Why Having a Business Bank Account Is Important
- Clean and Accurate Bookkeeping
- Prove Your Business is not a Hobby
- Separate Business Account Required for Incorporated Businesses
- A Clear Audit Trail for the IRS
What is Business Bank Account
One of the first steps undertaken after incorporating a private limited company is opening of current account in the name of the Company. A company can open one or more current account in any bank and is required to transact business. Unregistered business as it is not registered with the Central Government – as an independent business entity. Small Business is suitable for the unorganized sector which will not have an annual turnover of more than Rs.10 lakhs.
In many cases, the ownership would operate a business in a different business. Ownership business names are not stringently verified or controlled and most Entrepreneurs adopt a business name that is common and not infringing on any popular trademark. Finally, to provide legitimacy to the small business and collect payment in the name of the company, a bank account must be established.
When you open a business, one of your first tasks should be to open a business bank account. It is important to keep your business banking separate from your personal banking. It’s not enough to just keep separate records. You should actually keep the money physically separate in different bank accounts, one set up as a business checking account. Some business owners even use different banks for their business and personal accounts, one being a business bank only. Here are some reasons to keep your business funds separate from your personal funds.
Documents Required for Opening Company Current Account
Based on the above RBI KYC norms, various banks have formulated procedures and list of documents required to open a company current account. The following is an extensive list of documents required for opening current account in the name of the Company
- Certificate of Incorporation of Company
- Board resolution for opening current account
Memorandum of Association (MOA) & Articles of Association (AOA)
Latest list of Directors as per the bank’s format
- Registered office address proof of the company (Only required if different from the address mentioned in the Certificate of Incorporation)
Identity proof of all Directors / Authorized Signatories
Aadhaar card issued by Unique Identification Authority of India (UIDAI)
Senior Citizen Card issued by State/Central Govt
Fisherman Identity card issued by State/Central Government
Proof of resignation of Director/s (in case Board of Directors has changed overtime)
PAN Card of the company or PAN Card Application Acknowledgement (for New Companies which are less than 90 days)
PAN card of Director
Voter Identity Card
Proof of appointment of current director/s (in case Board of Directors has changed overtime)
Share Holding Pattern of the company as per the bank’s format
Opening a Business Bank / Current Account
Reserve Bank of India’s Know Your Customer Norms (KYC Norms) details the procedures that bank should follow while the opening of bank accounts. The KYC norms as prescribed by RBI also prevents banks from being used by criminal elements for money laundering or terrorist financing activities and enables the banks to know its customers better. Note that even though the following are the KYC Norms as prescribed by RBI, each bank may uniquely require documents and information as prescribed by the bank’s internal regulations for the opening of an account.
Opening a Bank Account for a Proprietorship
For opening a bank account for a Proprietorship Firm in the name of the business; address and activity of the business must be provided. In addition, two of the following documents in the name of the Proprietary concern must be submitted
Opening a Bank Account for a Partnership Firm
For opening a bank account for a Partnership Firm in the name of the Partnership Firm; legal name, address, names of all partners and their addresses, telephone numbers of the firm and partners must be provided. In addition, the following documents must be submitted.
- Registration certificate, if registered
- Partnership deed
- Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
- Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
- Telephone bill in the name of firm/partners
Opening a Bank Account for a Company
For opening a bank account for a Company the name of the company, principal place of business, the mailing address of the company and telephone number must be provided. In addition, the following documents must be submitted.
- Certificate of incorporation and Memorandum & Articles of Association
- Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
- Power of Attorney granted to its managers, officers or employees to transact business on its behalf
- Copy of PAN allotment letter
- Copy of the telephone bill