Every small and big business demands a business bank account for financial transactions. The object of crafting this article is to provide information about how to open a business account in India. Additionally, the procedure and list of required documents for opening a business account or current account in India.
In starting any type of small or big business, you must have a business bank account for transactions. Generally, it helps in many ways with a lot of features and benefits. The list includes getting payments from customers, paying bills to the vendors, employee salary payments, utility bill payments, etc.
However, the business account is different from the savings account. And different banks maintain different terms and conditions for opening and operating the business account.
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Advantages of Opening a Business Bank Account in India
A business bank account is one of the most important tools in running the business smoothly. It offers various types of advantages and benefits. These are:
a) First of all, a current account helps in accounting. Additionally, it helps to track the business transactions, and the financial health of the company and thus helps in decision-making.
b) You can easily draw a bank reconciliation statement at any time. And it helps you match the balances of ‘Cash in hand’ and ‘Cash in the Bank’.
c) Additionally, you can easily file the IT return with other statutory compliances like GST returns, professional tax, etc.
d) This helps in enhancing your company image and also in the growth of the business. A current account in the name of your business is an important factor in achieving this. When you issue and receive the cheques, they will carry the name of your current account. Having a current account signifies your seriousness in carrying out the business.
e) Maintaining a good business account ensures your eligibility for taking loans. It helps in getting a term loan or working capital loan that can help you to grow your business.
f) A business account offers different types of facilities that a saving account doesn’t. These are RTGS or NEFT facility, LOC, 24-hour phone banking, internet banking, etc.
Related: How to Get Bank Guarantee In India
8 Steps to Open a Business Bank Account in India
1. Determine the Type of Business Account
Decide on the type of business account that suits your business needs. Common types include current accounts, savings accounts, and specialized accounts for specific business types, such as sole proprietorships, partnerships, or companies.
Choose the Right Bank: Research and compare the services, features, and fees offered by different banks in India. Consider factors such as branch network, online banking facilities, customer support, and reputation. Choose a bank that aligns with your business requirements.
2. Gather the Required Documents
Prepare the necessary documents to open a business bank account. These typically include:
- Business registration documents (Certificate of Incorporation, Partnership Deed, or Proprietorship Registration Certificate)
- PAN card (Permanent Account Number) of the business entity
- Identity and address proof of the authorized signatories (such as an Aadhaar card, passport, or voter ID)
- Address proof of the business premises (such as rental agreement, utility bills, or property documents)
- Business-related documents (GST registration certificate, trade license, or any other applicable licenses)
3. Visit the Bank Branch
Schedule an appointment with the chosen bank branch and visit in person with all the required documents. Meet with a bank representative who will guide you through the account opening process.
4. Complete the Account Opening Form
Fill out the account opening form provided by the bank. Provide accurate information about your business, its structure, authorized signatories, and other details as required.
5. Submit the Required Documents
Submit all the necessary documents along with the completed account opening form. Ensure that the documents are valid, up-to-date, and comply with the bank’s requirements.
6. Initial Deposit
Make an initial deposit into the account as per the bank’s specified minimum balance requirement. This amount may vary depending on the bank and type of account you choose.
7. Provide Additional Information
The bank may require additional information about your business, such as the nature of operations, expected transaction volume, source of funds, etc. Provide these details accurately and honestly.
8. Signatures and Authorizations
Sign all the relevant documents, including account opening forms, mandate forms, and other necessary agreements. Designate authorized signatories who can operate the account on behalf of the business.
Once all the documents are verified, the bank will activate your business account. You will receive the account details, including the account number and Internet banking login credentials.
How to Choose the Right Bank & Account Type?
A business account is completely different from a savings account. So the bank where you have your account may not necessarily be the right one for your business.
Check what are the banks available in your locality. Because you must open a business account with a nearby bank for easy daily transactions. Contact each of them and understand the specialties and services.
Additionally, each bank may have different types of business accounts to offer. Check which fits your business the most. Check if there is any rule for maintaining balance, outstation cheque clearance charges, etc.
Many banks offer transactions based on minimum balance maintenance. These are very lucrative for startup companies. However, as your business grows, you may need to change the type of your account.
Choosing the right bank and the right type of account is extremely important for small business owners. Additionally, check the bank charges reflected in the bank statement every month. Try to get the maximum facilities from your business account with minimum cost.
Finally, if you are confused or not sure about what type of business account is perfect for you, talk to a financial professional in your area.
Frequently Asked Questions
Can I open a business bank account as a sole proprietor?
Yes, as a sole proprietor, you can open a business bank account using your PAN card and other identity/address proofs.
Can I open a business bank account online?
Some banks in India offer online account opening facilities. However, it is advisable to check with the specific bank for their online account opening process and requirements.
Are there any minimum balance requirements for a business bank account?
Yes, banks typically have minimum balance requirements for business accounts. The amount may vary based on the bank and the type of account you choose. Ensure you maintain the required minimum balance to avoid penalties or charges.
Can I add or remove authorized signatories later?
Yes, most banks allow you to add or remove authorized signatories at a later stage. You would need to submit the necessary documents and follow the bank’s process for making such changes.
Can I link my business bank account to other financial services, such as payment gateways or credit card processing?
Yes, many banks provide integration services for linking your business account with payment gateways, credit card processing services, and other financial solutions. You can inquire about such services with your bank.