How to choose a limited company bank account

When you have formed a limited company, one of your first tasks will be to choose the best bank account for your new business.

Your company formations agent or accountant may already have offered to do this for you, or you may choose simply to open an account with your personal bankers.

We would recommend comparing several accounts before signing up, to ensure you get maximum value out of your bank.

Choosing a bank account – things to consider

1. Don’t necessarily opt for opening a business account with your personal bank. This may be the easiest option, and can add simplicity when linking online accounts, for example, but you should also check what ongoing transaction costs you will have to pay, and compare interest rates (particularly on deposit accounts rather than current accounts).

2. All the main high street banks offer up to 2 years’ free banking to start-up businesses. The incentives to sign-up are less attractive if you are moving bank accounts. Make sure you find out what fees will apply once the free banking period is over.

3. Compare interest rates between business bank accounts. Given that most current accounts offer almost zero interest (particularly post-crunch), focus on the rates offered on deposit accounts, where you may decide to place any tax liabilities for safekeeping.

4. Online banking is a must these days – you can save a substantial amount of time by using web-based services for everything from paying your staff to setting up direct debits and viewing your transactions 24/7. The quality of interfaces and online services on offer does vary a great deal between banks.

5. If face-to-face contact is important to you, find a bank which will provide you with a dedicated small business account manager. They will have experience of dealing with small limited companies, and will be able to help with any questions you may have.

6. If you want to accept card payments from customers, you will need to set up a merchant account. The banks charge a percentage of each transaction for the privilege.

7. If you want access to other banking facilities, such as loans and overdrafts, or more ’boutique’ products such as invoice financing, you may find that the bank you choose to open a bank account with is not necessarily the best choice for other services.

8. What transaction charges apply to your account (after any free period has expired)? Many banks charge a fixed monthly fee, with extra fees for all transactions passing through your account each month. Standing charges vary significantly between banks, with some offering genuinely free day-to-day banking.

For information on how to actually set up your company bank account, click here.

Banking resources

Here are links to some of the leading business banking providers: