A Private Limited is a common company administered by the Ministry of Corporate Affairs.
A Private Limited Company is a privately held company in which the company's shares cannot be traded on the open market.
According to the Companies Act of 2013, a Private Limited Company (PLC) must have a minimum of two and a maximum of 200 members. A Private Limited Company can be formed in seven working days.
When the company is registered, the next thing to do is to open a bank account in its name.
Businesses cannot utilize a regular savings account. To avoid transaction limits, a current account must be opened.
As soon as they establish their business, all entrepreneurs create a current bank account.
Unlike savings accounts and recurring deposits, current bank accounts do not pay interest.
A current account is an essential necessity for big companies. It enables them to run their businesses more efficiently, make and receive payments, and better manage their finances.
A current account is required for a Private Limited Company in order to efficiently manage their money and keep their personal and corporate finances separate.
This article will guide you through opening a private limited company's current account.
What is a Current Account?
The term "current account" can also refer to a transaction or demand deposit account.
It is immediately available for deposits and withdrawals at any of the bank's branches.
The transaction limit on the current account can be increased. Furthermore, the owner has access to liquid funds at all times. However, the owner is not required to have a stake in it to compensate.
The Benefits of Opening a Current Account
1. Separation of personal and business money
A current account makes it easier to manage finances, compute taxes, and track business expenses by keeping personal and business finances separate.
2. Simple financial management
A current account allows businesses to simply handle their day-to-day financial transactions, such as payments, withdrawals, and deposits. It also includes tools like cheques, debit cards, and online banking, allowing you to manage your account from anywhere and at any time.
3. Professional image
Having a current account in the firm's name offers the business a more professional image because it shows that the company is a legal entity and operates in a more orderly manner.
4. Access to credit
Banks offer overdraft and lending facilities to businesses with a solid credit history and a current account. This gives you access to loan facilities that you can use during a financial crisis or to build your business.
A current account aids in the maintenance of financial records and enhances transparency. It allows firms to keep track of their cash flow, manage financial records, and generate accurate financial reports.
6. Easier tax calculations
Because all transactions are recorded in one place, a current account makes it easier to calculate taxes. It provides the financial data and evidence needed to support tax returns and claims.
7. Quick Payments
Payment processing is faster with a current account because firms can issue cheques or make online payments directly from the account. This aids in quickly paying bills and salaries, increasing the company's reputation and goodwill.
Step-by-Step Guide to Opening a current account for a Private Limited Company
1. Choose a Bank
The first step in opening a current account for a Private Limited Company is to select a bank that meets your requirements. Consider the location of the bank, the services it provides, and the prices it charges for its services. It is always better to select a bank with commercial expertise since they will be more acquainted with the requirements of a Private Limited Company.
2. Gather the Required Documents
The following documents must be given to the bank in order to open a current bank account:
- The PLC's Certificate of Incorporation.
- Memorandum of Association and Articles of Association of the PLC.
- The Board of Directors' decision to open a current account and the appointment of an authorized individual to open and run the current bank account.
- Power of attorney is granted to company officers, employees, and managers to conduct business on the company's behalf.
- The DIN (Directors Identification Number) of the company's directors.
- The PLC's PAN card.
- An updated list of directors in accordance with the bank format.
Proof confirming the PLC's registered address, such as
- The most recent copy of an electricity or telephone bill that is no more than three months old
- Copy of firm registration with the Employee Provident Fund Organization (EPFO) or Employee State Insurance Corporation (ESIC) and any other government registration/license with the company address.
ID proof for all directors and authorized signatories, such as
- Director's PAN card
- A passport,
- A voter ID card
- Adhaar card
- Driving license
- In the event of a change in directors, proof of the present directors' appointment is required.
- In the event that the Board of Directors changes, proof of the director's resignation is required.
- The PLC's shareholding structure follows the bank format.
- If applicable, information about the beneficial owner.
3. Fill out the Application Form
The next step is to go to the bank and get an application form for a current account. Or from the bank's online website, where the company's current account must be opened. Many banks allow you to start a current account online.
You can receive the form by downloading it from the bank's website or visiting the nearest branch. It is critical to fill out the form completely and precisely. Ensure you attach all the needed documents and check to see if the bank requires further information.
4. Submit the Application Form
After you fill out the application form, you must submit it to the bank.
If you filled out the application form for a current bank account on the bank's website, submit it by clicking the submit button.
If it is filled out offline by obtaining an application form from a bank branch, The completed application form for opening a current bank account must be returned to the bank branch.
Carry the original documents with you for verification. The bank will review the documentation to ensure that everything is in order. Before approving the account, they may also do a background check on the company and its directors.
5. Verification and Approval
The bank will approve the account and provide you with the account number and other details once they have confirmed all the documentation and finished their background check. They may also request that you come to the bank to sign the appropriate documents and finish the account opening procedure.
After the application for a current bank account is received, a customer service representative from the bank will contact the firm to complete the remaining steps.
6. Activate the Account
Following the KYC verification, the bank will open a current bank account in the company's name. You must deposit the minimum amount requested by the bank to activate the current account. This amount varies by bank, so you should check with the bank ahead of time to find out exactly how much is required.
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In the end, opening a current account for a private limited business requires careful consideration and preparation.
Certain prerequisites must be met, such as obtaining the correct documentation, completing the eligibility criteria, and selecting the appropriate bank.
Before applying for a current account, make sure that all of the documentation is in order and that the company fits the bank's requirements.
Private limited corporations can successfully open a current account and manage their money by following the steps mentioned in this article.
Finally, selecting the correct bank and having a solid connection with them is critical to ensuring that the company's financial activities go smoothly.
If you are experiencing difficulty opening a current account for your Private Limited Company online, you can get guidance from the specialists at Especia. They will thoroughly guide you while you may relax because they will do the process of opening a Current account on your behalf.
FAQs related to how to open current account for private limited company
1. What are the documents required to open a current account for a private limited company?
The documents required may vary from bank to bank. Still, generally, you will need the company's incorporation certificate, Memorandum of Association (MOA) and Articles of Association (AOA), PAN card, identity proof of authorized signatories, and address proof of the company.
2. Why does a private limited company need a current account?
A current account allows a private limited company to manage its day-to-day financial transactions, such as receiving and making payments, issuing cheques, and maintaining a record of transactions.
3. Can a private limited company have multiple current accounts?
Yes, a private limited company can have multiple current accounts with different banks.
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