You’ll need a small business bank account for transactions if you are launching a small or large firm. It aids in a variety of ways and has numerous characteristics and advantages. Receiving payments from clients, paying vendor bills, paying staff salaries, and paying utility bills are all on the list. The business account, on either hand, is not like a savings account. And the terms and restrictions for opening and operating a business account vary by bank.
Start-ups are an important part of the entrepreneurial ecosystem. These companies are attempting to overcome challenges in the Indian market and have gained regulatory attention and assistance in expanding their operations. The purpose of this post is to advise readers on how to open a small business bank account in India. In addition, the procedure for opening a small business bank account or current account in India, and a list of essential papers.
What is a Business Account?
A Business Account is a form of a Current Account with added benefits. These extra features vary for every bank; however, they often provide a single account with a variety of services. The Current Account entitles the holder to discounted access to other bank services, such as marketing, and the ability to network with peers in bank-led projects. A customized Business Account might assist a startup in obtaining additional knowledge from the bank. A start-up Business Account gives a start-up with additional resources to help them grow their business.
Read more: How To Open A Demat Account Online
Benefits of a Business Bank Account
Setting up separate business bank accounts is a necessary part of running a small business. Most business bank accounts offer privileges and bonuses that personal bank accounts do not, according to the US Small Business Administration. Here are four reasons why small business bank accounts are necessary.
1. Liability coverage is limited
By keeping your business and personal funds separate, business banking helps you minimize your liability. “Regardless of the type of business you own, keep your personal and business finances separate,” advised Chas Rampenthal, chief counsel at LegalZoom.
2. Customers’ purchase protection
Merchant accounts are available from a variety of institutions as a business banking alternative. Merchant services are beneficial to your business because they protect your clients’ personal information as well as their purchases.
Checks can be made out to the business with a small business bank account, which is more professional than having consumers write checks to your name. Customers can use credit cards to pay, and workers can manage banking for the company.
4. Alternatives to credit
Some banks offer an emergency line of credit that you can utilize in a pinch. Many of them also have business credit cards that you can use to establish a credit history for your new company.
Types of Business Bank Accounts
Business bank accounts come in a variety of shapes and sizes, just like personal bank accounts. The four most frequent forms of business bank accounts online over the internet are as follows:
1. Checking Account
A business checking account is a terrific way to keep track of wages, spending, and other essential financial chores.
2. Savings Account
You’ll most likely need business savings to account in addition to a checking account to keep track of your earnings.
3. Merchant account
Check with your bank to see whether you may open up a merchant account if you plan to take credit and debit card payments. “Some banks offer merchant services as well, depending on who you bank with,” Julia Spahiu, founder and CFO of Edi and Sienna Group, explained.
4. Credit Card Account
A business credit card can use for unexpected expenses or other miscellaneous expenses. The most important advantage of a credit card for entrepreneurs or those with bad credit is that it can help you establish or improve your company’s credit score.
How to Open a Business Bank Account for Startups?
It’s simple to open a small business bank account for new businesses. The steps to open a start-up business account are as follows:
- Obtain a business license for your start-up. It might be a sole proprietorship, a partnership, or a limited liability corporation (LLC) under the Companies Act. It is preferable to apply for the necessary licenses and register under other statutes such as GST, Income Tax, Customs, and DGFT rules.
- On the website of your selected bank, you can apply for a start-up business bank account.
- If the online application does not function, you can apply in person at a bank location.
- Gather the necessary Know Your Customer (KYC) documentation for opening business bank accounts online.
- The bank will complete the account opening procedures and open a new Business Account for you.
- After the Business Account is established, the start-up can take advantage of the bank’s additional services. Professional services at negotiated prices, cheaper access to credit, zero balance account facility, waiver of charges on Debit Cards, competitive access to foreign exchange, and so on are some of the usual amenities offered to start-ups.
The Bank also offers cash management services, as well as access to the SmartBuy marketplace, digital payment assistance, and bulk payments. It also gives you access to PayZapp for Business, the Smart-Up interface, and other benefits that make the Business Account a great option for new businesses.
How to Open a Business Bank Account for Individuals?
Individuals must provide any of the following documents to confirm their identity and address in order to create a bank account:
1. Acceptable Personality Verification of Legal Name
- PAN card (passport)
- Voter’s Identity Card, Driver’s License, and Job Card issued by NREGA, duly signed by a state government officer, and Letter issued by the Unique Identification Authority of India (UIDAI) with name, address, and Aadhaar number
- Identity card (subject to bank approval)
- A letter from a recognized official authority or public servant confirming the customer’s identity and residence to the bank’s satisfaction.
2. Acceptable Address Proof is an address verification service
- Telephone bill
- Bank statement
- Letter from a well-known public figure
- Electricity bill
- Ration card
- Employer’s letter (subject to satisfaction of the bank)
- A rent agreement with the customer’s address is officially registered with the State Government or another equivalent registration authority.
How to open Business Bank Account for Proprietorship?
When creating a bank account in the name of a proprietorship firm, the address and company activity must be specified. The Proprietary Company must also submit two of the documents listed below.
