Types of LLCs in India

LLCs in India can be formed as:

• Limited Liability Partnership

An LLP (Limited Liability Partnership) has features of both a partnership and a company. As per regulations, two partners have to be there to register an LLP. An important feature is that the liability of the partners is limited to the extent of their contributions in the partnership. 

Read more: Limited liability partnership

• Private Limited Company

Any business entity formed as per the regulations of the Companies Act 2013, where the shares are held privately and cannot be freely transferred to the public.  A private limited company can have a maximum of 50 shareholders, while a minimum of 2 must be there at the time of incorporation. 

• Public Limited Company

It is a type of entity defined in the Companies Act 2013 as an entity whose shares can be held by the general public. The shares can be traded on stock exchanges or subscribed through Initial Public Offering (IPO). A public limited company is formed with a minimum of 7 shareholders.

Steps to Register LLC in India

What are the Key Benefits of an LLC?

Let us explore the key benefits of opening an LLC: 

• Limited Liability

The company’s shareholders will have limited liability if the LLC faces legal proceedings for debts or other problems. The liability is limited to the unpaid amount for their shares. 

This prevents members and owners from being personally liable for the LLC’s operations. As the company is a separate entity, one cannot sue the LLC’s owners for the business’s activities.

• Separate Legal Entity

The law considers an LLC to be a separate legal entity, i.e. its existence is not tied up with that of its shareholders. In other words, it can collect assets, take on debt and work under its name separately. Furthermore, it can also own immovable properties such as buildings or real estate. This means that their owner’s personal assets are always safeguarded.

• Perpetual Existence

LLCs have perpetual existence, i.e. they will continue existing as a separate legal entity even after the deaths of their shareholders. This is primarily because shares get passed on to the beneficiaries or nominees after the current shareholders die.

• Transferability of Shares

Shareholders can transfer their ownership to any person of their choice. The buyers will receive the same transferability benefit, so they can sell it off anytime. This is a vital advantage that allows an LLC to have a perpetual existence.

• Immense Growth Potential 

LLCs have immense growth potential as these are separate legal entities and can formulate and act upon their development strategies. These business entities can accumulate assets and acquire loans for expansions. It is also not dependent on its shareholders’ creditworthiness or capabilities, which is beneficial for its overall growth.

What are the Limitations of Forming an LLC?

• Time-consuming and Expensive 

Acquiring a DSC (Digital Signature Certificate) and DIN (Director Identification Number) may be tedious. Moreover, preparing the MoA (Memorandum of Association) and getting the directors’ consent can be quite time-consuming. 

There are several expenses of running an LLC in India. Examples include payment to auditors, financial advisers and tax professionals. Add to this the expenses required for filing ITR (Income Tax Returns), GSTR (GST Returns) and arranging annual meetings.

• Complex Compliances

LLCs need to maintain detailed financial and audit reports. These companies need to maintain records of meetings and ensure that their account books are correct. Failure to comply with these rules may result in hefty penalties. 

Considering the advantages of forming an LLC and doing away with the complications, businesses can explore the RazorpayX business banking platform. 

• Company records are public

A public company is required to make certain disclosures and report their finances to SEBI the stock exchanges. This extreme transparency may be detrimental to the company as it might reveal sensitive information to competitors.

Additionally, excessive transparency can lead to increased scrutiny from investors, regulators, and the public, which can put pressure on the company to meet high standards and expectations.

• Extra costs

Once you have registered your company as an LLC, you may have to shell out extra money for an accountant, since accounts become more complicated and regulated for LLCs. There may also be extra costs pertaining to taxes, legal fees, and compliance requirements.

LLC Taxation in India

Corporate Income Tax for LLCs

• Corporate Tax: Corporate tax is paid on the company’s taxable income. This is calculated after deducting COGS, G&A and other expenses. The corporate income tax rate depends on the turnover earned by the company. For example, companies with turnover up to Rs 400 crore are liable to pay tax of 25% on taxable income.

Capital Gains Tax

• • • Short-Term Capital Gains: Gains from the sale of assets held for less than 36 months are generally taxed as short-term capital gains.
    • Long-Term Capital Gains: Gains from the sale of assets held for more than 36 months are generally taxed at a concessional rate or may be exempt, subject to certain conditions.

Goods and Services Tax (GST):

• • • • LLCs are generally required to register for GST and pay GST on the supply of goods and services. The GST rate varies based on the nature of the goods or services.

Other Taxes:

• • Professional Tax: Depending on the state, LLCs may be subject to professional tax on the salaries of their employees.
  • Minimum Alternate Tax (MAT): If the effective tax rate of a company is lower than the MAT rate, the company is required to pay MAT.

Documents Needed to Open LLC in India

Why Should LLCs Opt for RazorpayX?

Here is a list of the reasons why an LLC should consider RazorpayX: 

• RazorpayX offers completely digital banking solutions to businesses and accelerates the growth of businesses with the power of automation.
• It offers a single dashboard for tracking invoices, paying and reconciling taxes seamlessly, scheduling payments, viewing smart financial reports, and performing easy vendor payments.
• Collateral-free corporate cards enable startups and new ventures to access credit easily. 
• A smart dashboard promises a smooth user experience while managing inflows and outflows.
• Business owners can access their current accounts at their convenience via desktop, laptop, mobile or even smartwatches.
  
  
  Explore RazorpayX!

Start-ups and emerging businesses have massive growth potential, especially if they leverage the technology offered by RazorpayX. This all-in-one business banking platform is an efficient alternative to traditional banking facilities.

Frequently Asked Questions

Management accounting or managerial accounting is a special branch of accounting of presenting financial statements to managers of a business to help them make better-informed decisions. It is not disclosed to the public and is only used internally.

Management accounting is a prerequisite for all businesses. As long as managers know exactly what the financial position of the business is, they can make well-informed decisions to further business growth.

