A current account is still a tricky concept for many people to understand. This makes setting up a current account ever harder for some people. Regardless of how hard it is, it is crucial to create a current account if you run a business. Accounts are needed to make transactions of money in every part of life or even just hold the money that you have. They make sure that your money is available and easy to use at the time of need. But a current account is not exactly like every other type of bank account that you may have.
What is a current account?
If you have a regular savings account, you make transactions through it on a daily basis. However, each time you make a transaction, the bank has to process it. That means more transactions are more work at the end of the bank. Hence, banks employ limits on transactions. For example, most banks today do not allow you to remove more than₹ 25,000 through an ATM.
A current account is a type of bank account that allows you to make a large number of transactions without any special conditions or charges. It is ideal for customers that deal with a large amount of money regularly. For this reason, it is highly recommended for businesses to open current account online. With payments to be made internally and externally, you need to have a current account to manage the income and expenses of a business.
Moreover, the money that is involved in business transactions is large. Hence, transacting large amounts of money out of your personal accounts can also be very expensive. It is because each transaction for savings accounts charge a certain amount of fee, based on the amount you pay. Hence, large transactions mean a higher amount payable as the associated charges. On the other hand, current accounts encourage repeated and large transactions by lowering these charges.
How do current accounts translate to business legitimacy?
Whenever you start a business, you enter a legal framework of rules and guidelines within which you can operate. This involves many contracts to be made by the business. When it comes to contracts, the identity of the two parties between the contract is one of the important parts. In business contracts, you cannot enter your own name into the contract.
In business, you and your company are separate entities. You may be the owner of the business and in charge of making all kinds of decisions for it. But on legal documents, your company has a separate identity. Hence, the financial transactions of the company need to be from the business itself instead of the owner of the business
Moreover, it is important to separate personal and business finances. If you own a business, you will have to regularly make payments to vendors, suppliers, and other collaborators. Now, if you make these payments with your personal account, it shows a lack of structure in your company to the other party. On the other hand, if they receive a cheque from the business itself, it sets a great impression of your company and makes it look like a legitimate business.