There are mainly three types of companies explained by the Companies Act, 2013. They are private limited company registration, public limited company and One- Person Company. In a private company, the shares cannot be sold or bought by the public. The public has no right in it, unlike a Public Company. At least 2 members are required to start a private company. After deciding to start this type of company, it must be registered with the Registrar of Companies (ROC). The next most important work is the creation of a bank account. In this blog, we will be discussing how to open a private limited company bank account.
Current Account for Private Limited Company
After opening a company, the next step is to open a company bank account in the bank. The account must be in the name of the company. Majority of small businesses prefer opening a current company bank account instead of a savings account. This is because, savings account has a transaction limit. Whereas, the current account has no transaction limit. The business can do unlimited transactions. This is not mandatory, however if a private business opens a current account, it is beneficial.
Documents Required for Opening Company Bank Account
The process to open a company bank account is very simple. The members of the company can easily open an account. They just have to submit some documents to the bank. The documents required are:
- Certificate of Incorporation– This certificate is granted after a business is successfully registered. It is a legal document which stands as a proof that the business has commenced.
- Board of Resolution– The directors of the company decide to open a bank account in a meeting. Hence, a resolution is passed in the meeting. The copy of this resolution is asked by the bank. This resolution shows the approval of the members of the company.
- Member Identity Proof– Identification of the members who can use the account. It must be noted that company accounts must be used only for business transactions. It should not be used for personal transactions.
- Proof of Identity– Identity proof of all directors and members who have right to operate the account.
- Company Related Documents– Memorandum of Association (MOA), Article of Association (AOA), List of the names of all directors, Aadhar card or pan card of all the directors, shareholders names and the shares they hold.
Benefits of Opening a Current Account for the Company
Some of the key benefits of opening a current bank account are given below:
Limitless Transactions
The current bank account has no limit of transactions like the savings account. This means that you can withdraw more money in a month, as compared to a savings account. This is best for people who use their accounts frequently. Hence for the businesses it is best to open a current company bank account, it will help them in many ways.
Over- draft Facility
When a bank allows you to withdraw from your account even if you have no money in it is called overdraft facility. Current account has this facility. Hence, people prefer this account over any other account. This will help you out in the situation of the emergency. Sometimes its really necessary to avail such services. By opening this account, you can get a high number of free checks in a month.
Separate Professional and Personal Transactions
This account helps the owners or members of businesses to keep their personal and company transactions separate from the personal transactions. This reduces confusion and chances of loss to the company. Hence one must have a separate account on the name of the business in order to make the things clear. The current account is more helpful in the transaction process than the savings account.
Best Bank for Opening Company Bank Account
A company is free to choose the bank in which it wants to open an account. Each business should compare the services provided by various banks, and then decide which bank is best for them. There are various factors on which this choice depends. They are given below:
- Banking requirements
- Facilities or services offered by banks
- Bank reputation
- Bank is reliable or not.
- Bank support system
Is GST Required to Open Company Bank Account?
It cannot be said that GST is mandatory for opening a company bank account in India. Although there are some banks which ask for a GST registration certificate before opening a current bank account. Therefore, it is better to have this certificate beforehand. This will help you to open the bank account quickly in case this document is asked by the bank.
Process of opening a Current Bank Account
The process through which a current bank account by private business can be open is given below:
- There are many banks which allow the opening of a bank account online. Therefore, for opening you should visit the official website of the bank in which you want an account. However, if you don’t want to open it online, then visit the bank personally.
- Select “Business Current Account”
- Then select the type of current bank account you want. And click on “Apply Now”
- Now fill the application form online. Or you can collect the application form personally from the bank too.
- Then submit the form by clicking on Submit.
- After this, a customer care executive from the bank will get in touch with the company who has filled the form. Then further process will be completed by it.
Importance of Opening a Current Account
After establishing and registering a private business, a PAN number is allotted. After the business gets this number, it has to open a bank account. All transactions of the company, be it big or small must be done through the company account. Any member’s personal bank account must not be used for business transactions. A private business is free to have more than one current bank account. The current account is important for following reasons:
- For taxation process
- Transactions with creditors
- Transactions with debtors
- Paying salaries to its employees
Conclusion
It is hence concluded that, a private business should open a company bank account for the benefits of the company. This account must be in the name of the company only. There should be no personal gain from it. All transactions must be done only through this account only. Opening a current account is better than opening a savings bank account. Current account has limitless transactions and more facilities as compared to savings one. This is not a mandatory requirement. However, opening a current account is very useful and beneficial that is why it is suggested to the business owners by the professionals.