- Certificate of registration
- Sales and income tax reports, as well as certificates/licenses given by municipal authorities under the Shop and Establishment Act
- Certificate of CST/VAT
- Sales Tax/Service Tax/Professional Tax authorities issue certificates/registration documents.
- Certificates of Practice provided by the Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.
- In the name of the proprietary firm, the Central Government or a State Government Authority/Department issues a registration/licensing document.
- Banks may accept the IEC (Importer Exporter Code) issued by the DGFT office to the private firm as an identity document for opening bank accounts and other transactions.
- The complete Income Tax returns in the name of the sole proprietor, showing the firm’s income, are officially authenticated/ recognized by the IRS.
- Utility bills in the name of the private firm include power, water, and landline telephone costs.
How to open Business Bank Account for Partnership Firm?
To open a bank account under a Partnership Firm’s name, the legal name, address, names, and addresses of all partners, as well as the firm’s and partners’ telephone numbers must be provided. You must also give the following documents.
- You’ll get a certificate once you’ve registered.
- Partnership agreement
- Power of attorney is granted to a partner or employee of the firm to do business on the firm’s behalf.
- Any legally recognized document that lists the partners, Power of Attorney holders, and their addresses.
- A telephone bill is sent in the firm’s or partners’ name.
How to Open a Bank Account for a Company?
A company’s name, the major place of business, postal address, and phone number must be provided when opening a bank account. You have to submit all the details given below.
- Certificate of Incorporation and Memorandum & Articles of Association
- The Board of Directors decides to open an account and names the people who will be in charge of it.
- Granting power of attorney to its management, executives, or workers to do business on their behalf
- Photocopy of the PAN allocation letter.
- Photocopy of the phone bill
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How to open Business Bank Account for Trust/ Society?
When opening a bank account for a trust/society/foundation, names of trustees, settlers, beneficiary, and signatory, and also the names and addresses of the founders, managers/directors, and beneficiaries, along with telephone/fax numbers, are essential. Furthermore, the necessary information must be provided.
- If you’ve registered, you’ll get a certificate.
- To transact business on its behalf, a Power of Attorney was obtained.
- Any legally recognized document that names the trustees, settlors, beneficiaries, and individuals with Powers of Attorney, as well as the founders, managers, and directors, and their addresses.
- The foundation’s/governing association’s body makes a decision.
- a phone bill
Documents Required for Opening a Business Bank Accounts Online
- Your articles of incorporation, employer identity number, and personal identification documents will be required to open business bank accounts.
- You can open a checking and savings account for your business.
- To keep your business and personal finances distinct, you’ll need to open a business bank account.
- This post is for small business owners who want to know what they need to get started with a small business bank account.
Factors to Consider while Selecting a Bank for a Business Account
Business owners have a variety of banking options, and each bank provides something unique. Take your time looking over the many possibilities until you locate the best bank for your company. Here are some things to think about while comparing banks:
The charge structures and features of each bank vary. Business accounts may have higher fees and minimum balance requirements than personal accounts.
2. Bonuses for registering
Ask if the bank gives any bonuses, suggests Tracy Odell, vice president of content at FinanceBuzz.
3. Account upkeep requirements
You may be charged fees if you do not meet the requirements for your business bank accounts. If you have multiple accounts, the bank may include all of them when calculating the minimum balance, or they may look at each one separately.
When you are looking for a bank, think about which account features are essential.
Do you, for example, require a business bank account with comprehensive analytics?
Do you desire a mobile app that allows you to deposit checks digitally?
Do you need a debit card for your business?
Would you like to be notified when your account balance falls below a certain threshold?
When should you open a Business Bank Account?
Now that you know all the important things about opening a business bank account, another important aspect is to know what is the right time to open a business bank account.
So, The best time to open a business bank account is before accepting the first payment from your company. Usually, the business bank account is opened during the process of incorporation. You cannot open a business bank account without a license of your business to operate and you also need an identifying tax number.
Business Bank Account – FAQs
Is it possible to open business bank accounts online?
While it is uncommon to not see an online application, it does depend on the supplier. Some colleges only accept applications in person, but the great majority accept them online.
What is the cost of opening small business bank accounts?
It depends on the institution you choose, but most of them are upfront about how much money is needed to get started. You’ll generally need between $10 and $20 to get started but check with your provider for exact costs.
When should a small business bank account get created?
As soon as you begin processing business transactions, you should consider having a small business bank account. It keeps your personal and corporate assets separate.
What is the purpose of small business bank accounts?
To manage money, a company requires a system. Cash balances, money owed to the firm, money owed to creditors, and payments paid to employees are all tracked using business bank accounts. Although the number of accounts required by a company varies, all companies require business accounts.
To open a business bank account, do you require an EIN?
Small business entrepreneurs should open a business bank account to keep their personal and business finances separate. Most banks require businesses to obtain an employer identification number, or EIN, to open a business checking account, which you’ll likely discover during the process.
When it comes to business bank accounts, how long does it take to open one?
Opening a business account is simple; you can usually apply in minutes provided you have the necessary information and paperwork, especially if you do so online. The bank, your company type, and the state where you created your firm will all have different criteria for a business bank account.
Is it possible to conduct business using a personal bank account?
If your firm is a sole proprietorship, you might be eligible to use your bank account. You and your company are legally the same in a sole proprietorship.