How to open a Bank account for Sole Proprietorship

To open a Current account in the name of sole proprietary firm, RBI has issued certain guideline regarding KYC for such account.

Know your Customer (KYC) guidelines – accounts of proprietary concerns

A reference is invited to Para 2.4(a) of the Master Circular on KYC/AML/CFT/Obligation of banks under Prevention of Money laundering Act (PMLA), 2002 issued to banks vide DBOD.AML.BC.No.2/14.01.001/2009-10 dated July 1, 2009. It has been advised to banks that internal guidelines for customer identification procedure of legal entities may be framed by them based on their experience of dealing with such entities, normal bankers’ prudence and the legal requirements as per established practices. If the bank decides to accept such accounts in terms of the Customer Acceptance Policy, the bank should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are

2.  For sake of clarity, in case of accounts of proprietorship concerns, it has been decided to lay down criteria for the customer identification procedure for account opening by proprietary concerns. Accordingly, apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks / financial institutions  should  call  for and  verify  the  following documents before opening of accounts in the name of a proprietary 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,
  • CST/VAT certificate,
  • Certificate/registration document issued by Sales Tax/Service 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.
  • 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.

ii) Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

4. These guidelines will apply to all new customers, while in case of accounts of existing customers, the above formalities should be completed in a time bound manner and should be completed before December 31, 2010.

 

  • Jateen

    Service Tax code is for the proprietor and not in the name of the proprietorship firm. In this case would it be elligible as one of the two documents required as per the new guidelines.

    • http://www.mukeshraj.com/ mukeshrajco

      No, The service tax number should be in the name of the Firm.

      • Varun Mathur

        Dear Sir,
        In continuation of the problem above I operate from a residential location. Shops License is not available for the same. I have service tax and professional tax in my name (Both departments unwilling to change it for any reason to firms name) . I am now unable to open a new account for a trading firm which i need to start.

  • Jateen

    Service Tax code is for the proprietor and not in the name of the proprietorship firm. In this case would it be elligible as one of the two documents required as per the new guidelines.

    • http://www.mukeshraj.com/ mukeshrajco

      No, The service tax number should be in the name of the Firm.

  • Nilesh

    Dear Mukesh,

    For sole proprietar company , which of the following are needed to open an bank account ;-

    1. Service Tax Registration OR
    2. Shop Act Certificate

    • http://www.mukeshraj.com/ mukeshrajco

      To open a bank account of sole proprietorship any document as a proof of business identity is required. If you are covered under service tax then go for the service tax otherwise it is better to go for shop & establishment registration.

      • Sukanto

         Hi Mukesh,

        When an individual plans to start a small business then it is implied that they won’t take up a rented shop or place and start incurring fixed costs. So shop license is out of question. Also attaining a revenue target of 10 lacs is not a matter of joke and so service tax registration is also out of question.

        Tell me other ways to do it.

        Sukanto

  • Nilesh

    Dear Mukesh,

    For sole proprietar company , which of the following are needed to open an bank account ;-

    1. Service Tax Registration OR
    2. Shop Act Certificate

    • http://www.mukeshraj.com/ mukeshrajco

      To open a bank account of sole proprietorship any document as a proof of business identity is required. If you are covered under service tax then go for the service tax otherwise it is better to go for shop & establishment registration.

  • balaji

    can iec in the name of the firm be taken as 2nd id docs

  • http://none Mrs. ramesh

    My father had a sole proprietory chartered accountancy practice .He passed away recently.I am his only child . My mother expired long back.I have 2 questions
    a) What are the options for the CA practice i.e. continuation /transfer of goodwill etc
    b) How ill the balances in the current a/c of the firm be handled? Is a succession certificate needed or will a letter of indemnity suffice
    Thanks

  • Jay

    hi, i have read your and find your replies very informative. i have a few concerns too and look towards you for some clarifications.
    1. i propose to start a sole proprietary firm to do some exportbiz. i propose to work out of home. the biz i have in mind is cotton madeups or garments. do i need to register my firm. what designation can i use on a bizcard.
    2. is it enough tt i obtain a IEC from dgft to conduct export biz. would sole proprietaryship be a problem. will the office and home address being the same be an issue?
    3. do i need to open a current account.
    4. what other registerations wuld i need to have if i also do small amounts of local domestic sales.
    please guide me.

