Operating client & business accounts
Firms operate a client bank account and a business account, each subject to distinct requirements under the rules.
What "Operating client & business accounts" covers
- Client money must be held in a client account at a bank or building society in England and Wales: rule 3.1.
- The name of the client account must include the word 'client' to distinguish it from the firm's own accounts: rule 3.2.
- The business (office) account holds the firm's own money, including fees earned and money that is not client money.
- Where the only client money you hold is money for your fees and unpaid disbursements (before a bill), you may be able to keep it in the business account if you meet the conditions and inform the client: rule 2.2.
- You must promptly allocate money received to the correct client account and client ledger, dealing correctly with mixed receipts.
- Once a bill has been delivered and there is no other client money, money received for those costs may be treated as business money.
- Maintain a separate ledger for each client, plus the office ledgers, so balances can be identified at any time.
Key cases & statutes
The authorities and provisions most likely to matter for this subtopic:
How it's tested in SQE1
SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For operating client & business accounts, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.
Where candidates lose marks
- Omitting the word 'client' from the account name.
- Leaving client money sitting in the office account.
- Failing to allocate a mixed receipt promptly to the correct account.
Learn this subtopic in the course
A video lesson, notes and exam-style practice on operating client & business accounts.
FAQ
Is operating client & business accounts tested on SQE1?
Yes — operating client & business accounts is part of the SQE1 Solicitors Accounts syllabus (FLK2) and can appear in single best answer questions.
How is operating client & business accounts examined in SQE1?
SQE1 tests it by application: you're given a realistic scenario and choose the single best answer from five options. The focus is on using the law correctly, not reciting it — knowing the leading authorities (rule 3.1 (client account), rule 3.2 ('client' in the name)) helps.