Every small or big business in India requires a business bank account to perform financial transactions. In this blog, we shall provide information about how to open a new business bank account, the procedure, and a list of required documents.
While starting a small or big business, the business owner must have a dedicated bank account for business transactions. It has many features and benefits. The list of benefits includes getting payments from customers or vendors, utility bill payments, employee salary payments, paying bills to the vendors, etc.
Notably, it is imperative to understand that a business bank account is different from the savings account. And different banks have different terms and conditions for opening the account and operating it. Let’s now take a look at the advantages of a business account.
Advantages of Business Bank Account
A business bank account is one of the requisites in running a business smoothly. It has n numbers of benefits, such as:
- A current account helps in accounting. Additionally, it helps in tracking the business transaction and overall financial health of the business. Consequently, it helps in decision making.
- The business owner can quickly draw a bank reconciliation statement at the time he requires. It would help him in matching the balances of ‘Cash in Bank’ and ‘Cash in Hand.’
- A business account also aids in easily filing the IT returns with other compliance, such as professional tax, VAT return, etc.
- A bank account helps in enhancing the company image and also impacts business growth.
- A current account in the name of the business is a crucial factor in achieving business success. When the business owner issues or receives a cheque, it carries the name of the business current account. Significantly, having a business bank account signifies the seriousness of the business.
- Maintaining a good account balance ensures easy and quick approval for business loans. It helps in getting a loan to grow business upwards. Many loan lenders require at least nine months of bank statement to process the loan application. Additionally, a good balance also serves as good eligibility for a business loan.
- A current account offers various facilities which a saving account doesn’t offer. These facilities include NEFT or RTGS, LOC, internet banking, 24 hours phone banking, etc.
After discussing the benefits of business bank account, let’s now talk about how to choose the right bank and the account type.
How to Choose the Right Bank & Account Type?
As said above, a business bank account is completely different from a savings account. So, it is not necessary that the business owner should open the current account where he has opened a savings account. It may not be the right one for him. The following are the steps to choose the right bank:
- Check the available banks in the locality. Because it is a good idea to open a bank account in a nearby branch for convenience in daily transactions. Contact and visit all the bank branches to understand their services and specialties.
- All banks generally offer different types of business account. The business owner needs to search and zero in on the best account that offers most services as well as fits all his needs. Notably, it is crucial to ensure the rules for maintaining the lowest balance, outstanding cheque clearance charges, net banking charges, etc.
- Most banks in India offer transactions based on the minimum balance that the business owner has maintained in the account. It can be an added advantage for start-ups in India. However, as a small business grows, the business owner may require to change the business bank account in India type.
Procedure for Opening Business Bank Account in India
- First of all, fill the bank account opening form of the bank selected. Generally, all the banks ask the account holder to come in person in order to sign the account opening form.
- The applicant may require to sign the declaration form to the effect that he has read all terms and conditions, and accepted all the rules.
- Also, the business owner will have to provide the KYC documents to support the information he has provided.
Let’s now take a look at the documents required for business account.
KYC Documents Required for Business Account
The business owner would require to submit a few documents which are the KYC rules of the bank. And the required documents may vary from one bank to another. The following is the list of the documents needed to open a business bank account.
It is worth mentioning that the business bank account requirements vary from one bank to another. Therefore, the business owner must also ask the bank for their document requirements.
Documents for Proprietorship Firm
The following are the basic list of documents that the bank may ask for:
- PAN Card
- Registration certificate of the firm
- Pictures of the business owner (Passport)
- Utility bills, such as water, telephone, or electricity bills
- Trade license
Document for Partnership Firm
- Business registration certificate
- Partnership deed
- Address and identity proof of all the partners
- Trade license
Documents for a Company
- Business incorporation with MOA
- Board resolution
- Company address
- Identity and address proof
Choosing the right Business banking and the right type of account is imperative for small business owners. Additionally, the bank charges are reflected in the monthly bank statement. So, it is recommended for the business owner to get the maximum facilities from the business account with minimum cost.