Importance of Managerial Accounting

How Management Accounting Works

Management accounting provides financial and non-financial information to managers to help them make informed decisions about the business. The main functions of management accounting include:

• Communicating financial information: Management accountants gather and analyze financial data from the business’s financial statements and other sources, and then communicate this information to managers in a way that is easy to understand and use.
• Planning and budgeting: Management accountants help managers develop plans and budgets for the business. This includes setting goals, forecasting future financial performance, and allocating resources.
• Costing: Management accountants track the costs of the business’s products, services, and activities. This information can be used to set prices, make pricing decisions, and control costs.
• Decision-making: Management accountants use financial and non-financial information to help managers make informed decisions about the business. This includes decisions about pricing, products, marketing, and investments.
• Performance evaluation: Management accountants track the performance of the business and identify areas for improvement. This information can be used to set goals, improve efficiency, and make better decisions.

Techniques of Management Accounting

Management accountants use a variety of techniques to communicate financial information to managers. Here are three of the most common techniques:

• Cost accounting: Cost accounting is the process of collecting, analyzing, and reporting financial information related to the costs associated with producing a product or providing a service. This information can be used to monitor costs, set prices, and make pricing decisions.
• Performance accounting: Performance accounting is the process of measuring and reporting the performance of an organization or individual against predetermined goals and objectives. This information can be used to track progress, identify areas for improvement, and make better decisions.
• Strategic accounting: Strategic accounting is the process of analyzing an organization’s financial data in order to inform strategic decisions. This information can be used to identify trends in the market, assess the financial viability of potential business initiatives, and make data-driven decisions.

Types of Managerial Accounting

Managerial accounting encompasses a range of techniques and analyses.

Product costing

Product costing is the process of calculating the total costs involved in the production of a good or service. It identifies and measures the various direct, indirect, variable and fixed costs that go into the main revenue-generating activity.

This helps identify areas of high spending and low return, allowing managers to make decisions to improve spending and optimize processes.

Different costing methods, such as job order costing, process costing, and activity-based costing, are employed based on product characteristics. Accurate product costing is essential for pricing decisions, inventory valuation, profitability analysis, and overall business strategy.

Accounts Receivable Management

Accounts receivable (AR) management is another aspect of management accounting that can bring huge benefits to the company. AR can help businesses identify high-risk customers by categorizing invoices that routinely haven’t been cleared past the due date.

This data-driven approach helps in optimizing working capital, reducing bad debts, and improving overall financial performance. Moreover, efficient AR management can enhance customer relationships by providing timely and accurate invoicing, as well as responsive customer support.

Cash Flow Analysis

Cash flow analysis is a critical component of managerial accounting that provides insights into a company’s liquidity and ability to meet its short-term obligations. By examining the inflows and outflows of cash, businesses can identify potential cash shortages or surpluses, assess the efficiency of cash management, and make informed decisions regarding investments, financing, and operations.

Cash flow analysis is particularly valuable for forecasting future cash needs, managing working capital, and evaluating the overall financial health of a business. It helps in identifying areas where cash can be conserved or generated, such as optimizing inventory levels, accelerating collections, and delaying payments. By understanding the timing of cash flows, managers can make strategic decisions to ensure the company has sufficient cash to fund operations, invest in growth opportunities, and maintain financial stability.

Advantages and Objectives of Management Accounting

The primary objective of management accounting is to provide relevant and timely financial information to support the decision-making process. It involves:

• Planning and Forecasting: Developing budgets and financial projections to guide organizational activities.
• Decision Making: Analyzing costs, revenues, and other factors to evaluate alternative courses of action.
• Performance Evaluation: Measuring the performance of individuals, departments, and the organization as a whole.
• Cost Control: Identifying cost reduction opportunities and implementing measures to control expenses.
• Profit Improvement: Analyzing profitability and identifying strategies to increase earnings.
• Decision Making: Providing information to support strategic planning and decision-making.

Management Accounting in Business Decision Making

Here are some specific ways that management accounting can help businesses make better decisions:

• Identify problems early on: Management accounting can help managers identify problems with products, pricing, or marketing campaigns early on so that corrective action can be taken before the problems become more serious.
• Make better pricing decisions: Management accounting can help managers determine the optimal price for products and services by taking into account factors such as costs, demand, and competition.
• Allocate resources more efficiently: Management accounting can help managers allocate resources such as labour, materials, and capital to their most productive uses.
• Monitor the performance of the business: Management accounting can help managers track the performance of the business over time and identify areas for improvement.
• Plan for the future and set realistic goals: Management accounting can help managers plan for the future and set realistic goals by providing information about the business’s financial position and performance.

By using management accounting, businesses can make better decisions that lead to improved profitability and efficiency.

Management Accounting vs Financial Accounting

Limitations of Management Accounting

Better Business Financial Management

With RazorpayX, founders can supercharge every aspect of their financial operations.

• Save time, reduce manual effort and eliminate errors with instant payouts
• One single, powerful dashboard for all your money management needs
• Intelligent invoice generation for vendor payments
• Smooth integrations with all major accounting platforms

And more where that came from. Your business is in the future – it’s up to you to ensure your banking is, too.

FAQs

E-banking is an umbrella term for all banking services available online, from applying for loans on a website to simply checking your bank balance on your mobile app. Let’s go through the various dimensions of e-banking and how e-banking benefits everyone.

What is E-Banking?

E-banking is a banking service that enables customers to access their bank accounts through the internet. Most, if not all banks offer e-banking services to their customers today in a bid to improve accessibility, financial literacy, transparency and reduce dependency on physical bank branches.

Customers access e-banking services through a mobile app like ICICI Bank’s iMobile app, SBI’s YONO app, IDBI’s Go Mobile app and Axis Mobile. They can also use the internet banking websites provided by their banking service provider.

E-banking is used for both financial transactions like making and receiving payments; and non-financial transactions like changing your PIN, checking your bank balance or updating your personal information.

What are the services provided by E-banking?

