Any contractor thinking of setting up their own Ltd Company needs to be clear about one fundamental point: keep your business finances wholly separate from your personal finances, preferably not just in separate accounts but in separate banks. If things get tough, banks can resort to a ‘right of set-off’ to freeze both your personal and business accounts if they’re under the same banking roof (see “Cash Flow Hiccups” on this site, 16th June 2010). But there are also positive advantages to opening a dedicated business account in a separate bank.
For one thing, banks offer incentives for start-up businesses, such as fixed-term free banking. Barclays presently applies no charges at all for two years; more typical is Lloyds TSB, which offers 18 months. Many also offer a dedicated business account manager (but ask about this when you’re searching around for the best deal). You should also be canny – if you’re tempted by the free banking, ask about what fees will be applied once the “honeymoon” ends. These days, access to online banking is a must, so make sure that’s part of the deal, too.
If you’re “taking the plunge” of trading as a Ltd Company contractor, your bank will need your Certificate of Incorporation as well as a list of eligible signatories for the account. And don’t forget to take several forms of identification which confirm you as Company Director. It’s probably a good idea to hand these practicalities over to an experienced contractor accountant, who’ll know exactly what’s required and won’t miss anything out (like the mandate which authorises the company to appoint a banker). If you’re approaching an accountant for the first time, you’ll probably find they’ll offer this service as part of the welcome to new clients. Off you fly!
