Do I need a business bank account?

If you’re operating your business through a sole trader structure, you don’t need to have a separate business bank account. However, it’s highly recommended. ​

If you’re operating your business through a different business structure (for example a company), you are required to open a separate bank account for your business since the company is a separate legal entity to yourself and therefore it needs its own bank account.​

Although it may seem like setting up a business bank account takes more (admin) time, a separate account will save you money and time in the long run. Think about the time spent separating personal transactions from your business transactions. If you hire an accountant to do your accounts, this will also mean they will take longer to sort out your accounts, thus, a higher bill (unless you’re paying fixed costs, like with Beany!). ​

Here are some clear benefits of using a business bank account:​

When the tax season approaches, a separate business account will help you to show a clear financial picture of your business. If you have your personal and business expenses intertwined, this means you (and your accountant) will spend hours going through bank statements, receipts, and other accounting records to find each business-related transaction. You’re not making a good use of time, and could be missing tax deductions you’re eligible for due to human error. ​

A small business often starts as a hobby or a side hustle, such as an Etsy or Amazon store. But having a business bank account adds professionalism and credibility to your business. You will be more likely to gain customer trust if you conduct business from a business bank account that uses your business name. Besides, it helps to get your brand name out there. ​

You may not have had the long term growth of your business in the forefront of your mind when you first started your business but having a business bank account gives you more options for growth opportunities such as securing funding from investors, getting a business loan or line of credit. ​

You’ll have a much easier time handling your finances when demonstrating to the potential investors or lenders as separating personal and business accounts will take a lot of work.​

Your business bank account can be linked to the cloud-based accounting software you’re using (e.g., Xero). Here’s how if you’re using Xero. ​

For example, you can see how much and where your money comes from and where it goes in the cash flow statement. Besides, it’s also easier to carry out your monthly bookkeeping and reporting if you link your bank account directly to Xero. ​

When choosing a business bank account, you should consider the following:​

In short, it depends on your needs. Beany accountants recommend businesses having 2 business bank accounts:​

If you’re operating as a sole trader and running a side-hustle that’s not generating much revenue, you need to evaluate if it’s worthwhile for getting a separate bank account.  ​

Opening a business bank account is more obvious if you’re running your business through a partnership, trust, or a company structure as you don’t want to spend a significant amount of time, effort (and money) going through your personal and business transactions. ​

We're small business accountants that actually care. We’ve cut out manual tasks using the latest tech, so we work with you on your business and goals, not crunching numbers.​

We also save time (for both you and our team) and costs, then pass those savings on to you. Everything you need is in our core package, with one fixed cost split over 12 months. This covers your end-of-year accounts, tax minimisation, unlimited support/advice and more. Get in touch today.​