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Can I Use My Personal Bank Account For Business

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Yes You Can Use A Personal Bank Account For Business

Can I use my Personal Bank Account as my Business Bank Account?

UPDATE: This article was first published in 2015. Nationwide have now tightened up on this, and said that business use would be reviewed on an individual basis. In the meantime, if you need a basic business account without any credit checks, we recommend the Cashplus or Tide accounts. See the bottom of the page for more information.

Can you use a personal bank account for business transactions? This article we asked some of the main high street banks for their take on the situation, and also look at some of the alternatives.

In November 2014 the Government reached a deal with UK banks to ensure the provision of fee free personal banking in the form of basic bank accounts.

Unfortunately when it comes to business theres no such thing as a basic bank account. Even the no-frills Natwest Foundation account requires that the owner/directors undergo a credit check.

Thats a problem, since large numbers of entrepreneurs, freelancers, and would-be business owners are struggling to set up a dedicated business bank account for their business, whether due to previous bad credit or other reasons.

If you fall into this category then first see our guide on How to open a business bank account with a poor credit history.

Special Offer 1 Tide Business Bank Account

If youre looking to open a free business account with the minimum fuss, Tide is worth exploring. As a Limited Company Help visitor, Tide will credit your account with £40 with no catches at all.

All you need to do is open the account and fund it with at least £1. Just make sure you quote our unique code COMPANY to qualify. You will also receive 1 year of free transfers thrown in.

The application is made online and, if successful, you can have a business account up and running within 24 hours.

Popular with small businesses, other features include free bank transfers, no monthly fees and 24/7 access to your account.

Makes It Harder To Profit And Grow

The more disciplined a business is about finances, the greater the likelihood of success. If you are loosey-goosey handling bank accounts, it can cause your business to lack fiscal discipline in other ways. And that puts an unnecessary impediment in front of you.

Any financial reports may show an inaccurate picture of the business, because they may include personal expenses. How in the world can you generate a useful Profit and Loss statement without clean data?

At the very least you will have to stop to clean up your data first. This robs you of real-time reporting capability.

Overall, by mixing personal and business funds and not maintaining discipline, it becomes harder to manage the business toward profits and success.

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Benefits Of A Paypal Business Account

Why get a PayPal business account? Lets explore the reasons.

  • Its Free: As mentioned, there are no setup costs or monthly/annual fees associated with getting a PayPal business account .
  • Access To Business Features: Use a PayPal business account, and youll gain access to features like a virtual terminal, recurring billing, a hosted checkout page, and invoicing. Youll also be able to use PayPal Here/Zettle for mobile in-person sales.
  • Sell Online Or In Person: Use PayPal for business and take payments online and offline. Accept multiple payment methods credit and debit cards, PayPal and PayPal Credit, and mobile payment apps.
  • Let Your Employees Use Your Account: Sign up for a business account and let up to 200 of your employees use your PayPal account. You can give each employee a unique login ID and level of authority.
  • Integrations Galore: A PayPal business account will let you integrate with a wide range of shopping cart software. Brick-and-mortar merchants will find numerous POS integrations.

More Ways To Take Your Business Finances To The Next Level

Can I use my Personal Bank Account for my Small Business?

Opening a dedicated business bank account is a small step that makes a big difference in how you manage your business finances.

It makes it easy to pull financial reports, prepare taxes, and generate financial statements. Those reports give you the information you need to assess your business financial health and make data-driven decisions.

Here are five more ways to elevate how you manage your business finances.

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Special Offer 2 Cashplus Business Bank Account

Cashplus Bank also has an excellent special offer for business owners. If you apply for a business bank account , you can earn 1% cash back on up to £1,000 of monthly purchases via your card.

You wont have to pay the first years £69 annual fee. Simply select pay later when applying, and the annual fee will be waived. Find out more about this special offer here. Cashplus is FSCS protected, up to £85,000, and has UK-based customer service.

Makes It Tougher To Manage Cash Flow

The companys cash flow situation becomes confusing and harder to predict when commingling business and personal funds.

For example, the business might not have enough funds when an important business bill comes due. Why? Because the owner chooses that precise time to pay personal expenses from the business account.

Some owners look at their bank balance, see theres money there, and think they can spend it. This could lead to a cash flow crisis.

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Why Is It Best To Have A Separate Bank Account For My Business

  • it is much easier to separate personal expenses and business expenses, something you will need to do for tax purposes
  • you can keep track of how much money you have for personal use and the funds available for reinvesting in your business
  • if HMRC decides to audit your business, something they can do at any time, both your personal and business expenses will be scrutinised
  • it builds your business credit
  • it helps you track your business performance

Should You Use The Same Bank For Your Personal And Business Checking Accounts

Do you NEED a Business Bank Account in the UK?

