A business owner must keep the funds intended for the business separate from their personal finances. A corporate account is a bank account one can open in the name of a business. It is used to facilitate transactions, receive income, and store funds.
Every small business that is required to pay tax should have a corporate bank account for business banking and its numerous benefits. Read on to learn the vital details associated with a corporate bank account.
Difference between Corporate Account & Business Account
Often, people think a corporate account is the same as a business bank account. Though they both serve business needs, they differ in certain key aspects that are listed below:
|Category||Corporate Account||Business Account|
|Company size||Ideal for medium-sized and big companies||Suitable for smaller businesses|
|Company structure||Must have a board of directors||Individuals & unregistered business can apply|
|Benefits & Services||Lower transaction fees, better interest rates on profits||Varies from bank to bank|
Benefits of Corporate Account
Now, let us explore the benefits of having a corporate account:
1. Improves Credibility
Having separate bank accounts for personal and business purposes is immensely helpful because it makes the business appear more professional. When customers see that a business has a corporate account, they feel reassured about its legitimacy. Moreover, having this account also helps business owners receive better deals from vendors and suppliers.
2. Higher Investment Opportunities
A corporate account enables businesses to park and grow excess funds through reinvesting. Companies can also use this bank account to manage an investment portfolio and sell and purchase bonds, stocks, new companies, and other assets.
3. Offers Liability Protection
There are multiple ways to store a business’s funds. However, while users might receive more or less the same features, they will not receive the liability protection offered by a corporate account. Another essential benefit of a corporate account is that it separates a company’s assets and funds from the business owners. As a result, instead of a single person, the company as a whole is responsible for the funds.
4. Creates better Financial Management
Other crucial benefits associated with a corporate account include management of budgeting and spending. In addition, it provides more clarity with regard to the financial position of a business as proprietors get to view detailed reports and bank statements about their company.
5. Easier Financial Transactions
Business owners can carry out essential business transactions smoothly and efficiently from anywhere as corporate accounts come with internet and mobile banking facilities. Multi-location transfer of funds along with deposit and withdrawal of money at any location are additional benefits of a corporate account.
RazorpayX offers the best-in-class current account through trsuted bank partners such as ICICI & RBL banks that solve every banking need of a business. In addition, it comes loaded with features that help ventures focus on their growth instead of wasting precious time on financial management.
How to open a Corporate Account?
It must be noted that the eligibility criteria and documents required to open a corporate account vary from one business structure to another. Listed below are some of the key points related to opening a corporate account in India:
- The business for which the owner wishes to open a corporate account must have a board of directors.
- Individuals and unregistered businesses are not eligible to open corporate accounts in India.
- Companies must receive approval from their board of directors to open a corporate account. The standard procedure involves a meeting where a vote is taken to seal the decision. The directors also engage in a detailed discussion about the account’s primary purpose, access options, and features.
- For smaller businesses without a board of directors, the owner does not need anyone’s approval or vote to open a new corporate account.
- Generally, companies appoint a dedicated person, usually the board’s treasurer, to open and operate their corporate bank accounts.
Documents required to open a Corporate Account
Listed below are the documents required for a corporate account:
- Filled application form
- Article of Association
- Memorandum of Association
- Board Resolution
- Certificate of Incorporation
- Proof of Address
Disadvantages of a Corporate Account
Although the benefits outnumber the limitations of a corporate account, it would be helpful if people were aware of them:
- Considering that corporate bank accounts engage in significant business transactions, the expenses associated with maintaining them can be higher than regular accounts.
- Moreover, the process of documentation is confusing and time-confusing.
Get a Corporate Account that supercharges your banking experience
The RazorpayX-powered current account is backed by leading financial institutions. It comes equipped with advanced features that facilitate smooth business banking and save a lot of time. Let us look at some of its benefits:
- A dashboard that provides a crisp overview of the state of the business’s finances
- Powerful APIs to automate pay-outs
- Important tax payments from one single dashboard
- The process of adding beneficiaries is easy and instant
- The provision of setting up approval workflows does not require OTPs
Listed below are the registered business types that can open a current account with RazorpayX:
- Sole Proprietorship
- LLP (Limited Liability Partnership)
- Private/Public Limited Companies/ OPC (One Person Company)
7 crucial tips to manage Corporate Account
Listed below are essential tips that will help in managing any corporate account:
1. Decide on an investment strategy
Business owners should formulate a suitable investment strategy for their corporate accounts based on their financial goals. While there might be many investment options that financial institutions might offer, the following two are common:
i. Portfolio Rebalancing
The bank designates a financial adviser who manages a company’s investment portfolio. This person will make decisions based on market movements, company income, and goals.
ii. Dividend Reinvesting
This is an important way by which companies earn extra income. Business owners can choose their preferred investment types, for instance, what they are interested in—stocks or real estate purchases- but this process can also be automated.
2. Share access with the right person
When creating a corporate account, one must carefully determine which person should have direct access to it and when. This is especially important if the account is used for business transactions and savings. For example, the owner needs to grant the concerned manager or leader access to use the account for purchasing new equipment or paying employees’ salaries.
3. Explore given interest options
Some financial institutions offer higher interest rates on deposits in some accounts, which help businesses earn more while saving funds simultaneously. According to experts, directors should explore the interest options of different banks, discuss among themselves and choose one.
4. Consider different features offered
It is advisable to explore the features of a current account of different banks to make a more informed decision. For example, while some banks offer a corporate account with mobile banking features, others may have specified transaction or balance limits. Therefore, business owners must check whether their goals align with the account’s features.
5. Check local regulations
Tax regulations of a current account may vary depending on the business type and location. Generally, companies consult legal experts who are adept at taxation rules to ensure that the business is in full compliance.
To sum up, companies with a board of directors must open a corporate account for ease of financial management. It has numerous benefits, such as more investment opportunities and security. In addition, registered businesses can consider opting for RazorpayX-powered current accounts to manage their finances smoothly and efficiently.
Also read: Corporate Banking 101
1. Is it mandatory for a director to act as an authorised person for a corporate account?
A business entity doesn't need to assign a director as an authorised person. Anyone associated with a business can be the authorised person. But, if it is a director, he must submit his PAN and DIN details.
2. What are the documents required for opening a corporate account?
Listed below are the documents required for a corporate account: 1. Filled application form 2. Article of Association 3. Memorandum of Association 4. Board Resolution 5. Certificate of Incorporation 6. Proof of Address
3. Does a corporate account affect an individual's credit score?
A corporate account does not affect an individual's credit score as it operates on behalf of a business. The EIN (Employer Identification Number) is used to open this bank account.
4. What are the five most popular services that corporate account holders enjoy?
Listed below are the critical auxiliary services that come with corporate accounts: 1. Online banking, remittances, and phone banking 2. Insurance and mutual funds 3. Debit cards and credit cards 4. International transactions and ATM withdrawals 5. Deposits and safe lockers
5. Where can I view all transactions from my RazorpayX powered current account?
Every transaction made through a RazorpayX current account will be displayed on the dashboard under the 'Account Statement' tab.