Banks have evolved over the years to better cater to the needs of their customers. They have created unique accounts that ensure that customers can access various products and services and move their funds more easily.
For business owners that want to keep their business funds from their personal finances and enjoy other banking services like loans for their businesses at competitive rates, there are corporate accounts which we’re going to have a closer look at.
What is a Corporate Account?
Corporate accounts are bank accounts that one can open in the name of a business. The account facilitates transactions, receive income and store funds. The account is not just for conglomerates but also for small businesses required to pay taxes.
By opening a corporate account, you can enjoy business banking and other benefits from the bank associated with the account.
Difference Between Corporate and Business Accounts
While looking at corporate accounts, you will also come across business accounts. Both serve business needs, but they are different in various aspects.
- Company size – corporate accounts are ideal for medium and large companies. On the other hand, business accounts are suitable for smaller businesses that don’t have a significant cash flow.
- Company structure – Most companies requiring a corporate account have a board of directors in place. For business accounts, an individual can apply for the account.
- Benefits and services – Corporate accounts have lower transaction fees and better interest rates on profits. The benefits offered on business accounts are much lower and vary from bank to bank.
Benefits of a Corporate Account
Opening a corporate account has more requirements that businesses must meet. But the account has more benefits for the business, which include:
Improves credibility
Having a separate account for your business and personal funds is critical because the business appears more professional. When customers see that the business has a corporate account, they are reassured of its credibility and legitimacy. Also, a corporate bank account assures vendors and suppliers that they are working with a business and might give better product rates and discounts.
Better investment opportunities
Companies can use corporate accounts in different ways. One of those ways is parking and growing their excess funds through reinvesting. Companies can also use this type of bank account to manage an investment portfolio. They can also use the account to buy and sell stocks, bonds, new companies, real estate and other assets.
Better liability protection
There will always be risks when running a business. Separating the business’s finances is one way to mitigate the risk. Having a separate corporate account ensures you get liability protection. Because the account separates the company’s assets and funds from those of the business owners, this separation ensures that instead of a single person being responsible for the funds, the whole company is.
Cultivates better financial management
Having a corporate account will also help better management, budgeting and spending. It gives a better perspective of the business’s financial health away from its proprietors through detailed reports and bank statements about the company.
Easier and faster financial transactions
For the business to run smoothly, it needs a healthy cash flow. Business owners should be able to make essential business transactions efficiently and smoothly from anywhere. A corporate account can facilitate this because it comes with internet and mobile banking options. Other additional benefits of such accounts include the multi-location of funds with deposits and withdrawals available at any location.
Businesses can get some of these benefits from online payment services like Pay iO, which allows the business to receive money from multiple payment services and makes it easy to send money to suppliers through online banking options. Pay iO can also be linked to your bank account, opening up a whole world of new opportunities and ways to receive and send money for your business.
How to Open a Corporate Account
The criteria for opening a corporate account varies from bank to bank. The documentation required also depends on the nature and structure of the business. We recommend contacting the bank where you’re interested in opening the account to inquire about the eligibility and documentation required to open the corporate account.
What You Need to Open a Corporate Account
You can make the process of opening a corporate account easier if you have everything necessary beforehand. Generally, the information required should introduce the business and what it does. You should also provide information about the people who run the business along with some eligibility requirements like being at least 18 years old and having a UK address.
Some banks will also ask for identity and address verification for anyone with access to the account or owning part of the business (usually at least 25%).
Proof of ID documents
For proof of identification, you will need to provide the following:
- A driver’s license, passport or ID card
- Contact details such as your phone number and email address of the business and the applicant.
Proof of UK address
Banking providers may also request to see the following:
- Proof of personal address in the UK. This could be a recent bank statement, council tax bill or credit card statement.
- Proof of the business address in the UK. A recent utility bill or HMRC correspondence will do.
Business verification documents
The bank will need to prove the existence of your business and that it is legitimate. They will ask to see evidence of the following:
- Projected annual turnover
- The Companies House registration number of certificate of incorporation for limited companies.
- The number of employees you have, if applicable
- Your business tax status. For this, you might need to provide your Unique Taxpayer Reference for your National Insurance Number.
Another requirement that banks might request while opening a corporate account is proof that the business is running. They could ask for evidence that the business has a website or social media presence and that you are registered with an official industry body. Most bank providers should be able to tell you what they can accept as proof for the various requirements.
Are You Eligible to Open a Corporate Account?
There are additional requirements to be eligible to open a corporate account in the UK. First, you must be a sole trader, or a limited liability partnership, or have a limited company registered with Companies House.