Going to ATMs, swiping debit/credit cards, and transferring money online, all of this comprises E-banking. Here is the list of various types of e-banking services provided today:

• Mobile/Internet Banking

Regardless of whether you use your bank’s webpage or mobile application to make a transfer, you are using internet banking.

Internet banking enables users to make seamless transfers, access personal details, make easy bill payments and so much more just with a stable internet connection!

If you do all these things on your bank application on your phone, it is called mobile banking.

• ATMs

Do you have to withdraw or deposit cash urgently? Automatic Teller Machines (ATM) allow you to do so seamlessly in just seconds. ATMs were the first form of digital banking that was introduced.

Enter your card/account details, enter the amount to be withdrawn, enter your ATM PIN and there you go!

• Credit/Debit Card:

You’re at a mall, buying clothes, and it’s time to pay. You swipe your card and ping! The transaction is successful!

Before debit cards, this transaction would have involved exchanging cash, calculating balance, and counting coins – tedious, and long.

The introduction of debit cards has allowed for transactions to be completed in mere seconds.

Credit Cards allow users to borrow funds up to a pre-approved amount and in addition to this, you can avail of a range of offers.

• Electronic Data Interchange (EDI)

Electronic Data Interchange is a digital mode of fund transfer across businesses.

EDI is a standard electronic format that tends to replace company paperwork like purchase orders and invoices hence reducing manual processing errors.

In this way, it helps reduce transaction costs across a supply chain.

• Electronic Fund Transfer (EFT)

Electronic Fund Transfer is a digital way of transferring funds.

While you transact online, there are a number of modes of payment you can opt for. National Electronics Fund Transfer (NEFT), Immediate Payment Service (IMPS) and Real-Time Gross Settlement (RTGS). 

• Electronic Clearing System (ECS)

ECS is a provision that allows a customer’s credit card bill to simultaneously be deducted from that customer’s savings account. This allows the customer to avoid late payments.

Read: E-banking Guidelines

Benefits of E-banking

E-banking benefits everyone in the ecosystem – banks, customers, businesses, beneficiaries and even the economy and government at large. 

Cost efficient

Internet banking is the least expensive mode of making and receiving payments. This results in huge cost savings for both banks and businesses. For customers as well, since there is no added cost of making the transactions, can enjoy a reduced cost of goods and services in general.

This is a big motivator for the public to switch from cash based transactions or bank transfers. Why is this important? A shift towards digital payments fosters economic growth by accelerating financial inclusion. It reduces the informal economy, increases tax revenue and improves financial transparency.

Accessibility and convenience

Customers enjoy 24×7 access to their bank account, allowing them to manage their finances any time, any where. With no obstacles except internet access, e-banking has made it possible for people even in the remotest of places to access world-class banking services.

This increased accessibility fosters customer loyalty and attracts new clients, expanding the bank’s customer base. Moreover, mobile apps streamline operations by automating routine tasks, reducing operational costs, and enabling data-driven decision-making.

Reduced errors

E-banking relies on software, automation and technology. This reduces the risk of errors significantly, since all financial operations are digital. Errors could include miscalculations and fraudulent transactions, which are common in manual processes.

Reduced errors are beneficial to both account holders as well as banks, since save time and money. Banks can streamline operations, reduce costs associated with rectifying errors, and improve customer satisfaction.

Is E-banking the same as Internet banking?

E-banking is a blanket term that covers everything from internet banking to NEFT/RTGS transfers.

Any kind of digital mode of fund transfer comes directly under Electronic Banking (E-banking). For example, internet banking, mobile banking, and other modes of online fund transfers like NEFT, RTGS, and IMPS all fall under Electronic Banking.

There was a time when even for normal fund transfers businessmen/customers had to visit banks 157848 times. Other financial services like investments and loans along with fetching simple personal account details were extremely tedious since they were not readily available. 

E-banking and its evolution have modified lives. Banking at the fingertips is a dream come true and today, we face no more hassles of visiting banks for the tiniest of issues or services.

Similarly, banking has faced prominent evolution. From traditional banking to neo-banking the evolution of the fintech space has had a significant impact on businesses today.

Read more: What is Fintech?

Features of E-banking

Types of E-Banking

The integration of the internet and computers into finance and banking has created several branches of e-banking.

Online Banking

Online banking is a type of e–banking that allows customers to access their banking accounts, view account activity, make payments and transfer money via an online platform.

Mobile Banking

Mobile banking is a type of e–banking that allows customers to access their banking accounts, view account activity, make payments, and transfer money via a smartphone or other mobile device.

ATM Banking

ATM banking is a type of e–banking that allows customers to access their banking accounts, view account activity, make payments, and transfer money via an automated teller machine (ATM).

Direct Deposit

Direct deposit is a type of e–banking that allows customers to have their paycheck, Social Security, or other income deposited directly into their bank account.

Electronic Funds Transfer (EFT)

Electronic funds transfer (EFT) is a type of e–banking that allows customers to make payments and transfer money electronically.

Electronic Bill Payment

Electronic bill payment is a type of e–banking that allows customers to pay their bills electronically.

Online Investing

Online investing is a type of e–banking that allows customers to purchase investments such as stocks, bonds, and mutual funds online.

Frequently Asked Questions

A core banking solution (CBS) is a software used by banks to manage primary operations. It is a centralized system that allows customers or businesses to carry out transactions from any branch rather than only from the branch where the account was opened.

It streamlines and centralises banking operations for any bank or NBFC. With a robust CBS, banks can manage various account activities like deposits or withdrawals, loans, payments, information like account balance and more.

Today, with solutions like RazorpayX Business Banking+, businesses can harness the power of automation and technology to make cash management efficient and accurate. Businesses can now manage payroll, vendor payments, invoices and contracts, bulk payouts, and so much more from one centralized dashboard.

Explore RazorpayX

What is Core Banking?

Core banking is a centralised system that allows customers or business bodies to carry on business operations regardless of the bank’s branch. 

