A current account is a zero-interest yielding account used by companies or business entities to conduct their regular business transactions. Such accounts are used because of the wide range of benefits they offer in the form of unlimited transactions, free-of-cost demand drafts, RTGS/NEFT transactions, provision of overdraft facility, and more. However, small business owners, home-based businesses, shopkeepers, and freelancers usually do not open a current account and conduct their daily business transactions from their personal savings bank account. Opening a company current account for small businesses is important too.
Why is it important for home-based businesses/small businesses to open a company current account?
Opening a business current account allows you to properly manage your business’s finances. Through the account, you can easily determine if your business is profitable. Having a separate account for your business also helps you organize payrolls, avoid unnecessary spending, and make filing for taxes efficient. Other crucial reasons to open a current account for your home-based business include:
- There is no limit on the transaction number.
- There is zero restriction on transfers or deposits from the home branch.
- Various services at no charges are also available like internet banking, demand draft, and mobile banking.
- Availability of overdraft facility. This facility permits your business to withdraw funds over and above your account balance in the case of insufficient balance to meet your business needs. Like any credit option, the bank charges an interest rate just on the amount used through overdraft.
- Additionally, the current account provides additional features like free pay orders, multi-location fund transfers, free inward remittance, and free demand draft facilities.
Process to open a company current account for your home-based business
The process of opening a new company current account includes the following steps:
- Selection of bank and current account type: The initial step is to select a bank as per your preference. Once done, choose the current account type that matches your business requirements. While selecting a current account, ensure it has optimal benefits in the form of overdraft facility, higher transaction limit, superior banking support, and so on.
- Visit the bank’s branch: After deciding the kind of current account that you want, visit the bank branch to obtain the current account opening form and enquire about the account opening procedure.
Remember, you must keep handy certain documents for a hassle-free account opening process.
Required documents include:
Any two of the listed documents as business proof in the proprietary firm’s name:
- License/certificate issued by municipal authorities under the shop & establishment act.
- VAT/CST/GST certificate.
- IEC (Importer Exporter Code) issued to the proprietary concern by the office of license/DGFT/certificate of practice issued in name of the proprietary concern by a professional body incorporated under a statute.
- TAN allotment letter by NSDL in the firm’s name.
- Complete income tax return in the sole proprietor’s name where the income of the firm is shown, duly acknowledged/authenticated by the Income Tax (IT) authorities.
- Utility bills like water, electricity, or telephone bills.
Address and identity proof of the sole proprietor:
Driving license
Passport
Voter’s ID card
PAN card
Aadhaar card
Bottom line
A company current account offers high liquidity in the form of 24×7 RTGS/NEFT transactions, prompt SMS alerts, customized offering on products like CMS, trade, forex services, etc. It also allows you to manage huge volumes of your payments and receipts systematically. Thus, like big-scale businesses, small-scale businesses too must open a current account to avail the important benefits available on such accounts. Make sure to follow the above listed process and keep the required documents handy for a hassle-free opening process.
