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 in nature 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 Business Bank Account in India
A business bank account is one of the most important tools in running the business smoothly. It offers various different 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, the financial health of the company and thus helps in decision making.
b) You can easily draw a bank reconciliations statement at any time. And it helps you match the balances of ‘Cash in hand’ and ‘Cash in Bank’.
c) Additionally, you can easily file the IT return with other statutory compliances like GST return, professional tax, etc.
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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 hours phone banking, internet banking, etc.
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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 personal 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 with your business the most. Check if there is any rule for maintaining balance, outstation cheque clearance charges, etc.
Many banks offer transactions on the basis of 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.
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Procedure to Open a Business Account in India
First of all, you will need to apply on the prescribed form of that specific bank. Generally, the bank asks all signatories to come in person to sign the account opening application form.
Secondly, each application may require signing a declaration to the effect that he or she has read and accepted Current Account Rules.
Finally, you will need to submit the documents according to the KYC rule.
Documents Required for Opening a Business Bank Account in India
You will need to submit the documents as per the KYC rule. And the list of documents may change according to the form of the organization. Here we put a detailed list of required documents for different business entities.
Related: How to Register a Company/ Startup in India
Documents Required for Opening a Business Bank Account for Proprietorship Firm
Here we put a basic list of documents. However, check with the specific bank what are the documents they ask for.
- Registration certificate if your firm is registered
- Passport size photo of the owner
- PAN Card
- Trade License or Shops & Establishment License in the case of retail business.
- Income Tax return
- Utility bills such as electricity, water, or telephone in the name of the firm
Documents Required for Opening a Business Bank Account For Partnership Firm
- Registration certificate if your firm is registered
- Partnership deed
- Address proof and identity proof of the partners.
- An official document identifying the partners holding the power of attorney
- Trade License
Documents Required for Opening a Business Bank Account for Private Limited Company
- Incorporation certificates with MOA
- Board resolution
- Company Pan card
- Company address proof
- Identity proof and address proof of each and every director of the company.
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.
Editorial Staff at NextWhatBusiness is a team of Business Consultants having years of experience in small and medium scale businesses.