The main objective of core banking solutions is to offer tailor-made offerings to customers at their convenience. These solutions differ in nature and are dependent a lot on the customer base. CBS refers to the networking of different bank branches that enables customers to opt for varied banking facilities from different corners of the world. The entire banking application is based on a centralised server and can be used via the internet. 

Different functions of core banking encompass transactions, payments, loans and more. Internet banking, ATMs (Automated Teller Machines), Phone banking, Fund transfer remotely and instantly (IMPS, NEFT, RTGS and more), interest computation on loans and deposits etc., are some of the core banking solutions types.

While customers or business bodies reap the benefits of carrying out transactions freely, financial institutions via core banking solutions benefit from lesser time and can save upon resources that are used for repetitive business activities. 

Some of the lucrative features of core banking solutions are:

• Transaction management

• Customer relationship management activities

• Accounts, loans and disbursal management

• Customer onboarding

• Deposits and withdrawal management etc.

Advantages of Core Banking

Both businesses and customers benefit from different core banking solutions. 

Advantages for Customers

• Internet banking, mobile banking etc. are among the multiple channels that prove effective for faster payment processing.
• CBS (Core Banking Solution) benefits those who are living in rural areas. For instance, farmers can easily get e-payments towards subsidies directly in their accounts.
• Customers can get expedited service for routine transactions which includes withdrawals, passbooks, demand drafts, cash deposits etc.
• The provision of a 24X7 banking service is another notable advantage of core banking solutions. Moreover, the provisions can be opted at any time and anywhere. 
• Every bank branch uses applications from the data centre or central servers, hence deposits done in one branch get displayed instantly. Customers or any business owners can withdraw funds from any branch across the world.
• Core banking solutions curb the need for filling out multiple entries, thereby reducing errors and ensuring accuracy.
• It facilitates a hassle-free merging of self-service operations and back-office data.

Advantages for Businesses

• Core banking solutions facilitate standardisation and transparency within business bodies and branches of banks. Since all the branches are connected to a central server, transactions can be viewed anytime. Instant projection of the transactions helps businesses to deal with inaccurate transactions or fraud.
• Core banking solution emerged to be a saviour helping businesses cater to the increasing needs of customers. It ensures better customer retention via prompt customer service.
• This banking mode has led to the minimization of errors, thereby facilitating accurate transactions.
• It helps to bring down and manage operational costs involving lesser manpower for process execution.
• With the emergence of different core banking solution types, submission of reports to regulatory boards and the government has become convenient.
• Core banking solutions help in efficient documents and record management. CBS incorporates a centralized database that helps in the faster collection of data.
• It has become convenient for businesses to process cash, compute interest, open accounts, incorporate policy changes etc.
• In addition, businesses can offer services and products to customers at nominal rates. For instance, automating different parts of financial transactions has curbed the need for multiple staff, helping to save on wages and related costs.
• Custom-crafted banking software enables full integration of the banking system.
• Another advantage of core banking is that it adds security levels to the banking system. 
• Core banking solutions facilitate informed decision-making ability. For instance, as the overall banking procedure has become streamlined, business bodies can now decide whether to use the funds for business expansion or for lending out to customers.

How RazorpayX Has Emerged to Supercharge Business Banking?

RazorpayX, the business banking arm of Razorpay extends a suite of financial services and facilities aligned with core banking which caters to the changing market patterns. From opening a current account, scheduling payments, and applying for loans to paying taxes and viewing financial reports, everything can be easily done from one platform.

RazorpayX has curated its offerings owing to the fast-changing banking ecosystem. For instance, with RazorpayX-powered current accounts, business bodies can shift to fully automated business processes from performing manual financial operations. This account proves functional for carrying out day-to-day transactions like withdrawals, payments etc.

Even with the Forex funding facility, small businesses or start-ups can gather foreign capital. This facility aids expert-led and transparent means to ensure foreign capital inflow. The dedicated team of professionals will offer insights into forex rates and ensure that business bodies are 100% compliant.

A beneficiary is a person or organization that benefits from a will, trust, retirement plan, insurance policy, annuity, financial transaction or another arrangement. Generally, a beneficiary is entitled to receive payments or other benefits from the assets held in the arrangement.

To maintain healthy vendor & customer relationships, business owners need to make real-time payouts. However, traditional banks impose a cooling period before allowing businesses to make payments to newly added beneficiaries, making it difficult to make instant payouts. 

Modern banking solutions like RazorpayX Business Banking+ use technology and innovation to bypass the cooling off period and allow account holders to make payouts to beneficiaries instantly, in real-time.

Explore Business Banking+

How to Add a Beneficiary?

Let’s have a closer look at the steps to add beneficiaries:

1. Login to your net banking portal

Log in using your user ID and password. Select the option for third-party transfers or fund transfers. 

2. Create a beneficiary

To transfer funds via NEFT, RTGS & IMPS, you’ve to select a payee or a beneficiary. 

There are two options to do this, depending on if the beneficiary account is in the same bank or other bank branches. Add the beneficiary’s bank account details. 

• Name of the account holder
• Account number
• Account type

3. Add details of funds to be transferred

Once you have successfully added the beneficiary, choose the transfer option (NEFT, RTGS, IMPS) & add the fund to be transferred. 

4. Wait for the beneficiary to get activated

Banks generally take 30 mins to 4 hrs to authenticate beneficiary details. During this cooling period in the bank, the funds will not be transferred resulting in payment delays. 

Once the beneficiary is activated, the funds are transferred to the specified account. 

Depending on the mode of payment (NEFT, RTGS, IMPS) & the cooling period in the bank for receiver detail activation, the entire process of payouts can take up to 2 – 24 hrs. 

Don’t want to wait? Make instant payouts with RazorpayX Business Banking+.

 What is Cooling-off Period? 

In banking, after adding a beneficiary usually a period of 30 min to 4 hours is needed by the bank before any transaction can be made to this beneficiary. This is known as the cooling-off period.

