When starting a new business, it is crucial to establish strong business practices right from the beginning. Adopting a responsible financial management approach early on can help you save time and avoid complications as your business expands. A standard method used by successful entrepreneurs to achieve this is by setting up a business bank account during the initial stages of the business.
Creating a business account can have numerous benefits. Continue reading and learn more about the reasons to open a business bank account, the steps to open a business bank account, and how to choose the best bank account for a business.
Reasons to Open a Business Bank Account
Opening a business account can help you automate bookkeeping and establish your business’s credit history. Below mentioned are a few reasons to open a business bank account:
- Simplifies the Process of Tax Preparation: One of the fundamental reasons for having a business bank account is related to taxation. During tax season, the IRS requires a distinct segregation between personal and business expenditures. So, if you merge your finances, monitoring your business expenses when filing income tax can be challenging. Therefore, having a separate SME account is necessary.
- Bookkeeping: A dedicated business bank account serves another purpose: to simplify bookkeeping. As you monitor your small business finances, it’s crucial to have all your transactions consolidated in a single location. This approach enables you to quickly gauge your business’s inflow and outflow of funds.
- Shows Professionalism: Using your personal bank account for business activities may create an impression that your business needs more authenticity. Contrarily, maintaining a business bank account conveys that you take your business seriously and possess an organised and professional approach.
- Helps in Building Business Credit: You can effectively manage your expenses, payments, and invoices by having a separate business bank account. This practice can aid in boosting your business credit score by ensuring timely payments. As a result, your business credit will become a significant factor when seeking a loan or negotiating a vendor contract.
- Secures Personal Assets: Opening a business bank account is crucial because it safeguards your assets. Mixing your personal and business finances could jeopardies your personal assets as businesses may encounter failure or legal disputes.
Factors to Evaluate Before Opening a Business Bank Account
Below mentioned are a few factors you need to consider before opening an SME account:
- Different banks have different fees for business accounts, including monthly maintenance, transaction, and ATM fees. Be sure to compare the fees of different banks to find the most cost-effective option for your business.
- Some banks require a minimum balance to be maintained in the account to avoid fees or other charges. Consider whether you can meet these requirements and if they fit your business’s cash flow needs.
- Many banks offer online banking services, which can be convenient for managing your business finances. Consider whether the bank you are considering offers online banking.
- Some banks offer additional services that can be helpful for your business, such as merchant services, payroll processing, or credit card processing. Consider whether these services are essential to your business and whether the bank you are considering offers them.
- It is essential to determine the capabilities of a bank and check if it is compatible with your current accounting software before opening an account. This will enable you to access the appropriate integrations and simplify your business finances.
Eligibility Criteria for Small Businesses to Open an SME Account
- To initiate a business bank account in India, you must furnish your business’s PAN number and Declaration Forms 60 and 61.
- The business owner must provide valid government-issued identification to open an SME account. The specific type of identification needed will vary depending on the country of residence and operations.
- Business registration documents show that your business is legally registered and can include a tax certificate or proof of office space purchase.
- Registration requirements for your company can vary based on your industry and country of origin. Some industries may require individual licenses only after account opening, while others require specific permits before registration.
- If your company has a good credit score, it will be included in your application. However, if you are starting a business and creating an account for the first time, the credit score of the account owner (the business owner) may be required.
Steps to Open a Business Bank Account
Opening a best bank account for business is crucial for any new business owner. Here are the steps to open a business bank account:
- Research various banks to find one that meets your business needs.
- Look at their fees, services, and locations. Consider the features that are important for your business, such as online banking or mobile deposits.
- Once you’ve chosen a bank, schedule an appointment to open your account and take all the necessary documents.
- Fill out the application form given by the bank. Make sure you understand the terms and conditions before signing the agreement.
- Once your application is approved, you must deposit funds into your new account per the bank’s protocol.
- After the account is set up, order checks, credit cards, and debit cards to access your funds. Depending on the bank’s requirement, you may or may not need to pay additional fees for these services.
- Many banks offer online banking services. Set up your online account to manage your funds, track expenses, and pay bills.
Opening a business account is a smart step for any business owner. It helps to keep your personal and business finances separate and provides various financial services to help you better manage your business. HDFC Bank offers a comprehensive suite of business banking services that specifically cater to the needs of businesses of all sizes. From current accounts to digital banking solutions, attractive interest rates, to personalised services, HDFC Bank provides every solution to a business. You can conveniently manage your business bank account through various channels such as branches, ATMs, mobile phones, and desktop computers. So, if you want to open a business bank account, HDFC Bank is the perfect place to start.