Proper management of a sole proprietor has proper controlling of its finances. So, opening an proper account through your dedicated bank in your business named a sole proprietorship is one step for that. This might be sometime the best non-use, unwarranted bureaucratic paper, but a matter, a separate business account provide a whole set of benefits- much clear tracking of funds, an easier filling of tax, and many more.
Why to Open a Sole Proprietorship Bank Account?
One must open a sole proprietorship bank account because of the following reasons:
- A sole proprietorship bank account is especially designed to handle every transaction related to your company's financial affairs. It demands that you keep your personal finances separate from those of the business for many different reasons.
- It means accuracy in keeping records for you will never mingle one transaction of business with yours.
- Another benefit of maintaining separate accounts is that personal assets from reaching the business liabilities.
- If the creditors are suing with your sole proprietorship, say it's your house or personal saving money, it would be away from being attached and brought to clear the sole proprietorship debts.
How to Open a Bank Account for Sole Proprietorship Business?
This is relatively significant for opening a bank account for your sole proprietorship along with the handling of your business. For additional requirements feel free to ask our experts. We are documenting our support in the documentation process and the procedure for opening a bank account for Sole Proprietorship:
Research and Choose a Bank
These are the reputation of the bank, the number of branches it offers features on its accounts such as online banking, availability of mobile application, customer support, plus fees that will apply (monthly maintenance fees, etc., and transaction fees).
Get Required Documents
Just contact any time you need help. Remember to strictly adhere to guidelines issued by RBI and the bank. Ensure that every paper or document you bring is updated and does not contain false or misleading information.
Bank
Step out to your nearest branch of choice of your chosed bank. Make an appointment and get taken in, which could possibly be the more prudent to do at least for the time being.
Filling-up Application Forms
Once you are at the bank you will be provided with forms or application that you would need to apply to open sole proprietorship bank account. Please fill them out accordingly and furnish them with all your information as well as with the business.
Submission of Papers and Verification
Fill all your application forms and present all your documents to the bank to authenticate and get proper approval. In this procedure, the bank authenticates all of its requirements from the viewpoint of regulatory laws, and checks the genuinity of documents.
Differences Between Sole Proprietorship Bank Account and Proprietor's Account
Some of the key difference between sole proprietorship bank account and proprietor account are given below:
- It is a personal bank account for in all his expenditures-for example, groceries, utilities, and savings-all of these are personal financial transactions for him and include deposits of his salary, his payments, his bills, and the goods he bought.
- Accordingly, it does not pretend to serve a business purpose but it serves to fulfill a certain need of and satisfy some obligation on proprietor's part.
- However, the peculiarity attached to the finance of such a proprietorship's of a sole proprietorship account for business has its drawbacks; it can only be used for business. An account for such peculiarity attached to the finance of such a proprietorship's undertakings be tracking it.
- This quite often brings its services in the production of features as in creating an invoice and tracking of the business expense along reports reserved for the business. Therefore, avoiding confusion together with legal complexities would best be served.
Advantages of Opening a Sole Proprietorship Business Account
Running a sole proprietorship involves so many activities going on simultaneously. Among those activities is accounting for the finances. One good method of keeping track of money and ensuring that business is running properly is to have a separate business account. Having an account for business holds numerous advantages which only a few have listed; some of which are indicated below.
Detailed Cash Tracking
It includes business and personal transactions so that the owner can trace all his transactions and expenses. This helps the owner of the business to be friendly with the business finance and also ensures the financial health of the business is going good.
Easy Tax Filing
There would be one of the very advantages one could consider if there were to be a business account only. Incomes and expense of the business fall in one place; therefore tax preparation also would be much easier. Using direct extracts from your business account in the tax season is good.
Asset Protection
Separation of the business account will make sure that the finances of your business are differentiated from your personal ones. This will make sure that your personal assets are way ahead of the risks attached to your business.
Increases Scalability
It will come in handy even when it will be time to market growth and scalability in a business. This is because it will give one an idea of their business health, the different locations available for finding investments or expansions.
Documents to Open Bank Account for Proprietorship Firm
Paperwork is the other most significant aspect of opening a bank account for a sole proprietorship. It, however confirms that the business exists and proves who is the owner of the actual proof while showing any regulatory requirements in force as complied with. They, therefore would lay down the right groundwork for the subsequent operations of the business and independent finance of the firm. See below for the list of the full documents:
- Shops & Establishment Registration Certificate: This will reflect the fact that the business is a sole proprietorship registered under the Shops and Establishment Act. It therefore provides for the existence of the business and the labour welfare regulation as contained in the act.
- MSME or Udyam Certificate: Proof that defines business classification to be micro, small, or a medium enterprise. This kind of registration will provide various benefits to the bank in its credits as per different schemes and regulations followed by the government.
- GST Registration Certificate: That certificate proves a business name which proves registration done in the GST regime.
- CA Certificate: It is presumed to be valid and the importance is given to that point that even a CA issues a certificate to show the existence of an entity.
- KYC of the Proprietor : That means the proprietor's KYC documents. His photograph, PAN card, Aadhar card and the proof of address come in this.
Conclusion
One of the surest major steps that help win a soundly organized financial position and thus win society's trust for your business is opening up a sole proprietorship bank account. Proper research on banks, collecting the paperwork, visiting the bank to correctly file up the application forms, and submitting any necessary papers that are needed for verification purposes will help you open up a bank account successfully.
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