In cases where the vendor requires the fund to be transferred immediately, the cooling period in the bank can be a cause of concern. And if a receiver is added after banking hours, it gets approved & activated only the next day. 

Note: The cooling period varies from bank to bank. For example, the cooling period for SBI bank accounts is 4 days from the time of approval. During the SBI cooling period, you can transfer an amount of up to Rs. 5 lakhs to the receiver. After the completion of the cooling period in the bank, you will be able to transfer up to the maximum limit.

How to Add Beneficiary Without Cooling-Off Period?

Timely payments to vendors or customers are crucial for business success & any delay can cause an interruption in service. Businesses need to ensure dispute-free, quick payments to vendors & customers. 

New-tech solutions like RazorpayX Business Banking+ allow businesses to make 24×7 instant payments to customers, vendors and employees with no cooling period. 

Add beneficiaries as a contact and make single or bulk payouts without any cooling period in the bank. You can also add multiple banks accounts or UPI IDs against one contact.

Instant Payouts without Beneficiary Account Details

Adding a beneficiary requires the business to already have the receiver’s bank account details – a UPI ID, bank account number and IFSC. In certain cases like cash on delivery refunds or security deposit refunds, the business might not have these details.

Furlenco solved this problem with RazorpayX’s Payout Links solution. Simply send a payout link to the beneficiary, and the entire process is automated from there.

Read more: Furlenco Reduces Customer Complaints by 70% on Automating Refunds via RazorpayX

Learn more about RazorpayX Business Banking+

Frequently Asked Questions

Merchant banking is a special branch of banking that provides financial services to medium to small-sized businesses. They may help with underwriting, fundraising, credit or financial advice. Merchant banks may also provide services to high net worth individuals.

Some merchant banks may be affiliated with other retail or investment banks, but this specialized branch of banking does not provide services to the general public.

Today, merchant banking solutions like RazorpayX Business Banking+ allow businesses to harness the power of automation and technology to make banking efficient and accurate.

Manage payroll, vendor payments, invoices and contracts, bulk payouts, and so much more from one centralized dashboard.

Explore Business Banking+

How Does Merchant Banking Work?

Merchant banks work with large companies to cater to their complex financial needs. The services they provide include:

• Fundraising and capital acquisition for various purposes like mergers, acquisitions, expansion.
• They also provide underwriting, securities trading and advisory services
• Asset management, wealth management, investment management for companies and high net worth individuals and families

Read more: SEBI-registered merchant banks in India

Functions of Merchant Banks

A merchant bank’s primary function is to provide financial and advisory services to medium-sized businesses.

Portfolio Management

Merchant banking companies provide portfolio management services to high-net-worth individuals and corporate investors. These services include a selection of securities, portfolio monitoring and review, advice on the rationalization of portfolios, and tax planning.

Fundraising

 Merchant banking helps businesses raise funds from the public by issuing shares and debentures, rights issues of shares, preferential allotment of shares, private placement of shares and debentures, and other instruments.

Loan Syndication 

Merchant bankers help arrange funds for large corporate borrowers by syndicating loans from multiple lenders. They act as an intermediary between the borrowing company and the lending institutions. 

Leasing Services

Merchant banks provide leasing services to companies in the form of capital goods, vehicles and office equipment. This helps to reduce the overall financial burden of the companies.

Underwriting Services 

Merchant banks also provide underwriting services for initial public offerings (IPOs), private placements, follow-on public offerings (FPOs) and rights issues. This service helps companies to raise the required funds from the public.

Example of Merchant Banking

In 2021, merchant bank Avendus Capital helped the Indian company Piramal Enterprises acquire the debt-ridden assets of Dewan Housing Finance Corporation (DHFL) for ₹34,250 crore ($4.4 billion). This was one of the largest debt restructuring deals in India and helped Piramal Enterprises to become a major player in the Indian financial services sector.

Top 10 Merchant Banks in India

1. Kotak Mahindra Capital: India’s largest merchant bank, providing a wide range of services to businesses, including raising capital, mergers and acquisitions (M&A), and project finance.
2. Morgan Stanley India: Global investment bank with a strong presence in India, offering services such as underwriting, M&A advisory, and equity research.
3. JM Financial: Full-service merchant bank with a focus on emerging markets, providing services such as debt and equity capital markets, M&A advisory, and restructuring.
4. Avendus Capital: Leading merchant bank with a focus on M&A and private equity, providing services such as deal origination, execution, and post-merger integration.
5. Edelweiss Financial Services: India’s leading financial services company, providing a wide range of services to businesses, including investment banking, asset management, and wealth management.
6. Goldman Sachs India: Global investment bank with a strong presence in India, offering services such as underwriting, M&A advisory, and equity research.
7. Axis Capital: Leading merchant bank with a focus on debt capital markets, providing services such as debt issuance, restructuring, and advisory.
8. Citigroup Global Markets India: Global investment bank with a strong presence in India, offering services such as underwriting, M&A advisory, and equity research.
9. Nomura Financial Advisory and Securities India: Global investment bank with a strong presence in India, offering services such as underwriting, M&A advisory, and equity research.
10. Bank of America Securities India: Global investment bank with a strong presence in India, offering services such as underwriting, M&A advisory, and equity research.

Merchant Banking vs Investment Banking

Both merchant and investment banks provide financial services to businesses, but serve very different functions.

Merchant banking is a valuable financial service that can provide growing businesses with the capital and financial help they need. It can also provide advice and assistance in areas such as financial management, corporate strategy and risk management. 

By utilizing the services of a merchant bank, businesses can access capital, reduce costs and gain access to a variety of specialized services. In short, merchant banking is an essential component of any business’s financial strategy.

