What is a Sole Trader Business Bank Account and Why Do You Need One?

A sole proprietor business bank account is a special type designed for self-employed people who run their own businesses.

It's no secret traditional banks often overlook the needs of a self-employed sole trader.They often prioritize bigger business customers with larger accounts and more transactions.So, what can sole traders and smaller businesses do? You still need access to dedicated banking services to serve your business needs.But mixing personal and business transactions isn't sustainable long-term. Things will get messy fast.And yet, 54.3% of sole traders use personal accounts for business transactions — complicating expense accounting, taxes, and everything in between. Fortunately, we’ve got you covered with our ultimate guide to sole trader business bank accounts. That way, whether you’re a freelancer in the United States or a brand new startup in the European Union — you'll know how to find the best business bank account for your business needs.

What is a Sole Trader Account?

Let's start with the basics.A sole trader business bank account is a type of bank account that handles a sole trader’s business finances, separating them from personal finances. These specialized accounts are valuable for receiving payments, tracking business income, and business expenses without the risk of mixing in personal transactions.

Do Solopreneurs Require Separate Bank Accounts?

While it’s not legally required, this type of business bank account is a useful tool if you plan to conduct any kind of financial transaction in the course of your self-employed work.Without one, you won’t be able to accept payments or access the necessary credit facilities for running a successful business. In addition, having a dedicated business bank account can help you keep track of business expenses and income more efficiently than using a personal bank account. This will make it easier to file your taxes, as well as help you to identify any potential financial irregularities.Did you know? Narvi customers can open a dedicated personal bank account when registering.

Key Features and Benefits of Sole Trader Bank Accounts

Why should a self-employed sole trader set up a separate business account if it’s not legally required? These accounts give small business owners access to several important features. But what are the biggest benefits and features they offer? Don't worry, we'll provide a full breakdown below.Keep Personal and Business Finances SeparateHaving a separate business bank account guarantees that your personal and business finances are kept separate. This makes it easier to manage both types of accounts and ensures that any potential legal issues don’t affect your personal assets.While organization goes far in business growth, avoiding claiming incorrect deductions and being prepared for possible audits is critical for any business, self-employed sole traders included.

Access to Online Banking

Online banking is an expected feature, but when it comes to business accounts, it allows you to access your account and send invoices, accept international payments, and any other transactions you may need to undertake.Working with online banks is essential today as most financial processes happen online. Being able to send and receive online payments, check balances, send bulk payments, and access documents is a must-have.

Easy Domestic & International Payments

Accepting domestic and international payments can be a challenge with personal accounts. That's why it's essential to have a separate business account. Business accounts are purpose-built for common business transactions, like sending invoices and paying contractors or employees.A sole trade account allows you to accept payments from within the EU with instant SEPA wire transfers, or outside the EU with SWIFT. You’ll also be equipped to use other local payment systems, like ACH in the United States.

Business Credit Cards and Loans

Many banks offer credit facilities for those with sole trader business accounts. It could be in the form of a business loan or credit card, which can be used for making purchases or taking out loans.Some accounts also offer a business credit card, which can help you build business credit and manage your finances.

Cash Flow Management and Accounting

Having a dedicated business account will make it easier to track expenses and income and identify any suspicious transactions. Your dedicated business account also makes filing taxes much simpler.You’ll be ready to manage payments, invoices, and sending payments to contractors within the app. For sole traders, a business banking account might entirely prevent the need for an additional accounting platform.

Account Integration

For more advanced needs, the right platform will fully integrate with your chosen account software.The ease of sending and receiving payments is a powerful reason why sole trader accounts are so valuable for businesses. An account from a provider like Narvi can integrate with your payroll and accounting software, which is especially beneficial for receiving domestic and international payments.

Customer Service

Personal bank accounts certainly have customer service, but representatives aren't always familiar with the needs of a sole trader. Additionally, getting in touch with customer support and resolutions can often take longer due to higher volume of requests.A reputable business bank account will have customer service that understands the needs and urgency of self-employed sole traders like you.

How to Choose the Right Business Bank Account

You’re ready to set up a business bank account, but how do you choose the right one? Let’s break down a few things you'll need to consider when evaluating different options, so you can choose a bank that helps your business operate effectively and sets the stage for future growth. These factors include:

Fees: Have a strong understanding of fee structures and if they’ll work for your organization. While the lowest fees might not always mean the best bank account, they are a crucial factor to keep in mind when evaluating bank accounts.