Individuals and business have very different banking needs.

Businesses often handle large volumes of cash, write a huge number of checks, and need bookkeeping help from the bank. Individuals are more likely to use a ATMs and have a lower volume of transactions.

To serve the differing needs of business and customers, banks offer checking accounts specially designed for businesses.

Opening a business checking account can be a good first step towards starting your own business.

Though many banks offer business checking accounts, you may wonder whether it makes sense to just open your business accounts at the bank that you use for your personal banking.

There are upsides and downsides to this strategy.

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Can A Business Have Two Bank Accounts Uk

According to my knowledge, limited companies may have as many bank accounts as they wish, or as few as they wish. Investments resulting from the transfer of bank accounts owned by the same business are referred to as dividends. Separate business accounts should be maintained for you and your company.

Register Your Business Name

Before you talk to your potential new bank, set up your company name–that is, unless you want to operate under your personal name. This is a natural step in setting up your business.

  • For example, a copywriter can set up a company name like Sarah Smith Copywriting.

Check your business name isnt taken by using the U.S. Patent and Trademark Offices trademark database. Also, search for the name online to make sure your online presence wont be overwhelmed by similar names.

Now that youve chosen a business name, visit your county clerk or state office and pay the required fee to register your business name. It should cost less than $100. This U.S. Small Business Administration guide will tell you where to register.

You can also go the extra step and apply for trademark protection. This costs less than $300.

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Use Separate Credit Cards

Another poor practice is when the owner uses the same credit card for both personal and business.

This causes accounting confusion. It can lead to mistakes when its time to claim tax deductions.

It also adds extra steps to your bookkeeping. You cant simply download your monthly transaction history into your accounting software and have all business charges in one place. Just like with your bank account records, you have to manually sort through them.

Apply for a business credit card as soon as you have revenue coming in regularly. It will also help establish a separate credit history for the business.

How Much Does It Cost To Open A Business Bank Account

Can I Use A Personal Checking Account For My Small Business?

Rates and fees vary from bank to bank. Many bank dont charge a monthly fee, but they will require you to deposit a minimum amount to open the account.

Minimum deposits can be as low as $25 for a bare-bones business bank account, though this comes with certain requirements like keeping a daily balance of $1500. Some banks even offer no minimum deposits and no minimum balance.

There are also costs associated with getting the required paperwork to open a business bank account:

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What To Consider When Choosing A Business Account

Before implementing a business account, you should consider the type of business you run. If you are unsure of the type, look up your registered ABN. You should also determine the cash flow and services your company would need. Moreover, you must consider the merchant facilities available such as Eftpos. It is also important to analyse whether your sales are international or domestic and the type of interest you would charge.

Spend Less Time On Admin

When tax time comes, it’ll be a whole lot easier to get your books in order if you have a separate account for your business. It’ll mean you wonât have to spend hours trying to work out which transactions were for your business. If you use a bookkeeper or accountant to do your tax, you wonât have to pay them to sort out whatâs business and whatâs personal.

Also, once your business starts using accounting software, having a separate business account will make bookkeeping a lot easier. Thatâs because many accounting packages now can integrate directly with your bank account, to automate a lot of the bookwork. For example, you could connect software like Xero, MYOB or Quicken to a NAB Everyday Business Account, which has no monthly fees.

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Track Your Business Easier

With a separate business account youâll find it much easier and simpler to track your expenses, income and profit. Youâll be able to quickly look at the numbers and then make decisions about where to invest your time and money, and where to reduce expenses. If you run your business through a personal bank account, youâll have to find a way to manually work out all these things, and that can be difficult and time-consuming.

Your Bank Wont Allow You To Trade Through Your Personal Account Forever

Online Banking for Business: Linking Personal and Business Accounts

Sole Proprietors can trade through a personal account while youre doing a limited number of transactions. Its hard to put a number on it, but your bank wont mind while youre doing around 25 transactions a month or less, you should be fine.

But if everything goes according to plan, that number will go up as you grow. Eventually your bank will notice your success and force you to move to a business account anyway.

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Frequently Asked Questions About Paypal Business Accounts

You do not have to be a U.S. citizen to open a PayPal business account. PayPal accounts are available in more than 200 countries and regions. PayPal also supports 25 currencies.

There is no minimum income required to open a PayPal business account.

With a PayPal business account, you get three different account options for taking payments, one of which has no monthly fees. You also get access to eCommerce and in-person POS software integrations, numerous business features, and the ability to let your employees use your PayPal account.

