Lots of limited companies will have money sitting on their balance sheet which, given the returns from cash have historically lagged inflation, is being gradually eroded by rising prices.

If this is genuinely surplus cash and not needed for the day-to-day running of the business, a potential remedy could be to open a company dealing account which would enable the investment of these funds in the financial markets.

Accounts can be funded using a company debit card or you can set up regular payments through a direct debit from a nominated banking account. Typically, the charges for investing will be the same as those on standard dealing accounts for individuals, although some platforms will charge more. With AJ Bell there is no limit on how much you can invest and you can withdraw the money at any time.

WHAT CAN YOU INVEST IN?

You will usually be able to choose from a wide selection of funds, investment trusts, shares and exchange-traded funds. Investment choices will likely depend on how long a business can afford to have the cash tied up. Typically, to invest in the stock market, whether as a corporate entity or individual, you would want to allow at least five years before you need to access the money to avoid being caught out by short-term volatility.

Until you sell an investment it will sit on your company’s balance sheet as an asset and any gains will be subject to corporation tax. 

It’s important to note this brief guide is not exhaustive and if you have questions on tax or accounting it is worth seeking expert advice.

OPENING AN ACCOUNT

Several platforms offer this type of account. To open AJ Bell’s Limited Company Dealing Account, you need to complete a form which must be signed by a minimum of two directors or one director and the company secretary (unless it’s signed in accordance with the company’s signing resolution).

If there isn’t a company secretary then a sole director must sign in the presence of a witness and the nominated contact on the account must be among the signatories.

This nominated contact is the person authorised to act on the account and they must be an employee of the company. All controlling persons would be subject to anti-money laundering and tax checks. Plus, you’ll need a Legal Entity Identifier which is used to identify the company as the entity executing trades.

Once you’ve sent off the form your account would typically be opened within 48 hours although it can take slightly longer.

DISCLAIMER: Financial services firm AJ Bell, referenced in this article owns Shares magazine. The author (Tom Sieber) and editor (Ian Conway) own shares in AJ Bell.

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