• One-stop banking solutions platforms like RazorpayX allow business owners to open current accounts, pay taxes, schedule payments, pay vendors seamlessly and check invoices from a single dashboard. This saves valuable time and effort. 
• It is an accounting and banking platform that fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.
• With RazorpayX Payroll, businesses can automate salary payments and provide insurance policies to their employees

Frequently Asked Questions

A corporate account is a bank account one can open in the name of a business. It is used to facilitate transactions, receive income, and store funds. 

Every business should have a corporate bank account; corporate accounts offer significant benefits to businesses, with features like tax filings, credit and loans, automated payments and more. 

Today, digital-first corporate accounts like RazorpayX Business Banking+ offer more than just banking; centralized dashboards for everything from vendor management to payroll, enhanced with automation at all points.

Difference between Corporate Account & Business Account

Often, people think a corporate account is the same as a business bank account. Though they both serve business needs, they differ in certain key aspects that are listed below: 

Benefits of Corporate Account

Now, let us explore the benefits of having a corporate account: 

1. Improves Credibility

Having separate bank accounts for personal and business purposes is immensely helpful because it makes the business appear more professional. When customers see that a business has a corporate account, they feel reassured about its legitimacy. Moreover, having this account also helps business owners receive better deals from vendors and suppliers. 

2. Higher Investment Opportunities

A corporate account enables businesses to park and grow excess funds through reinvesting. Companies can also use this bank account to manage an investment portfolio and sell and purchase bonds, stocks, new companies, and other assets.

3. Offers Liability Protection 

There are multiple ways to store a business’s funds. However, while users might receive more or less the same features, they will not receive the liability protection offered by a corporate account. Another essential benefit of a corporate account is that it separates a company’s assets and funds from the business owners. As a result, instead of a single person, the company as a whole is responsible for the funds. 

4. Creates better Financial Management

Other crucial benefits associated with a corporate account include management of budgeting and spending. In addition, it provides more clarity with regard to the financial position of a business as proprietors get to view detailed reports and bank statements about their company. 

5. Easier Financial Transactions 

Business owners can carry out essential business transactions smoothly and efficiently from anywhere as corporate accounts come with internet and mobile banking facilities. Multi-location transfer of funds along with deposit and withdrawal of money at any location are additional benefits of a corporate account.

How to Open a Corporate Account? 

It must be noted that the eligibility criteria and documents required to open a corporate account vary from one business structure to another. Listed below are some of the key points related to opening a corporate account in India:

• The business for which the owner wishes to open a corporate account must have a board of directors. 
• Individuals are not eligible to open corporate accounts in India. 
• Companies must receive approval from their board of directors to open a corporate account. The standard procedure involves a meeting where a vote is taken to seal the decision. The directors also engage in a detailed discussion about the account’s primary purpose, access options, and features.
• For smaller businesses without a board of directors, the owner does not need anyone’s approval or vote to open a new corporate account.
• Generally, companies appoint a dedicated person, usually the board’s treasurer, to open and operate their corporate bank accounts.

Open a fully-digital RazorpayX Business Banking+ account with our team of experts and experience the future of business finance.

Documents required to open a Corporate Account

Listed below are the documents required for a corporate account: 

• Filled application form
• Article of Association
• Memorandum of Association
• Board Resolution
• Certificate of Incorporation 
• Proof of Address 

Disadvantages of a Corporate Account

Although the benefits outnumber the limitations of a corporate account, it would be helpful if people were aware of them: 

• Considering that corporate bank accounts engage in significant business transactions, the expenses associated with maintaining them can be higher than regular accounts. 
• Moreover, the process of documentation is confusing and time-confusing. 

Corporate Account that supercharges your banking experience

The RazorpayX-powered current account is backed by leading financial institutions.  Let us look at some of its benefits: 

• A dashboard that provides a crisp overview of the state of the business’s finances 
• Powerful APIs to automate pay-outs
• Important tax payments from one single dashboard
• The process of adding beneficiaries is easy and instant 
• The provision of setting up approval workflows does not require OTPs 

Listed below are the registered business types that can open a current account with RazorpayX: 

• Sole Proprietorship
• LLP (Limited Liability Partnership)
• Partnership
• Private/Public Limited Companies/ OPC (One Person Company) 

7 crucial tips to manage Corporate Account 

Listed below are essential tips that will help in managing any corporate account: 

1. Decide on an investment strategy 

Business owners should formulate a suitable investment strategy for their corporate accounts based on their financial goals. While there might be many investment options that financial institutions might offer, the following two are common: 

i. Portfolio Rebalancing

The bank designates a financial adviser who manages a company’s investment portfolio. This person will make decisions based on market movements, company income, and goals.

ii. Dividend Reinvesting 

This is an important way by which companies earn extra income. Business owners can choose their preferred investment types, for instance, what they are interested in—stocks or real estate purchases- but this process can also be automated. 

2. Share access with the right person

When creating a corporate account, one must carefully determine which person should have direct access to it and when. This is especially important if the account is used for business transactions and savings. For example, the owner needs to grant the concerned manager or leader access to use the account for purchasing new equipment or paying employees’ salaries. 

RazorpayX Business Banking+ comes with customizable approval workflows, allowing you granular control on access to the right people.

Speak with an expert for free

3. Explore given interest options 

Some financial institutions offer higher interest rates on deposits in some accounts, which help businesses earn more while saving funds simultaneously. According to experts, directors should explore the interest options of different banks, discuss among themselves and choose one.  

4. Consider different features offered

It is advisable to explore the features of a current account of different banks to make a more informed decision. For example, while some banks offer a corporate account with mobile banking features, others may have specified transaction or balance limits. Therefore, business owners must check whether their goals align with the account’s features. 

5. Check local regulations 

Tax regulations of a current account may vary depending on the business type and location. Generally, companies consult legal experts who are adept at taxation rules to ensure that the business is in full compliance. 

To sum up, companies with a board of directors must open a corporate account for ease of financial management. It has numerous benefits, such as more investment opportunities and security. In addition, registered businesses can consider opting for RazorpayX-powered current accounts to manage their finances smoothly and efficiently. 

