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As a Limited Company is a separate legal entity to that of its directors and shareholders, it will need its own bank account. Although opening a bank account is relatively straightforward, one of the earliest decisions you need to make when you start a new business is which bank to choose.

There are a number of choices that may affect your decision, and a variety of deals that can lead to confusion.

Choosing the right bank for your business

It is essential that you find the right bank and develop a good working relationship with them. For many new company directors, the first point of contact is the bank that holds their personal account. If you are the only director, this may be the most convenient and fastest option as the bank may be able to verify your identity and support your application based on your existing accounts and track record. However, if your company has more than one director and they bank elsewhere, this may not be an advantage.

Whilst it may be tempting to open a business account with your existing bank, you could also be missing out on the best deal, including lower charges and higher interest when your balance is in credit.

Its important to take a look at what's on offer before you sign up with anyone. Banking services differ greatly, as do the fees they charge, so compare at least three accounts using a financial information provider such as Moneyfacts.

You can find useful information for start-up businesses at most banks and can pick this up at your local branch or on their website. At the end of this guide you will also find links to some of the familiar high street banks offering business banking facilities.

Special introductory offers

Many banks are now offering free business banking for a specific period, often for 12 or 18 months. This usually means you will not be charged for any basic transactions such as using your debit card, transferring money, issuing cheques or withdrawing cash.

What type of account and facilities do you need?

Consider in advance what type of account(s) and the level of access you need:
  • Is it a simple, basic account with a cheque book and paying-in book?
  • Does it pay interest on credit balances or do you need a separate deposit account?
  • Will you need instant access to all funds?
  • Would you prefer telephone or online banking?
  • Do you need to be able to accept and process credit cards, debit cards and other electronic transactions?
  • If you trade overseas, do you need to make and receive payments in a foreign currency?
  • Will you need a loan to help your business start trading?

Putting special offers and the type of account to one side, it is also important to consider what services and facilities your company needs now and in the longer term. For example, would direct debits and standing orders help your business run more smoothly and keep costs down? You should consider:
  • How much does each service cost? During and after any introductory offer. If you will mainly be making payments electronically, does the account offer free or low-cost electronic transactions? Or if you will be using a lot of cheques, does the account offer low charges on paper transactions?
  • How are charges calculated? Usually the more transactions you make, the higher the charges. Can you pay a one-off, fixed fee (which might help you plan your cash flow and be a better option if you make a number of transactions) or will you be charged a separate fee per transaction?
  • What additional charges apply? Such as when the bank sends you a letter or if you exceed your agreed overdraft limit. Are there any standing charges?
  • Is a local branch important? If your branch is quite far, will it be a serious inconvenience to your day-to-day business if you need to make frequent cash transactions?
  • Would you prefer a named, personal adviser with a direct telephone number? This service is unusual nowadays, particularly for business banking. Some banks have a dedicated small business advice team. Others offer a telephone helpline.
  • How important are their hours of business? Do they need to remain open and accessible after your own business finishes work for the day?

If your chosen bank does not have all the products or services you need, or if you can get a better deal elsewhere, you may want to consider holding different accounts with more than one bank. However, your chosen bank may offer you the same or better terms if you commit all your business to it. Dont be afraid to try and negotiate a better tariff.

What do you need to set up a Bank Account?

Once you have decided which bank to use and have found the right account for your business, make an appointment to see the manager or an adviser to discuss your business plan and your business needs.
You should keep safe all documents you received when your company was registered, as you may need to produce some or all of these before the account is opened. You should ask the bank what documents they require so you have this at hand for your first meeting.

Most banks will ask to see:
  • A copy of your business plan
  • Details of where your business finance is coming from. This may be from you, from other investors, or through a loan.
  • A copy of your Memorandum and Articles of Association showing details of the business you are running and your business activities.
  • An original copy of your Certificate of Incorporation (printed on the correct paper) for limited companies.
  • Copies of any share certificates that have been issued.
  • A driving licence or passport and a recent utility bill for each officer of your new business. Banks need this information to check your identity and where you live, which they are obliged to do under stringent money laundering legislation.
  • A list of the people who can sign on the bank account and a sample of their signature. You will need to specify in what combination people will sign on the account. For example, cheques may require two signatures.

Most banks will also usually need to see all directors, other officers of the company, and signatories in person. As this includes any officers who reside overseas, it is important to check the requirements of the bank as early as possible to help you make any necessary arrangements.

How long does it take to open an account?

Although it can take 15 minutes to apply for an account online, it will normally take up to 4 weeks to complete the process of opening a new company bank account. This allows time to arrange and attend an introductory meeting and for the bank time to carry out all necessary identity checks, and to arrange any chequebooks and paying-in books, cheque guarantee and credit or debit cards etc.

Useful links

You may find the following links useful in answering any further questions you may have about opening a company account:

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