How to Open Sole Proprietorship Bank Account

Doing business in the name of the individual is called Sole Proprietorship. Proprietorships fall under the category of unregistered business as it is not registered with the Central Government – as an independent business entity. Proprietorships are suitable for very small businesses in the unorganized sector which will not have an annual turnover of more than Rs.10 lakhs. In many cases, the Sole Proprietor would operate a business in a different business name (for example, Chennai Metal Trading, Kumar Groceries, etc.,). Sole Proprietorship business names are not stringently verified or controlled and most Entrepreneurs adopt a business name that is common and not infringing on any popular trademark. Finally, to provide legitimacy to the Sole Proprietorship and collect payment in the name of the Sole Proprietorship business, a bank account must be established. In this article, we detail the procedure for opening the sole proprietorship bank account.

Bank Account for Sole Proprietorship

The Reserve Bank of India has laid out Know Your Customer (KYC) norms for opening of the current account in the name of a sole proprietorship and all Banks have the procedure to open sole proprietorship current account in the business name. The RBI has widely prescribed the following to be adopted by banks as KYC norms for opening of sole proprietorship current account:

• Proof of the name, address and activity of the concern: Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern), certificate/licence issued by the Municipal authorities under Shop & Establishment Act, sales and income tax returns, GST certificate, certificate/registration document issued by Sales Tax / Professional Tax authorities, Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.
• Secondary Proof: Any registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department. NBFCs/RNBCs may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of the account.
• The complete Income Tax return (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated/ acknowledged by the Income Tax Authorities.
• Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern.

Any two of the above documents would be sufficient for opening of sole proprietorship current account. The RBI KYC norms also mention that these documents should be in the name of the proprietorship.

Document Required for Opening Proprietorship Bank Account

Based on the above RBI guidelines, various banks have enacted procedures and list of documents required for opening a current account in the name of a Sole Proprietorship firm. The following is a Bank’s list of documents required for opening Proprietorship Bank Account.

First Sole Proprietorship Proof (Any one of the following documents)

• Any certificate issued for registration/operations/Trade License/business by Local/ State/ Central Government/ Government Agency/ SEBI/ IRDA/ ICAI/ ICSI/ ICWAI/ Office of Registrar of Newspapers for India in the name of entity/firm. Eg: Sales Tax, TIN/ TAN etc.
• APMC/ Mandi License/ Certificate
• Labour License/Certificate
• Professional Tax Registration Certificate
• Trade Mark Registration Certificate
• Liquor License/ Registration Certificate
• Drug License
• Registration Certificate issued by Excise & Customs Department.
• License/ Certificate to Sell/ Stock/ Exhibit for Sale or Distribute Insecticide/Pesticide
• Registration Certificate issued under Weight & Measurement Act
• Police Department Permission/License/Certificate
• Regional Transport Office Permit/Registration Certificate
• Consent to Operate document issued by State/Central Pollution Control Board
• Sales Tax Registration Certificate/ TIN Certificate/ GST Registration Certificate/ TAN certificate.
• Valid Shops & Establishment Certificate/ Trade License. Validity can be extended up to the grace period for renewal as mentioned in such certificate.
• Certificate Issued by SEZ, STP, EHTP, DTA and EPZ in the name of the entity mentioning the address allotted.
• Importer–Exporter Code Certificate along with PAN Card (if PAN is quoted on the IEC Certificate).
• Gram Panchayat Certificate (should be on letterhead and not more than 3 months old).
• Trade License in the name of the entity.
• District Industries Center (DIC)/ Small Scale Industries (SSI) Certificate – Acknowledgment Part -II issued by DIC/ SSI containing Entrepreneur’s Memorandum Number. Duly stamped and signed by issuing authority.
• Factory Registration Certificate in the name of the entity.
• SEBI Registration Certificate in the name of the entity.
• Certificate of enlistment/license/shop allotment letter issued by Municipal Corporation (Kolkatta, Ludhiana and others).
• Shops & Establishment Certificate issued by E-Seva Kendra’s (Andhra Pradesh). Receipt issued only by Municipal Corporation of Hyderabad (MCH) to be accepted along with Shops & Establishment Certificate.
• The Shops and Establishment Certificate issued by the Municipal Corporations in West Bengal are valid till March 31 every year.

Second Sole Proprietorship Proof (Any one of the following documents)

• Registration of firm with Employee Provident Fund Organization.
• Registration of firm with Employee State Insurance Corporation.
• Letter or Certificate (should be on letterhead and not more than 3-month-old) confirming existence of business issued by Chairman/ President/ CEO/ Head of the Nagar Panchayat/ Parishad, and not by local councillors/ corporators
• Complete Sales tax return in the name of the firm duly acknowledged. Note: The portion of the sales tax return showing the name of the firm should be duly acknowledged by the accepting authority
• Last available Income/ Wealth Tax Assessment order in the name of the firm.
• The latest copy of Electricity Bill, not more than 3 months old.
• The latest copy of Telephone Bill from Telecom operator, not more than 3 months old.
• Certificate issued by Municipal Corporation/ Local Self Government Bodies confirming the address of the firm.
• A true copy of gas connection book in the name of the entity along with the latest gas receipt, not more than 3 months old or Gas bill in case of pipe connection.
• Water Tax bill paid to Municipal Body/ Corporations, not more than 6 months old along with the Tax receipt should stand in the name of the firm.
• Property Tax bill should not be more than calendar one year old from the bill issuance date along with Tax receipts for property tax paid to Municipal Body / Corporations. The Tax receipt should stand in the name of the firm.
• Certificate of Verification issued under Weight & Measurement Act–This document will not be considered if Registration Certificate issued under the same act has been taken as 1st entity proof document.

Sole Proprietor Identity Proof (Any one of the following)

• Pan card in the name of the Proprietor (Mandatory)
• Passport
• Voter Identity Card
• Driving License
• Aadhaar card issued by Unique Identification Authority of India (UIDAI)
• Senior Citizen Card issued by State/Central Government
• Fisherman Identity card issued by State/Central Government
• Arms License

Sole Proprietor Address Proof (Any one of the following)

• Passport
• Voter Identity Card
• Driving License
• Aadhaar card issued by Unique Identification Authority of India (UIDAI)
• Senior Citizen Card issued by State/Central Government
• Fisherman Identity card issued by State/Central Government
• Arms License
• Utility bills (Electricity bill, Telephone bill) not older than 3 months
• Water tax bill along with receipt not older than 6 months
• Property Tax bill less than one-year-old along with Tax payment receipts
• Latest Three months Bank Statement from the scheduled commercial bank with account opening cheque/Bank passbook/Original letter from an existing banker with account opening cheque
• Consumer gas connection card/Passbook along with the receipt of gas supply not older than 3 months
• Registered Lease & Licence Agreement along with utility bill not older than 3 months in the name of the landlord

With the above documents and information, a Banker can open a current account in the name of the Sole Proprietorship Business. For more information, get in touch with an IndiaFilings Business Advisor.