Of the hundreds of tasks that you need to keep in mind when you step out to start your own business, one of the most important is to open a separate business bank account, called the Current account, with your bank. Even if you do not anticipate revenues to pick up soon after starting, you need to remember that business banking and personal banking should always be through separate accounts. The arguments for this are many – take a look and you will be convinced:
• Free and Fair Accounting Records:
With a separate bank account for your business, calculating your total income/revenue in a year will be easy and less-time consuming. Bank Reconciliations Statements will be easy to draw up thus helping you match the balances of ‘Cash in hand’ and ‘Cash in Bank’. Separate bank accounts will also help in cross-checking the amount due from your clients. Similarly, you can tell at a glance, how much you owe to your vendors at any given point of time.
• Easy to file IT returns:
IT Returns for individuals having income from a proprietary business or profession,as required by the Income Tax Act of India, need to be submitted in a specified format called the ITR 4. This form requires meticulous details of income and expenditure along with year-end balances of crucial cash and non-cash accounts. In the absence of a separate business account, furnishing accurate information in your IT Returns will be a mammoth task.
• Confident to take statutory audits and checks:
Businesses are often checked by regulatory authorities for proper adherence to laid–down rules and policies, and accurate disclosure of incomes and business activities. In the absence of a separate bank account, a sound audit trail will be difficult to establish thereby exposing your business to the risk of regulatory action.
• Availability of quick loans:
A current account with your bank for your business also means that you enjoy overdraft facilities. Hence, a quick bridge loans is never difficult in case of an existing business relationship with a bank. In cases where a business does not have a separate bank account, working capital loans or loans for expansion or capital investment will be difficult to get.
• Reflects a Professional attitude:
Maintaining a separate business account is an excellent way to give your business more credibility in the eyes of your clients as well as vendors. Both are confident that your business venture is for ‘real’ and not a ‘part-time venture’ or ‘hobby’. This confidence will go a long way in strengthening your business relationships.
Documents needed to open a Current Account:
• Trade License / Value Added Tax / Tax deduction Account Number Certificate / Allotment letter
• Sales tax / Service tax / Tax identification number.
• PAN / PAN intimation letter in the name of the firm
• Address Proof of the business
• Incorporation Certificate
• Proprietorship letter With the environment in the country going pro-business by the day, it is not difficult to open a business account if you have the requisite documents in place. Secure it for your business as you will reap the benefits for years to come.