Also read: Corporate Banking 101

Fully Automated Corporate Accounts

FAQs

Current accounts are a type of non-interest-bearing bank account used to serve businesses’ day-to-day financial needs. They are often used by business owners and corporations to manage their finances. 

Today, digital-first current accounts like RazorpayX Business Banking+ offer more than just banking; centralized dashboards for everything from vendor management to payroll, enhanced with automation at all points.

Current Account Features

Understanding what is current account means knowing the various features that help businesses in their day-to-day activities. Let’s have a look:

• Non-interest bearing account since current accounts are designed for high liquidity and ease of access. Since banks can’t rely on a steady pool of funds in current accounts, offering interest wouldn’t be profitable for them.
• Higher withdrawal and deposit limits to support business’s day to day financial needs
• Overdraft facility for business’s working capital needs
• Credit or debit card facilities and a relationship or account manager
• Special features to support businesses like bulk payouts, vendor management, accounting integrations, etc. These features are usually offered with digital current accounts, like the ones powered by RazorpayX.

Learn More About Payouts

Current Account Benefits

There are many reasons why business owners should opt for a current account over a savings account. A few benefits of a current account are listed below:

Read more: Current Account vs Savings Account

• Overdraft facility helps cover unexpected business expenses and help improve liquidity.
• Most providers offer special, customized current accounts for all kinds of businesses. For example, RazorpayX Business Banking+ Core is for businesses just starting up, with essential banking features like payouts and mobile app access. Check out the different kinds of accounts RazorpayX offers here.
• Current accounts allow for high accessibility, with features like mobile apps and internet banking, making your business’s finances accessible to you anytime, anywhere.

Get your RazorpayX Current Account Now

Current Account Example

All banks that offer savings accounts to regular individuals also offer current accounts for businesses and business owners. RazorpayX is one such fintech that offers a superior business banking experience for business founders.

Here are some of the features offered by RazorpayX:

Automated Accounting, OTP management
Maker-Checker Flows
Collateral-free Corporate Cards with higher limits
Forex & Funding Management
Automated Vendor Payments
Payroll – India’s ONLY payroll with Full Compliance Automation, Employee Insurance Management and TDS Filing

Documents Required to Open a Current Account

Frequently Asked Questions

The TDS rates are predecided by the Government under the Income Tax Act.

In this blog, we share the Latest TDS rate chart for the Financial Year 2024-25 and Assessment Year 2025-26 to help you calculate and pay TDS error-free.

TDS Rate Chart for FY 2024-25

*Applicable TDS rate for EPF withdrawals without a PAN number is now 20%, from the previous 30%

** Essentially means there is no limit

*** From FY 2023-24, interest on debentures issued by listed companies is also included

TDS Rates Applicable for Resident of India
(Not a Company) for FY 2024-25

TDS Rate Chart for Domestic Company for FY 2024-25

TDS Rate Chart for Non Domestic Companies for FY 2024-25

TDS Rate Chart for Non Resident Indians for FY 2024-25

Union Budget 2024 New TDS Provisions

TDS on Online Gaming – Section 194BA

From April 1, 2023, 30% TDS is to be deducted when income earned from online games is withdrawn. In this case, “online games” includes games of skill like online poker, rummy or fantasy sports; it also includes games of chance like online lotteries or roulette.

Previously, TDS was only applicable if winnings from online games exceeded Rs 10,000 in a financial year.

TDS on NRI Income from Mutual Funds – Section 196A

From April 1, 2023, NRIs can choose to pay a lower tax rate on income earned from investments in mutual funds by providing a tax residency certificate. Previously, NRIs had to pay TDS of 20% on income earned from Mutual Funds.

TDS on PF Withdrawal Without PAN – Section 192A

From April 1, 2023, employees withdrawing from their provident fund without a PAN will receive their balance after a 20% tax deduction. Previously, tax was deducted at the MMR (maximum marginal rate) which could go up to 42.74%.

TDS on Interest Earned from Securities – Section 193

From April 1, 2023, tax is to be deducted from interest earned on listed securities in materialized form like debentures. Previously, since TDS was not deducted on income from interest on securities, tax reporting was not erratic and had discrepancies.

TDS on Co-operative Society Cash Withdrawal – 194N

From April 1, 2023, cash withdrawn above Rs 3 crore by a cooperative society will be taxed at 2%. Previously, the limit was Rs 1 crore.

Automate TDS Payments for your business

It’s crucial for businesses to pay monthly TDS to the government under various categories for salaries, vendor payments, and more. On average, businesses spend hundreds of hours every year manually calculating and depositing TDS on the government portal.

With RazorpayX, Indian businesses can pay TDS in less than a minute and focus more on their business growth.

• Save manual effort using prefilled tax forms
• Automatically store challans on a single dashboard
• Collaborate with CAs to approve payments seamlessly

Bank smart with RazorpayX Current Account. 

Read more:

Vendor Payments

What is Procure to Pay

Accounts Payable

What is Procurement

FAQs

Zero-balance current account is a bank account without a minimum balance requirement. It allows account holders to carry out transactions without needing to maintain a minimum balance. 

To small business owners, zero balance current accounts can help them go from 0 to 1 – to get their business off the ground and running. However, zero-balance current accounts do not provide the infrastructure and support that a fast-growing business needs. 

Banks don’t make any revenue from zero balance current accounts, which translates into banks offering limited features with these accounts.

While limited features are okay to start with, they might make things difficult as your business scales, and you need more banking features and services at your disposal to manage your money efficiently.

For this reason, it is best to start out with a current account built for your present and future needs.

If you’re using a zero-balance current account and realize the need for a more robust one, it is possible to make the switch.

Explore Business Banking

Importance of a Current Account for Business

A current account is an essential banking requirement for any business. Besides separating business assets from personal finance, a current account provides features like unlimited transactions, overdraft facilities, and business tool integrations.

