How to open a business bank account for startups in India?
Statistically, India ranks second with the highest number of startups worldwide. If you dream of establishing your own business, there can’t be a better time than right now.
While starting your business, you will have to focus on many things. One that you can’t miss among them is opening a business bank account.
Any business, big or small, makes transactions daily, pays its vendors, and invests in materials needed.
Also, there are utility bills, employee salaries, and other petty expenses.
You need an exclusive bank account to store the capital and make outgoing payments. It can be unthinkable to start a business without having a business bank account.
But is it possible to open a business bank account for startups online, that to from the comfort of your home?
Without a business account, you don’t have a source to find out your monthly or annual expenses.
If you cannot find this, you cannot determine and project your future expenses or design a budget.
You can’t find out the profit margin either. Having a unified account helps you store business funds and send outgoing payments.
It doesn’t look professional when you clear your vendor bills with personal account details.
They cannot identify where the payment came from and cannot match the invoice with the received payment.
Additionally, a payment from a personal account raises multiple flags from security to acceptance in the recipient’s bank account.
Many business expenses are eligible for tax deductions.
But, only when you track your expenses and collect bills and proof, can you claim the exemptions and reduce your tax payables.
Opening a business account paves the way to do both stated above and thereby reducing your overall expenses.
When you keep using personal accounts for business banking, your banks could easily notice and shut down those operations.
They have different plans and charges for each user and don’t entertain those taking advantage of loopholes especially in terms of regulatory compliance for business owners.
You might ask why can’t personal bank accounts be used for business purposes.
But it’s essential to split your business and personal finances at the earliest.
Sharing your personal account details with someone doesn’t look professional, and keeping track of payments can also be hard.
However, opening a business bank account for startups also comes with its own challenges and headaches.
You don’t just decide, apply at a bank, and open a new business accounts right away.
Opening a traditional business bank account involves visiting a bank and other documentation processes. Here are some of its drawbacks.
It can take days for you to do the basic research, find the best banks that are serviceable in your locality, and finalize one.
You will have to check their plans, perks, benefits, charges, and their basic reputation among businesses.
Once you select a bank, you must fill out forms, provision documents they require, and wait until it gets approved.
Traditional banks are stringent to deal with, and you will not get alternative methods if you cannot carry through any step.
Overall, this is a testing process, and it can be an exasperating experience if they don’t have dedicated personnel to help you out and update you on the status.
Some banks just hold the application for days without moving it to the next desk.
Imagine starting your business but putting the finances on hold since you haven’t obtained access to your business bank account.
Traditional banks in India are heavily limited in their budget and differing opinions of large, numerous stakeholders.
Given their vast domestic networks, implementing updated UI/UX changes is not the easiest task; hence, they cannot provide high-end banking services.
On the other hand, private financial institutions are at liberty to not restrict their customers because of a higher amount of flexibility.
To provide an example, international transactions can be a pain if you opt for traditional banking services.
They might not have a user-friendly and robust interface in place that you can access from your end. Even if they do, it will be an additional expense for you.
Indian businesses feel that fintech apps have higher functional efficiency than banks, making financing better and accessible for even small businesses.
And that’s why they prefer opening a business bank account to going through laborsome procedures banks have put in place.
Do research about the banks in your area that let you open new business accounts with them.
You can either visit their branches or contact them through email/phone call/website to know their plans and services in detail.
As each bank has its own structure and plans for business bank accounts, compare two to three banks and zero in on the ones that fit your needs.
Once you select the bank, obtain the application form and fill in your business details for opening a business bank account.
Even though this is a business bank account, there should be a designated account holder who should fill in and sign the application form.
You must also know that Indian banks allow businesses to have current accounts which don’t fetch you interests for funds stored.
In the application form, the business owner must provide the legal name of the business (if registered), official address, contact number, particulars of the partners (if it’s a partnership firm), and mailing address.
Most banks require the account holder to visit in person to sign the form.
Both individuals with small businesses and registered entities are allowed to open small business account online in India.
The required set of documents will change for these different sets of account holders.
You should also sign a declaration form accepting the regulations and rules of the current account.
The next step is getting your documents ready that you have to submit to comply with KYC norms.
The required documents to open a business bank account for startups will slightly vary depending on banks, location, and your business type.
• Incorporation documents (if the concern is registered).
• Trade or shop establishment licenses and certificates obtained from the local authorities.
• Income tax return document where the businesses’ income is reported.
• PAN card.
• Utility bills like electricity, water, or telephone bills.
• Company registration certificate.
• Partnership deed.
• Power of attorney documents.
• ID proof and addresses of partners.
• Company’s telephone bill with partners’ particulars.
• ID proof of the account holder.
• Company address proof.
• Company PAN allotment letter.
• Telephone bill.
• Resolution of the board of directors.
• Power of attorney documents that give authority to managers or directors to make business transactions.
There are many banks and there are many business account plans offered around the world.
So, it’s not a cakewalk to nail down the perfect bank account as per your requirements. But it is possible.
A fair share of banks in India allow small businesses to open bank accounts online as current accounts and not as savings accounts.
Current accounts let you deposit funds without limitations and make payments without delays. But you cannot earn any interest on the deposited money.
Here are some parameters you can weigh up and compare with the features of the bank accounts you have selected.
Location of the bank: If it’s located close to your company location, you can easily visit the branch to get your issues fixed.
Overdraft protection: If the bank provides overdraft protection when you initiate a payment at a low balance.
Monthly balance to be maintained: You must know if there is a minimum balance that needs to be maintained and untouched. Knowing this will help you plan your expenses accordingly.
Support: When downtime occurs, it’s the support team you run to. They should have enough support resources and a dedicated support team who assist you with any inconvenience.
Online banking facility: Checks are outdated, and it’s online banking which is a reliable source to send or receive money in India. They must have an application that schedules and sends payments and keeps track of them.
Also, with our article discover the top business bank accounts in India offering exceptional features and services to support your entrepreneurial journey. Compare and choose the best.
The checklist is endless when it comes to analyzing business bank accounts. We can conclude that it’s an arduous task to open small business account online or offline.
But smart businesses in India are moving towards smarter options to solve the business payments concern.
They save time and energy by opting for solutions like Volopay which is an end-to-end payment platform for businesses.
Chase away your confusion as Volopay is far cheaper, more transparent, and more reliable than traditional banking payment solutions.
With Volopay, you can
• Schedule and send payments at your convenience to both local and international vendors.
• Create and distribute corporate cards in unlimited numbers and make online payments better organized.
• Integrate with your other payment systems like Netsuite, and Zoho Books, and minimize double data entry.
• Reimburse your employees for their out-of-pocket expenses.
Interesting read - Guide to open a corporate bank account in India