Do I need a Limited Company Bank Account ?

Limited Company Advice

I am often asked for advice on the question, is it a legal requirement to have a Limited Company Bank Account if you form a new Limited Company ? says Gary Alker of Preston based, Alker Accounting.

The short answer is No, however, I always recommend that the company does have its own bank account for the following reasons:

  1.  A Limited company is a separate and distinct legal entity (consider it as another person). Where an individual uses their own named bank account, and say that account is in credit, it could be considered that the person is borrowing money from the company (that other person), and this could lead to additional tax liabilities.
  2. If the business is subject to a tax investigation, all of its records and bank accounts will be reviewed. Once HMRC discover that a personal bank account is being used for company transactions, they may extend the investigation to that individual as well.
  3. HMRC may not allow any tax relief such as Bank Interest and charges on the grounds that they have not been incurred in the company’s own name.
  4. If the company becomes insolvent, and the owner wishes to rely on the principle of limited liability (to avoid being held personally liable for any business debts), you may still incur a liability, for example, any bank overdraft.

If you do decide to open a Limited company account, a new account and account number is recommended, as you will not be permitted to convert your personal or sole trader account by the Bank.

A properly set up company bank account will have its own name, and “Limited” or “Ltd” will appear in the bank account name.

If you do decide to form your own Limited Company, and require assistance, please do not hesitate to contact Alker Accounting based in Fulwood, Preston.

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