Business banking
Just as it is necessary to make a clear distinction between yourself and your business in order to keep your sanity (see How to stop your business taking over your life) it is important from a legal perspective to separate your personal finances and your business finances.
Bank accounts. Having a business bank account through which you conduct any work-related transactions (payments from clients, bills, rent, office expenses and business purchases), and which is kept apart from any personal banking, is crucial.
You may even wish to have your accounts in separate banks. This will prevent your bank being influenced by your business account when making decisions about your personal finances. Some contractors, moreover, open two business accounts: one for the transactions mentioned above and one with a higher interest rate where they can accumulate money for making tax and VAT payments.
Which bank? As a contractor, it may be in your best interest (no pun intended) to shop around for a bank that offers high interest savings accounts and even specialist contractor accounts.
Whatever kind of bank and whatever bank account you choose, make sure it offers an overdraft, loan finance and credit arrangements. Free banking and a good interest rate on cash savings will also benefit you; the latter is, in fact, crucial, since the interest you earn on company money is outside IR35.
As well as a company chequebook, you may wish to consider getting a company credit card. This will prevent the confusion that is likely to result from making company purchases on your personal card, allowing you to keep better track of your finances and work out tax-deductible expenses more easily.
Business development loans
The costs involved in funding a new business can be considerable: office space(if you are not working from home), insurance, equipment, membership to specific trade organisations, subscriptions to magazines and online publications, travel expenses to seek out new clients, the list goes on and on.
Signing up for a business development loan can be an effective way of funding your business when it starts out, increasing cash flow and ensuring you have enough capital to support both yourself and your new initiative. Make sure you shop around for a competitive rate.
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