Partnership Bank Account: Do I need a joint business account?

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. We’ll also outline the benefits of a Wise Business account, particularly for sending and receiving overseas payments.

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So, let’s get started.

Do I need a business bank account for a partnership?

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.

When do you need a business bank account for a partnership?

If your business is a limited partnership (LP) or limited liability partnership (LLP for short), then you are required to set up a business bank account for your partnership.

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.

How can a business bank account help your partnership?

There are a number of ways in which a partnership business bank account can make running your business easier²:

• Make it easier to separate business and personal transactions

• Simplify accounting and cash flow management, 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 partnership business bank 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.

What are the benefits of having a business account?

Business accounts usually have higher monthly or per-transaction fees than personal accounts. They also offer low to no interest rates, but don’t usually come with the perks (such as switching bonuses) you can 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:³

• 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 cash flow and complete your tax returns with 100% accuracy.

If you plan to scale 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.

How to get a joint business account for my partnership

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:⁴

• 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.

Discover Wise Business multi-currency account

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, always check the fees and charges first. Some banks charge high fees to send money internationally. In addition to transaction and currency conversion fees, you may also lose out to high exchange rates too.

A cheaper, more convenient solution could Wise Business. Open a Wise Business account to enjoy low transparent fees when sending and receiving international payments. Better still, you’ll always get the mid-market exchange rate.

Wise Business is a great option for partnership businesses of all kinds, as it comes with a Wise Business debit card and seamless integration with accounting software such as Xero and Quickbooks.

Get started with Wise Business 🚀

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 cash flow management so much easier – not to mention completing your annual tax return.

Sources used:

Sources checked on Apr 16, 2024