Balance and transaction requirements: Some accounts will have requirements for starting and maintaining an account. Be aware of these requirements and ensure you can meet them consistently.

Account features: Does the account have the right features you need for your business? Built-in invoicing and integrations with bookkeeping apps are common features that can help streamline operations.

Customer service: Does the bank offer exceptional customer service? Find reviews from other businesses to help you understand the experience you might have. Look for a bank that provides good customer service, as this can be invaluable in times of need.

Business credit cards and financing: Does the bank offer the possibility of credit cards, credit lines, and other financing options that help grow the business? While you might not initially qualify, having the potential for future financing can go far in promoting business growth.

Evaluate each of these moving pieces so you have a strong understanding of a potential bank’s offering and how it will affect your business. Regardless of which bank you choose, make sure you have a strong understanding of the bank’s fee structure to avoid any surprises. Your chosen financial institution should support business success — not slow you down with unforeseen expenses.

Sole Trader Bank Account Requirements and How to Apply

Setting up a personal bank account has relatively straightforward requirements, but the process is a little more involved for business accounts. Let’s break down the signup process and requirements you’ll need to meet before you can benefit from a business account. Here are the requirements and workflows for getting started with a sole trader account with Narvi:

Choose your country
Create an account with an email and password
Verify your email and phone number
Complete the questionnaire, providing your name, address, residence, TIN, reason for opening an account, and source of wealth.
Provide necessary documentation, including:
- Photo ID and proof of address from the account holder (like a utility bill)
- Certificate of incorporation (only for limited companies)
- Proof that your company is registered
- Any contracts or invoices to show that the business is active and legitimate

Approval processes aren’t typically automated, so you may need to wait a few days before you are approved by compliance and can start using your new account.

What Fees Are Associated with a Sole Trader Account?

The fees and pricing associated with a sole trader account will vary based on the bank you choose. Narvi uses pricing tiers based on a variety of business factors. We'll unpack more about these later and what you can expect from a reputable sole trader account. Our tiers include:

European startups within the European Economic Area (EEA) with resident directors and low-risk business models.
International companies in low-risk countries outside the EEA with low-risk business models or complex holding structures.
Medium risk companies may require compliance reviews based on risk factors and company structure.
Enterprise customers have custom plans and fee structures based on their needs. Sole traders are unlikely to be in this category, unlike limited companies with complex operations, e.g., in the finance vertical.

Based on the above tiers, our services have standard fees and transaction fees for the following types of transactions (with the exception of enterprise customers):

One-time account opening fee plus three months of monthly deposits
Monthly fee dependent on your classification tier and any other added compliance requirements.
Minimum balance requirement equal to three months of monthly fees, which makes sure your account stays positive.
Internal transfers between Narvi accounts have a straightforward €1 per transfer
SWIFT transactions carry fees based on the banking network

Our fee structure is transparent and explained up front. You’ll never have hidden fees or sudden charges you weren’t expecting that can otherwise hinder your business.

Your solution

Get Moving Fast with Narvi's Sole Trader Accounts

You need a reliable business bank account that makes banking seamless, each and every time.That's why businesses partner with Narvi — an industry leader in business bank accounts with specialized products for sole traders like you.Make banking the easiest part of your day with options for both business and personal bank accounts.

With our business accounts, you get access to:

A dedicated euro IBAN account

A sleek UI for managing all your banking needs

SEPA and SWIFT transfers

OTC crypto-to-fiat-to-crypto settlements

API integration with your accounting or expense claim software

Personal banking solutions

Narvi Payments is a revolutionary new business banking solution specifically designed for small- and medium-sized businesses. Not only does it offer a custom and fully-flexible all-in-one solution for your finances, but it also makes international payments and currency exchanges incredibly easy.All Narvi customers get access to responsive customer service that actually cares about your small business. We're also regulated in Finland as an Electronic Money Institution and have passporting rights in 29 European countries. Looking for an easier approach to your business banking needs? Set up an account today.

Published February 9, 2023. Updated December 19, 2024Author

Eric Carriere is a fintech writer and entrepreneur with over a decade of experience in B2B and digital strategy. As the founder of WriteOn, Eric offers practical insights into solopreneurship and small business operations, helping businesses navigate the evolving fintech and SaaS landscape.

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.