Does a limited company need a business bank account?

Why setting up a dedicated business account is so important and how to go about it.

If you've just set up a limited company, you may be wondering whether you need to open a business bank account. After all, it's not always clear what the requirements are and which type of account is most appropriate for your business. In this article, we will discuss why setting up a dedicated business account is so important and how to go about it.What constitutes a limited company?A limited company is a type of business structure often referred to as a corporation or an incorporated enterprise. It’s formed when two or more people come together and create a legal entity with its own rights and liabilities separate from those of the individuals who founded it. Limited companies can be in any industry, from retail to manufacturing.Why does a limited company need a business account?A business account allows a limited company to pay its taxes, accept payments from customers, and make purchases. It also allows the directors of the company to keep track of their profits and losses more easily. A business bank account also helps protect personal assets from any potential liability claims that may be made against the limited company. How? All transactions are kept separate from those of the individuals who have a stake in the company.So, while it’s not obligatory to have a business bank account, it is highly recommended for any limited company. The directors of the company can then keep their finances organized and ensure that all transactions are kept separate from their personal accounts.Can you use a personal account as a business account?Using a personal account would almost be like using your own car to transport goods for a business. It may work in the short term, but it’s not a good long-term solution. You might get away with it for a while, but eventually, you will need something more suitable and reliable such as a van or truck.It is not advised to use a personal bank account as the primary business account for a limited company. In these cases, all transactions are treated differently when they go through separate banking accounts, and it can be difficult to keep track of which payments were made from which accounts. Additionally, if there were ever any legal disputes or complications with the company’s finances, using a personal bank account could make things more complicated than necessary. Read more about accounts for sole traders.Benefits of a business accountHaving a dedicated business account offers several advantages to limited companies, including:

Separating personal and business finances: Having a dedicated account for your business will make it easier to track income and expenses, as well as provide better visibility when filing taxes.
Professionalism: Opening a company bank account gives your business a level of credibility and professionalism that is essential in today’s competitive marketplace. It also lets you set up online banking facilities, which can be used by authorized staff members securely and conveniently, making it easier to manage the day-to-day finances of your business.
Access to finance: Having a dedicated business account can make it easier for you to access additional funding, such as loans and overdrafts, if needed for growth or expansion. Most banks will require that you have a separate account in order to apply for any type of financing.
Tax efficiency: A business bank account also makes it easier to track expenses and income from different sources, which can be helpful when filing taxes.

Choose NarviWhen it comes to setting up a business bank account for your limited company, Narvi makes the process as simple and straightforward as possible. We want you to think of Narvi as the Ikea for small- to medium-sized businesses for payments and business needs. Although based in Finland, we offer payment solutions for online businesses across the European Union and beyond.Our Nordic-designed modern banking solution for global businesses features powerfully integrated solutions like global SWIFT wire transfers and dedicated IBAN accounts. We make working with local and international customers and suppliers seamless with effortless integration into your everyday business operations.So choose Narvi, a regulated and safe borderless business banking solution for your limited company.

Published January 26, 2023. Updated November 6, 2024.Author

Noah Edis, online entrepreneur and writer in the SaaS and fintech space. Noah has contributed to SEMRush, NordVPN, and dozens of other seven-figure content companies.

Disclaimer
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

Does a limited company need a business bank account?

Why setting up a dedicated business account is so important and how to go about it.

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