, keeping your business finances separate from your personal accounts is a good move. While only required for limited companies, opening a business bank account can be an important step in getting your business up and running smoothly, no matter the business type.The right account makes it easy to report to HMRC how much your business makes and helps you establish business credit. It also looks more professional when you’re dealing with vendors and clients. Once you’ve found the right bank account for your business, there are best practices when it comes to setting it up, and some common pitfalls to avoid.In this article, we’ll talk about the ins and outs of opening a business account. We’ll also share what information you need to set one up and cover major mistakes to watch out for.

Table of contents

    What information do I need to set up a business bank account?Business bank account mistakes to avoidSummary

What information do I need to set up a business bank account?

When you open a business bank account, you need to present the provider with documents that identify your company. In the UK, each bank, credit union or account provider has its own rules about what’s required. Here’s a general overview of what you can expect:

Proof of identification

First, you’ll need to provide a government-issued ID to prove your identity.Note that this requirement doesn’t only apply to the person opening the account. All company officials and each person who has permission to access the account will need to provide some form of ID verification. Accepted documents can include a passport or a driver’s license.

Proof of business address

You’ll also need to show proof that your business resides at the address given on the account application. Forms of valid proof vary depending on the type of business opening the account.For example, if you’re a sole trader, you can show proof of address with a utility bill, a recent personal bank statement or a council tax statement.If you’re a limited company, you’ll likely be subject to a credit reference agency check. Or you’ll need to provide a certificate of incorporation and a copy of the company board resolution that authorises you to trade in the company name.

Additional requirements

Depending on your account provider, you may also be asked to show any of the following when opening a business account:
    The Companies House registration number if you’re a limited company or partnershipPrevious banking details when switching an account over from another bankA description of your business telling the bank account provider what your business does and how you'll use your accountYour projected yearly turnoverThe size of your business (that is, the number of employees)Details of your personal financial situation (depending on your business’s financial history, you may need to provide documentation of your own credit and banking history)

Business bank account mistakes to avoid

In addition to knowing what to bring with you, you should be aware of common problems that may arise when opening an account. To avoid complications, watch out for the following mistakes:

1. Giving inaccurate or incomplete information

Be careful about providing the wrong information—or leaving out key information—when you fill out forms to open an account. An incomplete form can hold up the process and cost you valuable time in setting things up.To avoid this problem, check with the account provider in advance about what documents and information they need. That way you can have the right paperwork on hand when you show up to your appointment or start the process remotely.

2. Choosing the wrong bank

Not all banks are equal when it comes to your business bank account. It may be tempting to open a business account with the same provider that handles your personal banking, but that’s not always a good idea.Not every account or bank is set up to cater to your business’s needs. For example, an account that at first glance seems ideal may not offer features like cash flow visibility, accounting software integration or business debit cards. These can be helpful tools for streamlining your record-keeping and tax preparation. It’s worth taking the time to shop around to find the business bank account that works best for your needs. 

3. Failing to read the fine print

As part of your research, make sure to read the fine print once you’ve narrowed your search to a few accounts. You’re looking for whether there are any hidden fees or penalties. Will you be charged for not maintaining a minimum balance over time? Are there limits to the number of transactions you can make in a month for free? Fees may appear small, but they can build up quickly over time.Also, make sure you’re familiar with all terms and conditions that apply to the account. For example, there may be limits on business size or a maximum annual turnover you’re allowed. Even if you qualify now, these may affect your growth plans down the road. Save yourself time and frustration through careful reading.

4. Not giving yourself enough time

Opening a business bank account can take anywhere from a few minutes to a few weeks depending on the provider. Some banks will require you to pre-schedule in-person meetings, and processing your paperwork can also take time. Digital business banking services may offer a quicker turnaround because everything happens virtually, but that’s not guaranteed. Regardless of the account you choose, you need to know the timeframe. Otherwise, you may end up delaying vendor payments or be unable to move forward on a line of credit as you wait for the paperwork to go through. Find out what to expect from the start so you can plan ahead.

Summary

A business bank account gives you opportunities to grow your business and gain credibility. For limited companies, they’re required, but sole traders can seriously benefit from opening a separate business account, too.. It’s up to you to choose the right account and be ready with everything you need to open it. Careful research leads to good decision making. When you know what to expect, you can open the right account quickly, avoid any costly mistakes and move forward with confidence.
Caroline Wire
Caroline WireFreelance Copywriter

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