  • amit

    Many business may not require registration, then in such situation how would one give 2 documents for opening of a/c. Has RBI looked into the facts that mostly only one registration is enough for a business, then why asking banks to take 2 documents

    • http://www.mukeshraj.com/ mukeshrajco

      Yes, as per RBI Guideline any two documents is required for registration. So, please arrange atleast two documents as a proof of the Name of Firm

  • amit

    Many business may not require registration, then in such situation how would one give 2 documents for opening of a/c. Has RBI looked into the facts that mostly only one registration is enough for a business, then why asking banks to take 2 documents

    • http://www.mukeshraj.com/ mukeshrajco

      Yes, as per RBI Guideline any two documents is required for registration. So, please arrange atleast two documents as a proof of the Name of Firm

  • Pramod Natarajan

    Recently I went to HDFC Bank to open a current account. I submitted my municipal License as proof address. But they said as per RBI guide lines 2 documents are required. please clarify whether 2 documents or only any one document is required for opening of account as per RBI guide lines.

  • Pramod Natarajan

    In your reply to Amit dated June 7 2010, you have mentioned that only one document is required. Can you please mentione the No and date of the RBI circular mentioning only one document is required so that I can mention it to my bank

  • Manish Chachra

    Hi Mukesh,

    I want to open a new proprietorship concern, but to open a bank account, I need to have a registration of sorts…

    Being a new startup, what kind of registration should I get?
    And in the mean time, if my overseas clients want to make a payment, does it make sense to have them remit the same in my savings account as I am not able to open a current account under my firm’s name?

  • Rohan

    Sir,
    1. Would an existing current account in the name of the sole proprietorship concern constitute one of the two documents? It not specifically mentioned, but it does say ‘etc’.

    2. Can a sole proprietorship concern call itself as a ‘Firm’ even if there are no employees?

    Thanks.

  • http://www.gmail.com Ajit

    Can an NRI form a HUF and become the karta. Can he authorise his spouse to be an authorised signatory in his absence.
    and Can he buy property in the HUF name and take tax benefit by including the Rent in the HUF’s income and file separately?

  • http://www.gmail.com Ajit

    Can an NRI form a HUF and become the karta. Can he authorise his spouse to be an authorised signatory in his absence.
    and Can he buy property in the HUF name and take tax benefit by including the Rent in the HUF’s income and file separately?

  • ashok

    How a newly started business person to open a sole proprietorship ac , since after open account he can able to do all these things.Kildly clarify

  • Amit D

    Sir,

    For indivisuals doing consultancy works (service tax -N.A) how to generate the proof of business name & address of operating office.

  • himanshu gupta

    i want to start a propritership firm so how registraction in propritership firm , registraction is nessarry pls inform me sir

  • himanshu gupta

    i want to start a propritership firm so how registraction in propritership firm , registraction is nessarry pls inform me sir

  • Himanshu Sharma

    How foolish you are!

    In case of new current account opening of sole proprietorship, how will he/she arrange these documents in case of IT/Web Designing/ Designers/film maker/ service industry like architect/fashion designer/ software designing etc which they are working from their homes itself. To obtain a Service Tax number or IEC number, the bank details are required. If the person doesn’t have any bank account in name of proprietorship firm then ……

    This is the same things which comes first egg or hen…….

    The govt. is making a policies without any depth knowledge or practical things….I don’t know how these (Govt Employees) clear their exams and get the job. Even they don’t know which they are demanding from the people.

    They are such a foolish guys………

    • http://twitter.com/EasyDestination EasyDestination

      What RBI has done is stupid and illegal. The entire idea of sole proprietorship in India was to allow people start small business that does not require registration or any other form of documents. Clearly time has come for RBI governor to commit suicide.

    • Stdave15

      You are absolutely right on that matter. I am also work as a software developer and a proprietor and I have work as a SOHO system (Small Office Home Office ) so I no need to any registration no for municipal  or ect…My work is only based on onsite development. At that point of view I no need shop or commercial office. and that registeration no. At this foolish regulation of RBI, I not have a current a/c  of my small proprietory firm.
       

  • Vanand

    The RBI should restrict itself to one document and also allow the customer some time aftre opening an account to submit the document.
    A bank account is needed to commence business and these documnets can follow.

    AIA

    • Anonymous

      Yes, you are right. Current Account is very initial document to start a sole proprietorship. Everybody knows that import export can only be obtained after opening of current account, so how it is possible that attach copy of IEC code as proof of registration.

      • pramod chavan

        Bank may open the account with an undertaking from the client to submit the iec code within a month, failure from the customer bank may freeze the account or may refund the amt by closing the account.

        psc

  • S.K.Jha

    My conception since beginning was that people at RBI are educated, knowledgeable, practical, forward thinking, progressive etc but after going through my experience of opening a current a/c for proprietorship based company (which i could not open till now) due to this circular of RBI, I think they they are the most impractical and illiterate person. They might be having masters and Ph.D. degrees but their action show that they are no better than clerical staff of banks who sit across the counter and talk as if they were finance minister of India.

