What type of account do I need for my small business?

Taking the leap into small business ownership is exciting, but navigating the financial aspects can feel overwhelming. This guide will look at different types of small business accounts in the UK, answer common questions like "Can I use a personal bank account for my business?", and highlight the benefits of opening a business bank account.

Can I use a personal bank account for my business?

While it might seem convenient to use your existing personal current account for business transactions, it's generally not recommended for few reasons:

• The law – for limited companies, a separate business account is a legal requirement
• Record-keeping – mixing personal and business finances can make bookkeeping difficult, but a dedicated account keeps it separate from the start and can help you organise income and expenses
• Professionalism – presenting a business bank account to clients and suppliers portrays a more professional image.

Do I need a business bank account if I'm self-employed?

Even as self-employed, a business bank account can be beneficial. While not a legal requirement, it can help separate your personal spending and simplifies bookkeeping.

Additionally, some business bank accounts offer features and tools like online and mobile banking, access to business insurance and ways to take card payments.

What counts as a small business?

A ‘small business’ usually refers to a business with a turnover below a certain threshold. The UK Government defines a 'small business' as a company that has at least 2 of the following:

• A turnover of £10.2 million or less
• 50 employees of less
• £5.1 million or less on its balance sheet

Benefits of a small business account

If you’re just setting up or are in the early stages of running a small business, a dedicated account can offer many benefits, including:

• Free business banking – some small business accounts offer free business banking or banking with no monthly fee to help you get off to a good start
• Simplified bookkeeping – track income and expenses without getting them mixed up with your personal spending
• Improved budgeting – with all your business transactions in one place, you can get a clearer picture of your business finances
• Easier access to credit – having a business account history can strengthen your application for business loans or credit cards
• Dedicated business features – many providers offer features and perks like discounted payment terminals, online banking with invoicing tools, and cash deposit facilities
• Protection – business accounts may offer higher transaction limits and fraud protection compared to personal accounts.

How to pay into a small business account

When you’re setting up your business, you need to consider how you’ll take payment. There are several ways to pay into your business bank account, and depending on type of business and industry, some may be more common than others.

Some ways to get paid into your business bank account are:

Card payments

Card payments can be taken in person, online or over the phone. If you accept card payments from your customers, you can link your device or terminal to your business bank account for quick and secure payments.

Co-operative Bank business customers can access an exclusive package of benefits with Clover. Learn more about how Clover can help you take card payments.

Cash deposits

If your business handles cash daily, look out for cash deposit fees, as you may be charged based on the amount of cash you pay in. Some accounts will be more competitively priced than others so it’s worth comparing business bank accounts before applying.

Bank transfers

In some industries, bank transfers may be a more common way to get paid. With bank transfers, clients can send electronic payments directly into your business bank account.

Online payments

If you’re setting up an Ecommerce business allowing customers to purchase products from your website, you’ll need an online payment processor, like PayPal or Stripe, to take payment securely.

The online payment processor will link up and pay out to your business bank account.

Choosing the right business bank account

With a variety of options available from high-street banks, challenger banks, and online-only providers, it's important to choose a small business account that’s right for your specific needs. Some factors to consider include:

• Account and transaction fees – understand monthly account fees and any per-transaction charges
• Minimum balance requirements – some accounts have minimum balance requirements to avoid fees, which could impact your cash flow flexibility
• International banking – if your business involves international transactions, choose an account with competitive foreign exchange rates
• Customer service – consider the bank's customer support channels and how quick they are to respond to questions.

The Co-operative Bank have a range of accounts to suit different needs. See our business bank accounts to find the right account for you.