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Discover everything you need to know about opening a business bank account if you're self-employed.
So whether you are self-employed or doing a side-hustle, it is often recommended to create a separate bank account to manage your finances. A number of providers have created bank accounts that have been designed for those who are self employed.
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Do I need a business bank account or can I use my personal one?
If your business is set up as a partnership or a corporation, you’ll have to run your business finances through a business bank account, for tax purposes.
If your business is a sole proprietorship, you are still taxed as an individual, so there’s no obligation for you to open a business bank account.
However, you may still find it useful to separate your business and personal expenses.
Can you transfer money from a business account to a personal one?
Yes, most business owners will pay themselves a salary – and perhaps an occasional bonus – from their business account into their personal account.
The important thing to do is to record and declare these transactions, for tax and bookkeeping reasons.
In many cases, these payments will be delivered automatically using a payroll software provider, so that they are automatically recorded and the taxes are paid.
If your business is set up as a partnership or a corporation, all one-off payments to your personal account will need to be signed off by your business partners.
Pros and cons
Pros
- Business bank accounts allow you to separate your business and personal funds. This makes accounting and bookkeeping far easier.
- Many accounts include useful incentives and improved rates on international payments.
Cons
- Business accounts don’t tend to have as many incentives as personal bank accounts.
- Many of the best business bank accounts have monthly account fees and may charge you for making payments.
The bottom line
For most types of business, it is compulsory to have a business bank account.
Even if this isn’t the case for them, the majority of business owners recognise the advantages of opening one.
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