    I will with draw my above comments and apologize if any RBI executive gets the above two documents for a new proprietorship concern and gets the current a/c opened in the name of the concern when the above circular is active and without influencing any bank……

    • Anonymous

      I am 100% agree with you, this RBI circular is total impractical thing.

      • Amit

        i agree on this.. this is foolishness.

    • m

      These stupid jokers at RBI want to suffocate the innate energy and entrepreneur talents of ordinary Indians…They are self-appointed bunch of jokers dancing on our heads…Doom is the only word….

  • Monika Ahuja

    Hi Mukesh ji,

    Please let me know if it is necessary to Register trademark the small business If I am a sole proprietor?

    And If I dont register the Trademark & somebody copies it & registers the trademark then what will be my small business’ future?

    Nidhi

  • Niranjansng

    Hi Mukesh Ji, Thanks a ton first of all since you are doing a great help to the people knowing less or nothing about accountancy.
    My query is
    What document i need to submitt to open a current account/saving account in name of a propritery firm if i have PAN as my identity and rent agreement as proof of residence, since the registration of such firm is not neccessary can i put name of firm without having any suppoting document.
    Pls. let me know sir.

    • m

      Have the Rent Agreement in the name of your proprietary firm.

  • Bbboy

    Sir,
    1) RBI asking for document called registration certificate , what does it means ? where to register a sole propritory firm ? ROC is for big companies , so where a sole propritory firm will need to register ?
    2) I am planing to take a sub-brokership from one of the big main broker , for that i want to open a new sole propritory firm and also need to open current a/c on firm name, my question is that in this case as sub-broker i don’t comes in service tax or sales tax or any shop and establishment etc…, so how do i start my new firm without a current bank a/c ? As for taking sub-brokership i need to show my propriertory company and alo need to mention my current bank a/c details in sub-brokership form, only then my form is accpeted by SEBI to allot me a sub-brokership thru some main broker.

    Pls. let me know how to start as i unable to open current bank a/c and i am tryed many banks and everyone says that i need these 2 documents, but no one tells that how to full fill these 2 documents in diffrent cases.

    India is big country and 1000′s of diffrent kind of small business are born daily and each and every small bisuness is difrent from each other, and most of these are not covered in any of the guidelins etc..

    Pls. guide me step by step sir

  • Namrata Patel

    Dear sir,

    please let me know how many properitership firm can be open in the name of one person as per indian law?

    Regards,

    Namrata

  • Subhashish

    Hi Guys,

    I usually don’t post anything ever on any blog/forums however, this time I thought I should post this to help thousands like me. I was in the same boat, looking for desperate measures to have a current account setup with my proprietor name, but all I got to hear was an individual current account from each bank as the solution.

    This is what I did to solve my problem:

    1. I got my service Tax registration done with my Proprietor firm name(Yes this is possible). But ensure to apply for exemption of tax else you will have to pay ST even for revenues below 10 Lac.

    2. I approached HDFC Bank Current Account Dept(Call Centre –> Leave No –> They call back). They agreed to give me current account on the basis of the ST registration and a letter from my CA stating the verification of business entities(they sent the format too). I just got it signed from my CA and attached other personal details like address proof, PAN.

    Thats it, the thing which looked impossible to me, suddenly turned sides and now I have a Current Account with HDFC under my proprietorship firms name.

    If you need any further details, I would be glad to help you out.
    P.S: I am from Mumbai (India)

    Thank you all for reading!!!

    • Abhay Tibrewala

      hello Sir, 
      Thanks for your post, great help. Can you please email me the draft of the letter from HDFC Bank at tibrewala.abhay@gmail.com

    • Vaidattaatours

      Thx a lot

    • http://pulse.yahoo.com/_2S5RHCWOALWMETFANQ6342ZUI4 kc

       Hi… Subhashish …

      Thanks for sharing, Valuable Experience and Experiment ……

      now can u please tell me how to had apply for exemption of service tax as small service provider ( below 10 LK )…..

      Thanks in advance ……..

      • Anonymous

        There is no need to apply for exemption for small service provider. If you are registered with service tax department then you have to mention the exemption notification number in the half yearly return and if you are not registered then you have to show your bank statement and other account books to prove that you are not providing services more than 10 lakhs.

    • Rahul

      Hello Subhashish,

      Where in Mumbai can I get the Registration done for Service Tax under the firms name  and what documents are required?

      If you could please share your contact number or email address or mail me at rahulvicky1@gmail.com.
      @gmai:disqus 

      Thanks
      Rahul

    • Arpanjot Singh

      Hi

      Subhashish,thanks for the valuable comments!As per the rules,one cannot register service tax unless the taxable amount exceeds 9 Lakhs per annum.Considering this,how did you get your service tax registration?

