Step 5: Opening a Business Account

Once you are happy with your business plan you will be ready to approach a bank to set up a business account. Explore the incentives offered by each of the high street banks, and check internet banks and building societies.

Walk into any branch and they will give you a binder or folder with useful tips on self-employment and a CD Rom with a business plan outline for free. Many high street banks now also offer free personalised business set-up advice. (Though they may not understand the complexities of the Visual Arts and Creative Industries)

It is worthwhile noting that some high street banks do not charge for 'managing' your business account for the first year, sometimes offering free banking for up to two years. The financial sections of newspapers also offer good advice on bank, money and comparative deals such as the Guardian's Money pages.

It is not compulsory to have a business account in order to be self-employed and run a business. Transactions can be carried out through your personal bank account. However, it is more professional to have a business account and gives you a credible status and it is easier to separate your business and personal expenses. Trading out of one bank account can get confusing. Please note it is however a legal requirement for you to have a business account if you are trading as a limited company.

All banks offer online banking and most have mobile apps you can download to manage your account whilst on the move.

For more information on business-start-up bank accounts many price comparison websites such as Money Super Market helpfully do some of the legwork for you. 

It is worth knowing that if you use your personal account for business purposes Her Majesty’s Revenue and Customs (HMRC) now has greater powers to examine your personal bank account going back over several years if they suspect wrong doing. If HMRC desires it can investigate your business account should they suspect tax evasion or have other concerns.

You are more likely to be successful in your application for a business account if you do not require overdraft facilities, and you have the support of your local Enterprise Agency. Usually you just walk into a local branch and ask to open an account or apply via their website. You will usually need a business plan (including images of artwork or products) or evidence of trading such as accounts, promotional materials or letter headed paper. It is now the case if you are on the electoral role and have a good credit rating you can open a business account online or over the phone, though various documents which prove your identity would need to be send through the post or presented at your nearest branch before the account can be opened.

If you are worried about your credit rating you can check it via Unfortunately a poor credit rating can penalise you from setting up a business account. However Natwest offers a business account to customers with poor credit rating, ask for details about their ‘Foundation’ business account.

Alison Branagan (© 2002)

This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material.
The article is for information only, and not for the purpose of providing legal advice.
Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.