Setting up a business partnership? If you’re the co-owner of a partnership, you’ll have a long to-do list in your first few months. One thing you may be looking at is whether to set up a dedicated business account for your new organisation.
In this guide, we’ll cover all you need to know about the basics of partnership bank accounts. This includes all the legal stuff about who needs to have one, plus the benefits of business bank accounts for partnerships.
So let’s get started.
When it comes to the legal structures of businesses, there are a few different types of partnership. If you have a general partnership, it isn’t mandatory for you to have a dedicated business bank account¹.
If you prefer, you can keep using a personal account for business transactions, just like a sole trader.
But there are certain benefits to having a dedicated business account. You might want to consider these when choosing a bank account, as it can affect the running of your business now and in the future.
For example, a business bank account can:
- Make it easier to separate business and personal transactions
- Make accounting and cashflow management more straightforward, which also helps when submitting tax returns to HMRC
- Make your business look more professional (especially if you deal with other businesses)
- Enable your business to accept customer card payments
- Enable your business to apply for loans and funding streams.
Your bank may also require you to switch to a business account at some point. Take a look at the small print of your personal account, as it may mention that the account is strictly limited to personal (and not business) use.
If the bank flags up that a lot of money or a large number of transactions are being made through the account, they may threaten to close it unless you open a dedicated business account instead.
Unlike general partnerships, certain business structures are required by law to have their own dedicated business account. These include:¹
- Limited partnerships (LPs)
- Limited liability partnerships (LLPs).
This is because these business types are legally separate entities, which need to be managed separately. This means that accounts, including all day-to-day transactions, also need to be handled separately.
Business accounts usually have higher monthly or per-transaction fees than personal accounts. They also offer low to no interest rates, and don’t usually come with the perks (i.e. switching bonuses) you get with some personal accounts from high street banks.
But there are still many advantages to having a dedicated business account for your partnership. For example:²
- Access to specialist financial support and advice from your bank
- Free and discounted business tools and services, such as accounting software
- Access to loans and other business finance to help your business grow
- Higher thresholds for transactions and overdraft limits
- Option to add credit cards and expense cards
- Fee-free initial period – many banks offer this on business bank accounts, particularly to new or small businesses.
And of course, your partnership business bank account should make accounting so much easier. With personal and business finances separated, you can keep on top of your cashflow and complete your tax returns with 100% accuracy.
If you plan to expand your business, the right bank account will be crucial. You’ll find your options severely limited with a personal account, not to mention how unprofessional it may appear to clients and customers.
Applying for a partnership bank account with your fellow company directors follows much the same process as for sole traders. You’ll need to provide the following:¹
- Details for the business – including contact details, registered address and Companies House registration (for limited partnerships and limited liability partnerships)
- Projected yearly turnover and other financial details – some banks may also required evidence of a clean credit history
- Proof of identification and address for all company directors.
You can expect the process to take anywhere from 1-4 weeks, during which credit and other checks will be carried out. Once this is done, your new joint business bank account will be open and ready to use.
Does your partnership trade internationally? If so, you’ll need a reliable, affordable way to make and receive global payments.
If you’re planning to open a new partnership bank account, make sure to take a look at the fees and charges list first. Unfortunately, some banks charge high fees to send money internationally. And as well as transaction and currency conversion fees, you may also lose money to unfavourable exchange rates.
A cheaper, more convenient solution is to use Wise. Open a Wise Business account and you’ll only pay tiny, transparent fees to pay clients and suppliers overseas. Better still, you’ll always get the real, mid-market exchange rate.
Wise is a great option for partnership businesses of all kinds, as it comes with a Wise Business debit Mastercard and seamless integration with accounting software such as Xero and Quickbooks.
It really is one of the easiest, cheapest ways to manage overseas transactions, as you can send, spend, receive and convert 50+ currencies all from the one account.
So, that’s it – all you need to know about partnership bank accounts. We’ve covered who legally needs to have one and the benefits on offer. Plus, alternatives for certain transactions, such as using Wise to save money on international payments.
As to whether it’s the right choice for your partnership business, it’s completely up to you. But in most cases, a dedicated business account makes everything from accounting to cashflow management so much easier – not to mention completing your annual tax return.
It’s the professional choice, and a good way to prepare your business for future growth. Good luck with your new partnership!
Sources checked on 27-January 2021.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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