      Thanks

    • Rupesh

      give me that CA letter format on rupesh.vardam@gmail.com

    • Sauabh

      Dear Subhashish

      Kindly mail me the format for letter from CA to my id

      it would be very greatful of u…

    • Rupesh

      hi subhashish,
      you got your ST no. on your business basis, your firm doesn’t have the turn over of ST circumstance. are you have to pay ST to any kind of your billing?

  • Chandrakant Prasad

    For a simple website, how can I open a current account on the name of WEBSITE in any Bank as I have not a single document as prescribed by RBI.

    • Sameer Goyal

      Chandrakant Prasad ji, Do you find any solution. If yes, please let me know. I’m having a simple website and want to open a current account on the name of WEBSITE.

  • AJK

    I have just started selling artificial jewellery from home in wholesale. Please suggest how to establish proprietorship firm. How & where should I register… Pls help & guide….

    • Abhayvithlani

      Any business , small or medium or large scale require proof ,means licence /registration , means u can apply for shop act registration , which is simple Form-A , then you can open current account as same name given in Shop Act Firm Form , and That’s Siittt!! , Its look complex , but its easy and compulsory ,dear! 
      and As above said b’out RBI , that’s really  our Misfortune , laws are strict in india , rules rules and rules  , and Politician has Jetplanes !!!!!!!!! its India , Paypal is restricted  and we want to become Super Power in IT field !what a Govt we have !!!What a joke !! savitabhabhi.com is banned , and what bout other millions of pornographics sites !!India India !!!

  • K.Rajendran

    Propreitory concern requires classification, in today’s trend marketing by individuals is based on online and personal contact, such propreitors who work as providers of solutions or materials through  agencies, the basic requirement is only a Current A/c., for this the guidelines issued by the RBI for requirement of documents or irrelevent, we should have democracy to open any type of A/c, if he is the citizen of India
      

  • Piyush Sheth

    DEAR SIR,
    I am a propritor of my Transport business , Iam working with reputed company, they paid Sales tax onbehalf of  all transporter, they also give us letter for that also.

    But my bank not reay to accepte this  I am also ready to submitt the inmcometax return file, but they are still refusing & they required return file on the firm name but this is not possible in propritorship firm, & other document required in KYC norms is not relavent with my firm.

    Please halp me for this matter,& give me some solution 

  • Harsha

    Hi Mukesh Ji, I have developed classified website having online payment for advertiser. I want to register company name as sole proprietorship. Can you please advise procedure for the same. 1. What documents/process require for opening account in Bank with Company name 2.Revenue is very less, so is it compulsory to register company name? 3. After opening bank account what is the next procedure? Please advise…

    • http://www.mukeshraj.com/ Mukesh Goel

      Mr. Harsha,

      When you open a current account in the name of firm, bank will ask to provide two registration in the name of sole prop firm as per the KYC norms issued by the RBI. So you have to obtain two registration in the name of firm like service tax reg, VAT reg, IEC etc. For any further help please call me at 8010111333.

      Mukesh Goel

  • Bhaskar Dev

    Hi Mukesh ji, I have been reading the blog and stuck in the same dilemma as everyone else. I have a started a business 2 months ago where I provide services to my clients based in UK and Australia.
    Eg Clients send me designed photographs for wedding albums, I get them printed from different printing companies in Delhi. I pack the album and courier. For this work client has to pay me commission. I am not doing any sales only providing services.
    How can I get a current bank account opened in this scenario? Annual turnover would be around 4lakhs a year.

    I spoke to HDFC bank they told me to get ST2 registration.

    At ICICI bank they told me to get partnership deed made from a austhorised notary person. Apply PAN card using this notary documents and once the PAN card comes they will open back account. Is that true?

    Please help. I’m confused and stuck. I tried calling you however number not reachable.

    regards,
    Bhaskar Dev
    Seven7prints

    • http://www.mukeshraj.com/ Mukesh Goel

      Dear Mr. Bhaskar,

      To open a current account with bank require KYC compliance as per the RBI rules. If you are sole proprietary firm then you must provide atleast two documentary proof in the name of business entity as mentioned in the KYC circular of the RBI. Normally Tax registration number of Trade association certificate are accepted as business proof. In your case you can register your self with the Shop & Establishment Act and Service Tax.
      But suppose you want to do the business as a partnership firm then you should only furnish partnership deed. No tax registration is mandatory in this case.

      Mukesh

  • Sandeep Patil

    If you look at Indian companies act, they say proprietary firms, do not need any kind of registration! Now to get a VAT they ask for a bank account and for bank account they ask for VAT. We want to pay taxes as a duty. On one hand government wants to increase tax revenue on the other hand we have foolish rules and idiotic banking systems. I request the author to write a way around this instead of stating what is mandatory!