Hi all,
Im hoping someone may be able to offer me some guidance...
I recently took a career break from my long term job in order to care for my partner who is undergoing cancer treatment. Having always worked and not living the thought of depending on benefits, i have been using the time to work in a business idea ive had for a long time but never had time to fulfill. I have completed my legwork and have all but secured the contract with my customer which, if my projections are correct should bring me in a minimum of £2000-£3000 per month to start with. I will be invoicing one client and receiving their payment. There will at the moment only be the one client.
My problem s that i am unable to get a business bank account. I had some credit issues approx 4 years ago which i think is the cause. i completely accept this and despit my regrets of it, had little choice at the time and have learnt to live with it. I have spoken with my banks business manager who has confirmed this and told me "off the record" that i could use my personal account - i have two seperate accounts as upgraded some time back but left the original open, for a period of time until the bank can see that i am using it as a business account and have regular income at which point they may then be able to open a normal business account. I dont have a problem doing this but have a couple of questions...
- is it legal to use a personal account as a trading account?
- should i use it purely as the business transaction account (i still have a few direct debits which go from it)
- i think i will look rather unprofessional to ask my new client to make their cheque payable to me personally. Is there any way of avoiding this?
Hoping someone can advise..
Shell
you can rename a personal account very easily to pretty much anything that you wanted to. Talk to your business manager at the bank about renaming your semi dormant personal account to your trading name.
There are a lot of decisions that you need to make such as the legal form of your business (limited or sole trader). Also you will need to keep HMRC informed of your change of status.
You give the impression that you have more than one bank account already. Can you not move the standing order to another account and then use this account purely for business purposes?
It is not illegal to use a personal account for trading but it will generally cause you to have higher accountants fee's if your professional advisor needs to unravel a mix of personal and business finances.
Many accountants will not bill your business for advice until the period end, and many others will give you an hours consultation for free to see whether or not they are able to help you (don't expect actual help and advice during that time, those meetings are just to see whether a professional relationship would be viable). It maybe a good idea to look around good local accountants and bookkeepers to give you a helping hand getting started.
January is not normally a good time to be calling accountants as it's one of the busiest months. If you hold off until at least the second week of Feb you will find that financial professionals will have a lot more time to help you get started.
Wishing you the very best in your new venture and hope that you get lots of useful advice from your posting on here.
kindest regards,
Shaun.
P.S. where abouts in the Midlands are you?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for your advice. I do have another current account so i could arrange to use my one account only for business purposes i just didnt know whether the bank would get funny if i (hopefully) start putting through lots of money. At the moment im not sure whether the payments will come in cheque, cash or direct transfer form. Im assuming cheque but may be wrong. If it s cash would the bank not question that with a personal account?
Can i ring my bank account manager and ask them to change the name to a trading as name? I didnt think that was an option but it would be great uf it was as its a major worry at the moment that i will get the contract but then fall through because i dont have a professional sounding account for payments etc.
I have been considering setting up as a limited company if i do get the contract but have no idea how to do it or what and when my legal ibligations in terms of book keeping etc would start!!
Whilst I'm very reluctant to disagree with Shaun (Shamus), I would be extremely surprised if your bank allowed you to put a trading name on a personal bank account. The only hope I would suspect you have is that your business manager has (off the record) mentioned you using your personal account for business - but I imagine you will find that he/she thought you would use your own name and not bring to the banks' attention quite so obviously what you are doing. I would not speak to any other member of staff about this, but go back to the business manager.
Whilst it's not illegal for a personal account to be used for business purposes, it's usually outside the terms & conditions of a personal account which means the bank could close your account if they thought it was being used as a business account.
Most of the banks offer a kind of basic business bank account which they offer to new businesses that don't qualify for a full business account (usually for historic credit reasons) - which means that it is a business account and can be titled as such (trading name etc) but they restrict any facilities, so no overdraft or credit cards, sometimes no debit cards and just a cash card. The account is then reviewed after 1 or 2 years and upgraded on their system to a full account if they are happy with how it's been run. I'm surprised you weren't offered this, and would suggest it may be an idea to shop around to other banks if yours doesn't do this.
I'd certainly hold off a limited company until this is sorted, as no bank will allow a personal account to be a limited company!
darn it, two messed up answers in one week (#1)... Must be senility setting in. Either that or I've just fried the old grey matter this month!
Anyway. You're completely right Helen and I'm wrong.
I'm so used to accounts having Pseudonym's and changing business account names that I went and forgot completely about not being able to change the primary name on the a base personal account unless there has been a real change such as through marraige or change by deed poll. Darn it. You would think that I should just know that sort of thing considering the day job wouldn't you!... Actually, my side of banking is payments and corporate rather than retail so I'm using that as my excuse for my shoddy first answer.
Many thanks for picking up on my mistake there.
Shell, Helen's answer is much better than mine. Many appologies for the misformation in my first answer although there is still quite a bit in the rest of the answer worth reading.
kindest regards,
Shaun.
#1. The other incorrect answer was an almost throw away last line at the bottom of a response about tax credits on dividends.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