Newer, tech-enabled current account providers like RazorpayX Business Banking+ even offer automated compliance, payroll and vendor management tools and so much more.

Apply now!

Current accounts generally have a higher minimum balance requirement than savings banks, only because of these special features. However, it can be difficult for startups and small businesses to keep money locked away as a minimum balance requirement.

What is Monthly Average Balance?

Monthly Average Balance, sometimes also called Minimum Average Balance, is the average closing balance of your account on each day of the month. 

MAB =  sum of closing balances each day of the month/number of days in the month.

Not maintaining the MAB in your account can draw penalties from your bank – based on the extent of your shortfall. 

New business owners or small business owners might not see the merit in maintaining a minimum balance. After all, this is money that could be put to good use elsewhere.

This is why many small business owners look for zero balance current accounts; or current accounts that don’t have a minimum balance maintenance requirement.

Read more: Why a Current Account is Crucial for Businesses

Advantages of Zero-Balance Current Account

Drawbacks of a Zero Balance Current Account

There are many reasons why business owners choose to open a more robust current account with a minimum balance requirement over a zero balance account.

In most cases, the minimum balance requirement is a small amount – as is the penalty charged for non-maintenance.

Zero balance accounts do not provide most features that businesses need for growth:

Limited functionality: Zero-balance accounts often lack essential features like overdraft facilities, cheque issuance, or integration with business tools, hindering a company’s ability to manage cash flow, handle larger transactions, or streamline financial processes.

Higher transaction costs: While you avoid minimum balance penalties, zero-balance accounts often charge per-transaction fees, which can quickly mount up for businesses with frequent activity. This negates the cost advantage and can even make them more expensive than traditional current accounts in the long run.

Limited credit access: Businesses with zero-balance accounts may struggle to secure loans or lines of credit due to perceived financial instability. This can restrict their ability to invest in growth opportunities or respond to emergencies.

Potential reputational risks: Frequent account closures due to inactivity or insufficient funds can reflect poorly on a business’s image and raise concerns about its financial health.

Unsuitable for long-term needs: As a business grows, its financial needs evolve. Zero-balance accounts may become increasingly restrictive, requiring an eventual transition to a more comprehensive current account, potentially causing disruption and additional costs.

Get Your Smart Current Account

Does Your Business Need a Zero Balance Current Account?

The short answer is no. 

As your business grows, so will the amount of money flowing into your account, making it easier for you to maintain your MAB.

With growth comes the need for a more comprehensive suite of banking services – something a traditional zero-balance current account cannot give you.

There are numerous benefits to having a fully-loaded current account like Razorpay X-powered Current Account in the long run.

Cost Savings – With solutions like RazorpayX Business Banking+, businesses can save costs on multiple fronts like transaction fees, foreign exchange fees, and other banking charges.

Improved Financial Efficiency – With access to real–time insights into finances and automated expense management capabilities, businesses can gain better financial visibility and improve their financial efficiency.

Increased Security – RazorpayX-powered Current Accounts are equipped with the latest security protocols and risk management techniques, ensuring businesses gain complete security for their finances.

Improved Cash Flow – With real–time insights into finances, businesses can manage their cash flow more efficiently and reduce their chances of running low on funds.

Automated Solutions – Automated solutions like invoice generation, payment reminders and payment reconciliation help businesses save time and resources.

Explore Business Banking+

Types of Businesses That Can Open Zero Balance Current Accounts

• Micro and Small Enterprises are early-stage businesses with cash constraints – they might not be able to keep a minimum balance. Zero-balance current accounts provide them with the flexibility of managing finances without worrying about minimum balance requirements.
• Seasonal businesses that enjoy excessive cash flow during the up season but have a drop in inflow during the down seasons can benefit from a zero balance current account.
• Freelancers and consultants have irregular incomes and may not be able to maintain a steady balance in their accounts.

 Related Read: What are the Different Types of Startups and Their Examples?

Steps to Open a Zero Balance Current Account Online

When opening a current account, it’s important to consider several factors to ensure you choose the right account that meets your needs. Here are some tips to keep in mind:

• Research and choose a bank that offers zero-balance current accounts online.
• Visit the bank’s website and locate the section for opening an account online.
• Select the option for a zero-balance current account.
• Fill out the online application form with the required personal and business details.
• Prepare the necessary KYC documents such as identification proof and address proof.
• Upload scanned or photographed copies of your KYC documents.
• Review the application form for accuracy and submit it online.
• Wait for the bank to initiate the verification process.
• Provide any additional information or documents as requested by the bank.
• Receive confirmation from the bank once your application is approved.
• Follow the instructions to activate your account and set up online banking access.

Documents Needed to Open Zero-Balance Current Account Online

Here are the documents typically needed to open a zero-balance current account.

1. Identification Proof: Valid identification document (e.g., passport, driver’s license, Aadhaar card, PAN card).
2. Address Proof: Utility bills, rental agreements, bank statements, or government-issued address proofs.
3. Photographs: Recent passport-sized photographs (usually 2-3).
4. KYC Form: Bank-provided Know Your Customer (KYC) form.
5. Business Documents (if applicable): Certificate of Incorporation, Memorandum and Articles of Association, Partnership Deed, GST registration certificate, etc.

 Related Read: What are the Legal Documents Required for Starting a Business?

RazorpayX Business Banking+: the end-to-end banking solution you need

Built for growing businesses, the RazorpayX Current Account is a comprehensive business banking hub that streamlines your banking operations. Today companies like Swiggy, Hotstar, Nykaa, and Flipkart are a part of our ever-growing family.

Apart from the standard operations of a traditional current account, your RazorpayX Current Account allows you to

• Add beneficiaries and transact instantly, without a cooling period
• Gain detailed insights into your finances
• Automate payouts with powerful APIs
• Set up an efficient approval workflow
• Access a suite of smart apps and integrations, like Payout Links, Vendor Payments, Payroll  
• Make tax payments from one dashboard – without having to hop portals

Frequently Asked Questions