This article will discuss how you can open a UK based bank account for your Scottish Limited Partnership (SLP) entity. So keep reading on.
A Scottish Limited Partnership (SLP) is a type of business structure that combines features of both a traditional partnership and a limited liability company. It is a legal entity that exists separate from its partners, providing a degree of limited liability for those involved. SLPs are governed by the law of Scotland and are commonly used for various business purposes.
Why Scottish Limited Partnership Is Popular?
Scottish Limited Partnerships (SLPs) are popular for several reasons that evolve around tax, limited liability, privacy and ease of use.
First and foremost, main attraction of SLP is that all partners have limited liability, which means that personal wealth of partners is protected from debt and liabilities.
Secondly, SLP is able to get into contracts, conduct business or own assets as any other normal company. The structure of SLP also allows its partners freely define their rights and responsibilities in a partnership agreement, which can be highly customized.
In addition, SLPs benefit from not being subject to income tax. Profits and losses of SLP is being past individually to the partners who then have a duty to report on those. This is obviously advantageous for tax planning exercises.
Let’s not forget the ease of forming such SLPs that are much easier than forming a regular company. Moreover, SLPs are also know for their confidentiality benefits that allow them not to fully disclose some peace’s of information to the Register of Companies.
Why It Is Hard To Open A Bank Account For Scottish Limited Partnership (SLP)?
Opening a bank account for Scottish Limited Partnerships (SLPs) has become more challenging in recent years, and this is largely due to concerns related to transparency, money laundering, and financial crime.
SLPs, like other corporate entities, have been associated with money laundering activities. The privacy features of SLPs, such as the ability to maintain the identity of beneficial owners confidential, have raised concerns among financial institutions and regulatory authorities.
The SLP structure is scaring the banks in a sense of reputational risks. If banks are associated with entities that are later found to be involved in illegal activities, such as money laundering, their reputation can be damaged and regulator might impose huge fines or restrict their business. The use of SLPs for purposes such as tax evasion or money laundering has led banks to be cautious about accepting them as clients.
The lack of standardized reporting requirements for SLPs is another challenge for banks that burdens their risk assessment procedures with these entities. In the similar vein, Common Reporting Standard (CRS) and the Automatic Exchange of Information (AEOI), require financial institutions to share financial account information with tax authorities. The privacy features of SLPs may conflict with the transparency expectations of these reporting requirements.
Due to all these challenges, banks may be more selective when considering whether to open accounts for SLPs.
How To Open A Bank Account For SLP?
Opening a bank account for a Scottish Limited Partnership (SLP) is a process that involves several steps. However, it's important to note that the process might be more challenging than opening an account for a regular business structure.
Choosing a bank that is SLP friendly is a hard part for sure. Not many traditional banks want to touch SLPs and if they do, the due diligence process might not scare you by the depth but rather the time it will take to open an account. Many SLPs benefit from working with digital so called neo-banks. IF you would like to get an up to date list of digital banks that are opening bank accounts for SLPs then do not hesitate to reach out to us and we will send it to you via email.
Once the bank is selected, speaking with the bank is also a task on its own. Banks do want to understand the activities of companies they onboard to a very detail. Be prepared to explain the partnerships activities and investments/assets that it holds, especially the flow of funds. More commonly requested documents during the bank account opening application are these:
-Certified copy of the SLP's Certificate of Registration
-Proof of identity for all partners (passport, utility bills, etc.)
-Business plan or overview of the partnership's activities
-Proof of the source of funds for the partnership
However, the due diligence process will take some time, and follow up from compliance will come. We advise SLP clients to be patient and answer all the questions in as much detail as possible.
Some banks may want to ensure that the SLP has genuine business activities and substance. Be prepared to provide information about the partnership's operations, clients, and suppliers. Onboarding team might ask for supporting documents such as agreements, invoices or bank statements. Be prepared for that too.
Once the account is approved, you will likely need to agreements and T&C’s and fulfil any remaining requirements to complete the account opening process. Do not forget to collect online banking access credentials and account manager contact details so that you can receive timely help and assistance later on.
Once again, if you would like to get our help in getting connected with several SLP friendly banks, fill out the contact form and we will get back to you within 1-2 business days.
In conclusion, while the Scottish Limited Partnership (SLP) offers appealing features such as limited liability and flexibility, opening a bank account for an SLP has become more challenging due to concerns related to transparency and financial crime. Navigating this process requires careful consideration of SLP-friendly banks, meticulous due diligence, and a recognition of the evolving regulatory landscape to ensure a successful account opening.