You might already be using your savings account for a few small transactions. Maybe you’re receiving money from clients also there. But this isn’t sustainable. Once your business picks up, you’ll need to manage more payments, handle vendors and collect payments. You’ll also have to pay salaries and track expenses separately from your personal finances.
A current account is a dedicated space for your business money. Unlike a savings account, it doesn’t have limits on the number of transactions and is designed to support high volumes. You can issue cheques in your business’s name, offer customers bank details and apply for GST registration smoothly.
Plus, if you’re ever applying for loans, credit or even bringing on partners then having a proper current account helps keep everything professional and organised.
When should you open a current account?
Not every founder creates an account on day one. Here are a few signs that tell you it’s the right time:
- You’ve registered your business entity
Whether it’s a sole proprietorship, partnership, LLP, or private limited company, once you have the registration and basic paperwork ready, you’re off to a solid start. The following smart move is to set up a business account.
This is because most banks will ask for business registration proof to open a current account. Without it, your options might be limited.
- You’re about to start billing clients
Once you send your first invoice then you’ll want the keep the money somewhere that’s clean and easy to track. If payments go into your savings account then they’ll mix with personal spending. This can cause confusion later especially during tax time.
Having a separate account from the beginning also helps in building a financial history for your business. This comes in handy later if you’re looking for funding or applying for a loan.
- Planning to register for GST
Once your turnover crosses ₹40 lakhs (₹20 lakhs for special category states), GST registration becomes mandatory. And to complete that registration, you’ll need to provide bank details preferably a current account in the business name.
Even if your you haven’t reached that point yet, some businesses get GST registered early to appear more credible to clients. If that’s your route then getting your current account in place first makes the process smoother.
What do you need to open a current account?
Now comes the paperwork bit. The specific current account open documents may vary depending on the bank and type of business but here’s what most banks ask for:
- Proof of identity (PAN card, Aadhaar card, etc. of the proprietor/partners/directors)
- Address proof
- Photographs of the business owner(s)
- Proof of business (e.g., GST registration, business license)
- Business related documents (partnership deed, MOA/AOA)
Some banks may also ask for a Letter of Authority, partnership resolution or board resolution depending on how your business is structured.
Setting up a current account early gives your business a clear advantage. If you mix up personal and business funds for too long then it becomes hard to keep track of where your money’s going. This confusion often leads to tax issues, problems proving income and can even raise concerns with clients or vendors. As your business grows, you’ll also need tools like payment gateways, POS systems, and access to business credit.
Starting later may force you to pause operations and sift through records which is a lot more stressful. Fortunately, some banks now offer startup friendly current accounts with low or no minimum balance. They also include helpful tools like invoicing, payment reminders and cash flow management.
Once you have your paperwork ready then the setup is usually quick. Many banks offer e-KYC and some even handle documentation at your doorstep. Just check the requirements and you’re all set.
FAQs
- What happens if I don’t use the current account for a long time?
Banks may classify unused accounts as inactive or dormant. While no money is lost, you’ll need to reactivate the account to resume usage. So, it’s better to keep minimal activity going like a few small payments or transfers.
- Is there a way to compare different banks before choosing one?
Yes, several fintech platforms and financial blogs provide comparisons on fees, features, and service quality. If you’re planning to open current account soon then doing this bit of research can save you future trouble.
- Can I switch my personal savings account to a current account?
You can’t convert it directly but you can open a separate business account with the same bank using your company documents. Keeping both accounts with the same bank can make internal transfers and management easier.
Follow our WhatsApp channel