Depending on the selected provider, there might be other requirements like minimum or maximum turnover limits or prohibited industries. You should always check with the provider before registering to ensure you don’t go through all the trouble for no reason.
Also, some banks have accounts designed for sole traders. With numerous options available, it’s critical to know how your business is structured to find an account that best serves your business and needs.
Disadvantages of a Corporate Account
Corporate accounts can be helpful, but they’re not without drawbacks and limitations. Before opening one, you should know about such drawbacks and whether you can do anything about them.
Transaction costs
Unfortunately, there’s nothing you can do here. It’s the nature of business. Because these accounts have higher demands and transact significant amounts, they have higher maintenance costs than regular accounts. Large businesses with a higher turnover will barely feel the costs, but smaller businesses might.
Lengthy account opening process
Opening a corporate account takes time and can be confusing. You need to provide a heap of paperwork that includes documentation of the major stakeholders and board members, their addresses and other paperwork related to the business. It can be draining and frustrating, but it is a necessary part of the process.
Also, the corporate account has the same deposit insurance restrictions as the personal account. However, some banks might offer special products that minimise risk exposure for the business, or you can always ensure you protect your business by staying below the deposit limit.
A Supercharged Corporate Banking Experience
While traditional corporate accounts have their benefits and serve certain purposes, a lot more convenience comes with the digital economy. You can unlock your business’s full potential with solutions like Pay iO. Pay iO has the best features to facilitate business banking efficiently and conveniently. It offers:
A tailored experience from small and big businesses
Banks offer most of the same services for small and big businesses. But we believe every business has unique needs and has the features to ensure you make the most out of it. Small businesses can get payments from banks directly from your customers. You can also manage transactions and expenses all at the click of a button or the swipe of a finger.
Big businesses can send and receive global payments. You can also conveniently manage your account and reduce administrative time and effort.
Mobile and web accessibility
You can access your account through our online platform or download the Pay iO business account app via Apple App Store or Google Play Store. You get to enjoy a vast feature collection that makes account management and payment processing easier, faster and more convenient.
Global payments
Get fast and simple multi-currency bank transfers. With our global network, you can have an account anywhere to ease the movement of funds. We also offer currency exchange to help you consolidate the different payments into one.
Enjoy modern convenience with our digital wallet, a business card and dedicated bank details. Everything is hassle-free and fully online. We provide you with the ultimate experience right from your phone or computer for businesses that want to keep up with the changing times.
Important Tips for Managing a Corporate Account
Once your corporate account is up and running, you could use some tips to ensure you maximise its benefits and grow your business.
Decide on an investment strategy
With your corporate and business accounts, having a suitable investment strategy that matches your financial goals is vital. There’s no shortage of investment options available at financial institutions, but these are the most common and most practical for most businesses:
- Portfolio rebalancing – Under this option, the bank designates a financial adviser who manages the company’s investment portfolio. The person makes decisions based on market movements and trends as well as the company’s income and goals.
- Dividend reinvesting – This is another way companies can make extra income using the money in their corporate account. You can choose from several preferred investment types depending on what you’re interested in, like stocks, bonds or real estate purchases. Some providers allow for this process to be automated.
Share access with the right person
Your corporate account is your business’s lifeline. You can’t afford to hand over the keys to the wrong person. So you should carefully determine who should have direct access to the account and when. This is particularly vital if the account is for business transactions and savings. Your choices should also be strategic to ensure your business runs smoothly. For instance, procurement and accounting should have access to ensure the purchase of new equipment and employee salaries are paid on time.
Explore the different interest options
When opening the account, look into your provider’s interest rates on deposits. Some institutions offer higher interest rates on deposits in some accounts. This can be a way for the business to earn more from their savings funds. When opening the banks, the directors should explore the different interest options of different banks and discuss the best options among themselves before settling on one.
Factor in the features
Corporate accounts are not equal. Each provider has varying benefits and features for their accounts. You should take time and research to make a more informed decision. Some banks offer a corporate account with mobile banking features, while others have specified transaction or balance limits. All these factors are crucial when determining the best corporate account to open. The goal is to go for the friendliest, most technologically advanced account, offering the latest features and most convenience.
Check the regulations
The tax regulations vary depending on the type of account and business type. You might want to consult a legal expert with in-depth knowledge of the taxation rules to ensure your business is fully compliant. If your company has a board of directors, they should open a corporate account. It has more benefits, investment opportunities and security. Once the account is up, you can link it to Pay iO to unlock even more functionalities and make the management of finances smooth and more efficient.
