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If you have just started your new business you have probably looked at business accounts and their fees. And with all the various charges you might be thinking is it worth the cost or can I use a personal account for business instead?
The quick answer to this question is if you are a creative professional with an online business then YES, you can use your personal account for business.
All opinions are my own. This article does not contain financial or medical advice, it is for entertainment purposes only.
But all businesses are nuanced, what if you sell merchandise or have a physical store for example? In that case do you still use your personal account? I’ll discuss that further down the article. But if you are a creative professional using a website, social media and an online store to create an income then this is what I would recommend:
Can I Use a Personal Account for Business?
If you are a creative and have incorporated your business (US)/ made your business a limited company (UK) then you are required by law to use a business account.
Now if you are a freelancer who has not done this you are a solo proprietorship/ sole trader and the IRS/HMRC make no distinction between you and your business entity. They are both one and same.
If you are also mainly making income online, from affiliate income, online store purchases, adsense etc. then there aren’t huge advantages to using a business account over a personal account, at least not dealbreakers that make a business account imperative.
The main reason I want a separate account for my business is to separate the business finances from my personal finances. Working out where you are spending money and differentiating it can be troublesome in the multitude of transactions on one account.
When it comes to Tax self assessment having clearly defined finances will be so much better for your stress levels!
You can do this with a second personal account. There is no limit to how many personal accounts you choose to open. And provided the bank do not prohibit you from conducting business with a personal account then it makes sense to use it.
A personal account will usually have no monthly charge or fees for incoming and outgoing transactions. Business accounts seem to have so many different fees for every type of movement of money from international payments to cashing cheques etc.
You avoid this with a regular personal account.
Of course there are still fees like ATM fees and some accounts have a maintenance fee do special types of current accounts.
Why You Should Get a Business Account
So the argument that you should get a business account to separate finances doesn’t wash, because you can just use a second regular personal account and forgo the multitude of charges/fees.
But there are still good reasons to get a business account over a second personal account:
1. Establishing Business Credibility
When you open a business account you are showing the banks immediately that you have a serious business.
Some banks will not offer loans or a line of business credit if you don’t have a business bank account.
On top of this, some clients, large clients in particular, will actually not want to make a payment to a personal banks accounts. In accordance with strict business rules, some large companies will insist on payment to an account in your business name.
It does make sense, paying an invoice in the name of the business they are working with is much more clear for them.
2. Better Connections to Business Tools
Lots of business accounts these days offer easy linking to accounting softwares like XERO, Quickbooks or FreeAgent.
This isn’t the only business tool though. There’s insurance software too. You can’t do this with a personal account. So obviously this is a huge advantage when it comes to bookkeeping and filing those tax returns.
3. Better Bookkeeping
As well as connecting to business accounting tools there are little helpful features that business accounts can perform that I think are great to utilise.
Automating your expenses is a great option, where the business account can automatically put your expenses into business categories to simplify your self-assessment return.
Speaking of tax. Some bank accounts have a feature where you can siphon a portion of your income every month for example. Starling Bank for instance call this Saving Spaces. This would be ideal for creating a saving pot for a tax payment for example.
4. Capturing Receipts
The better business account apps will offer much better functionality. For example Starling Bank’s app will allow you to capture receipts in app as you go. The immediate logging of receipts is a huge time saver.
5. Payment Alerts
If you’ve worked long enough in the industry you will know the pain of chasing payments from clients.
Now a business account won’t help chase up late payments, but when they do pay you can get notifications with business account apps. You can get real time alerts for when both money leaves or enters your account.
Personal Vs Business Bank Accounts
The most important function of whichever type of account you pick is to help you separate finances from your personal and business finances. Maintaining accurate and clear records is the backbone of a profitable business.
You can do this with either a business or second personal account.
After this though, you need to work out which areas better suit your business. Maybe the accounting tools make the charges and fees worth paying, maybe they don’t.
It’s not something I can work out for you, I can only give you the information you need to decide.
|Bank Features||Second Personal Account||Business Account|
|Clear separation of finances||✔||✔|
|Connecting to Business Tools (XERO)||✘||✔|
|Saving Spaces (putting aside funds for e.g. Tax)||✘||✔|
|Business line of credit||✘||✔|
|Business loan availability||✘||✔|
|Cheque Deposits Fees||No||Yes|
|Monthly Maintenance Fee||None (for normal personal a/c)||Yes|
|International Payment fees||None||Yes|
Business Account Tips
I really hope the information here is helping you decide. If you’ve got this far I want to offer some tips that will help you with your decision.
The first is look at the fine print, business accounts will have a section on the charges and fees. You need to look carefully!
On HSBC’s business account site there was no mention of international payment fees which are important to me. I had to download a pdf of their charges to find out they charge £6 for each international payment.
Another bank, Natwest UK, charges £0.70 for every £100 payed to your account, which can add up. If there isn’t a flat fee then there is a fee per £100.
Different banks will charge differently for moving money between accounts. Pay attention because there are always fees somewhere.
As your business grows it does make sense to move to a business account format. The features and tools you can use just makes your business more legitimate and work efficiently. You just need to make sure you’re aware of all the fees that can catch you out.
When I researched the fees for opening a business account I asked myself can I use a personal account for business instead, but I opted for a business account with fees that I felt happy paying.
For more on building your business check out my comprehensive guide on how to build a business article. I go over choosing a niche to setting up a website to which gear to buy.
Also check out more video content on my YouTube channel.
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