How To Open a Limited Company Bank Account?
Find out how to open a limited company bank account by researching the process of establishing financial accounts for this type of business entity.3 min read
2. Choosing a Bank
3. Opening an Account in a U.S. Bank
Find out how to open a limited company bank account by researching the process of establishing financial accounts for this type of business entity. A private limited structure is popular in both India and the UK, although these businesses must open a U.S. account to do business here. Sole proprietors can mingle business and personal finances, but limited companies are required to have separate, dedicated business bank accounts. That's because a limited company is legally considered completely separate from its directors and shareholders. Its finances must be traceable by the IRS and other authorities.
The Process of Establishing a Business Account
If you have hired an accountant for your limited company, he or she may establish an account on your behalf. You can also do this yourself by either signing up on your bank website or visiting a branch in person. This process will be simpler if you choose to work with a bank where you already have personal accounts. The information you will need to provide includes:
- The name and contact information for all executives
- A registered business address as well as a personal address if you've been at your current address for fewer than three years
- Details about your current bank account
- Date of birth
- Residency status and nationality
- The name of your limited company
- Your company registration number
- The number of transactions you expect to process each month
- Anticipated borrowing requirements
- Your business incorporation documents
- Your passport or driver's license
Choosing a Bank
Although it's fairly easy to set up a bank account for your business, you should carefully consider the bank at which to open your account. Obviously, your own bank is the easiest and most convenient option. However, this may not be the best option if your company has several directors who each use a different bank. Your bank also might be great for personal banking, but not as great for business banking. You'll need to use your business account to:
- Pay director salaries
- Receive client payments
- Pay shareholder dividends
- Pay monthly and annual taxes and fees
- Claim personal expenses
- Make direct debits for phone and utility bills
Factors to consider when choosing a bank include:
- What charges and fees must be paid for business accounts
- Whether referrals and testimonials from satisfied customers are available
- Whether phone and online banking is available and if fees are associated with these services
- Whether interest will be paid on your balances
Because the bank will need to check the identity and credentials of all your business directors, it can take up to four weeks to open a new bank account for your limited company.
Opening an Account in a U.S. Bank
Limited companies based in the United Kingdom must open a U.S. bank account to do business in the states. Doing so allows you to tap into a major market and has the potential to substantially grow your business.
- First, register for a U.S. employer identification number (EIN) by completing IRS Form SS-4.
- Complete W8/W9 forms to establish tax classification in the United States as either a domestic or foreign entity.
- Consider opening your account with a UK-based bank that has branches in the U.S., such as Barclays or HSBC.
- Find a U.S. representative such as an accountant who can visit the bank with your required paperwork.
Although it can take several weeks to establish a U.S. bank account for a foreign entity, it can sometimes be done in a few days if you come prepared with your passport, a second form of ID, your EIN, your corporate papers from the UK, and your W8/W9 forms.
Because the U.S. is a treaty country with the UK, you do not need to pay U.S. taxes unless you are permanently established in the country and have a fixed location. If you aren't sure, consult a tax specialist based in the U.S. to make sure you're on the right side of the law.
Failing to pay taxes as required can subject your business to an IRS audit. If you're not sure whether your business has a permanent establishment, file Form 1120-F to raise your concerns. This may protect you from losing deductions if an audit does occur.
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