You can create a PayPal business account free of charge, and if you use PayPal Checkout to take payments, you wont pay any monthly fees. When accepting payments, however, you will pay transaction fees, just as with any payment processor.

If you use PayPal Checkout to accept payments, you wont pay any monthly fees. If you use PayPal Payments Advanced, youll pay $5/month, and if you use Payments Pro, youll pay $30 per month.

As for transaction fees, these fees vary depending on transaction type, but youll pay 3.49% + $0.49 per PayPal Checkout transaction, 2.99% + $0.49 per standard online credit/debit transaction, 2.59% + $0.49 per advanced credit/debit transaction, 2.89% + $0.49 per credit/debit transaction if you have Payments Advanced or Payments Pro, and 2.29% + $0.09 per swiped, dipped, or tapped offline transaction with PayPal Zettle.

Could Negate Part Of The Subchapter S Benefit

Commingled accounts can throw a monkey wrench into the best Subchapter S tax plan.

A Subchapter S is an election you make with the IRS to treat taxes as a pass-through and avoid double taxation of both the corporation and the owner.

Another advantage of a Subchapter S is that it can reduce employment taxes for the owner. Here is how it works. The owner becomes an employee of the company. As long as he takes a reasonable salary, the owner doesnt have to pay employment taxes on corporate distributions over and above the salary.

However, if the owner takes non-salary distributions without keeping good track of how much he is spending, he could run afoul of the IRS. How? By taking distributions that far outstrip his salary. Tax law requires that the owners salary not be unreasonably low compared to profit distributions.

What can happen is that the owner loses track of how much he is taking out of the company for personal purposes. This is easy to do when you mix personal and business expenses and dont have good accounting controls.

As Nolo.com states, If the IRS concludes that an S corporation owner has attempted to evade payroll taxes by disguising employee salary as corporate distributions, it can recharacterize the distributions as salary and require payment of employment taxes and penalties which can include payroll tax penalties of up to 100% plus negligence penalties.

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Basic Business Bank Accounts With No Credit Checks

Using a personal bank account whilst, doable isnt going to be ideal for most people. You are limited in the type of transactions you can carry out, and of course its not in the business name. Add to that the time and inconvenience of identifying and separating your personal income/expenditure to that of your business, and you can see why even sole traders might seek out an alternative.

If you need a guaranteed business account as soon as possible then digital alternatives in the form of Cashplus, Card One Money, or Tide could be worth a look. The former now has a full banking licence. Whilst Tide and CardOneMoney are e-payment institutions, Tide has a partnership with ClearBank allowing it offer most of the features of a traditional account including FSCS protection. Its low cost and low barriers to entry make it a good sole trader account, whilst Cashplus might be a better option for Limited companies.

These business accounts dont require a credit check, making them perfect for those with either bad, poor or no credit history. Whats more, you could have an account up and running in as little as 24 hours. Bear in mind that both services have annual or monthly cover charges, and some basic transactions will cost. The good news is that all of these can be offset against profits thus reducing your tax liability. Also see compare the top business current accounts.

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Can I use my personal bank account for business?

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What Do You Need To Do To Open A Business Bank Account

In order to open a business account, your chosen bank will need to carry out credit and security checks.

Youll likely need some of the following too:

  • passport, national identity photocard, driving licence
  • Proof of your address bank or credit card statement, for example, less than three months old
  • Mortgage statement less than 12 months old and not printed from the internet
  • Letter or bill from a utility company less than six months old.

Your chosen bank may also need to make the same checks if anyone else will be using the business bank account or if they have a significant share of your business.

Can You Use A Business Bank Account For Personal Use

A reader asks:

Recently I was hired as a bookkeeper for a small manufacturing business. My boss, the owner, uses the business bank account for personal use and its driving me crazy! He withdraws money with a debit card for personal expenses. Last week his wife bought a big screen TV for their home using a blank check he signed from the business account. From one day to the next I never know how much money the business will have. Ive explained that its best practice to separate business and personal funds, but he tells me it doesnt matter since the business is an LLC and he is the sole owner. Who is right? My boss? Or me? And what should I do?

Roxanne from New York

Excellent question, Roxanne. You happen to be right in this case.

Business owners should not use a business bank account for personal use. Its a bad practice that can lead to other issues, including legal, operational and tax problems.

As the company grows, the problems will also grow. That is, if the company is able to grow. Many businesses operated in a fiscally-lax fashion dont grow the way they should or could.

I suggest you provide the business owner with a copy of this article. It has all the reasons to help you convince him. At the end is a list of best practices to follow.

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