Bank Accounts

[MD1968]

I am new to contracting and close to securing my 1st contract.

I am looking to set up a ltd company, but dont have good credit ratings personally from several years ago, which make it very difficult for me to get a personal bank account,

Does anybody know if same rules apply to buisness bank accounts on credit checks or does it go on the ltd company. I dont want overdrafts or credit cards or anything like that.

Also do you have to use buisness accounts, or can standard bank account be used, as I have several where I already have set up but dont use very often.

Any recommendations on banks to use and advice appreciated.

[malvolio]

Really, if you don't have a grasp of these basics, why are you going freelance? It's not like there isn't enough information washing around already...

Anyway: your company is a whole new legal entity: it starts from scratch, so your personal history is neither here nor there (unless you're an undischarged bankrupt, of course). Company money and your money are two different things. Understand that now and always keep the separation very clear in your head.

And if a bank thought you were using a private account for company business, it would freeze it very quickly and launch a money-laundering check.

[ASB]

so your personal history is neither here nor there

Apart from the fact that they will do a credit check on the applicants individually and any adverse will be considered. In parctice most banks will not offer a company account where the directors don't show up clean enough to be granted a new personal account. There are ways round this using nominees, but then they will often also credit check the signatories.

It is likely that the OPs current bank will offer a company account. Anybody else might be more fussy.

[Denny]

Really, if you don't have a grasp of these basics, why are you going freelance? It's not like there isn't enough information washing around already...

Anyway: your company is a whole new legal entity: it starts from scratch, so your personal history is neither here nor there (unless you're an undischarged bankrupt, of course). Company money and your money are two different things. Understand that now and always keep the separation very clear in your head.

And if a bank thought you were using a private account for company business, it would freeze it very quickly and launch a money-laundering check.

I doubt that this is true Moldivo. If a contractor has opted in or, if opted out, wouldn't still qualify for IR35 exemption a personal bank account would be fine too. After all, Gordo doesn't consider us to be own businesses anway. It may be more convenient though to have a business account if some of your work is direct during the year that satisfies all the own business criteria set out by Gordo.

As long as you have all your receipts and can demonstrate that you are entitled to the dispensations you are allowed by law that these receipts relate to then it doesn't matter a jot whether you use a personal bank account or not given that your fees and their origin would be readily viewable on your statement in the event of questions being raised about this by the authorities. After all employee salaries are also paid into personal bank accounts. It's much more important to ensure that your travel expense tickets and phone calls are kept separate from your personal use tickets and calls by not using all inclusive travel cards and phone tariffs that have personal use inclusions priced into them.

[VectraMan]

I'm just getting a bank account now (well tomorrow) and I've had to put down all my personal details, my personal account, and previous addresses and the like, so clearly they're going to do a check on me personally as a director and signatury. I also have to go and identify myself with my passport and utility bills. According to the bumf, "due to money laundering regulations" it can take 2 weeks to set up a business account, so clearly they take this stuff seriously and aren't just going to okay an account for a business because it's a seperate legal entitiy without checking out it's directors.

Having said that, I would think with contractors they wouldn't take issue with your personal rating as you're probably staying in credit, and won't have that many transactions. The PCG supposedly has contractor friendly deals with Barclays and CoOp, so perhaps those are the people to approach.

[malvolio]

You're still not thinking clearly, are you. It's a Company, not a person. By all means find out who the director is and what their history is like, but the bank's interest in the business account stops and starrts with income and expenditure. If the business in question is likely to be solvent (or at least, likely to provide them with ongoing business!), then that's the extent of the financial concern. If your history turns up a conviction for fraud or bankruptcy or laundering or anything else of similar ilk, they may well refuse - but your past personal financial status won't be the major factor.

[ASB]

but your past personal financial status won't be the major factor.

With most banks it may well be. Like it or not they pretty much view small business as an extension of the owners(s) - whether it is incorporated or otherwise. Once the business has a few years history of its own things improve.

[dazza12]

You're still not thinking clearly, are you. It's a Company, not a person. By all means find out who the director is and what their history is like, but the bank's interest in the business account stops and starrts with income and expenditure. If the business in question is likely to be solvent (or at least, likely to provide them with ongoing business!), then that's the extent of the financial concern. If your history turns up a conviction for fraud or bankruptcy or laundering or anything else of similar ilk, they may well refuse - but your past personal financial status won't be the major factor.

I'm afraid you're wrong there malvolio. Banks see any customer as a risk, even if it's obvious the customer in question is going to be permanently in credit.

I've been trying to get a company bank account for a couple of years now, but due to past problems on my credit file, it's almost impossible. Every bank I have applied through has checked my credit file as a director, and has refused to offer an account. A couple I already hold personal accounts with, and it makes no difference.

There is the possibility of using some of the companies that specifically advertise non-status business bank accounts as they seem to be able to bypass the usual checks. However, if you go down this route, avoid Credit4All (or variations on the name) like the plague.

For now, I use a separate personal account. My bank know about this and have no problem with it. In fact, it was suggested to me by their business manager as an interim solution.