What Is A Corporate Account? A Comprehensive Guide
By Indeed Editorial Team
Published 27 September 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Corporate banking is a subcategory of business banking, and it includes various banking services available only to corporations. You may eventually access such an account if you want to work for a company, currently hold a job in one or progress to a senior position in the business. Learning about this account and everything it entails may help you manage one in your current or future role. In this article, we answer the question, 'What is a corporate account?', share its benefits, explain who can open one and offer tips to help you manage a corporate account.
What Is A Corporate Account?
Knowing the answer to 'What is a corporate account?' may be beneficial if you want a career in finance, accounting or management. A corporate account is a type of bank account specifically for businesses. A company might use a corporate account to manage its financial resources. Business professionals may frequently use corporate accounts in the following ways:
Saving: Corporate accounts can help businesses retain their funds for the future. Some businesses utilise this type of account to save their company's money for impending purchases.
Banking: Businesses can utilise a corporate account to handle routine banking tasks such as paying vendors or making purchases. They can complete their tasks quickly and effectively as a result.
Investing: Businesses can use corporate accounts to invest their dividends and surplus funds automatically. Over time, this can assist the business in boosting its profits.
Benefits Of A Corporate Account
Opening a corporate account may offer several advantages based on the goals and size of the organisation for which you work. Here are a few potential benefits of opening and using a corporate account:
Advanced investment opportunities
Corporate accounts make it simple for firms to reinvest their leftover capital. For instance, a business might deposit these funds in a corporate account if it goes through a period of significant earnings. You might be able to reinvest them to boost the company's profits quickly with such an account. Some corporate accounts include special features that can assist the business in managing its finances, such as automatic portfolio balancing.
Additionally, many banks offer services such as portfolio analysis, analysis of leverage, restructuring of debt and equity and evaluations of real assets. Some other crucial services that corporate accounting may provide companies include asset management services, underwriting for initial public offerings and other such financial services.
Businesses may safely store the company's money in a corporate or typical business account. If the business you work for generates more revenue than it spends each period, you can securely utilise a corporate account to hold the extra revenue. Corporate and business accounts typically offer similar benefits, although liability protection might not be as substantial in or even a feature of a business account.
As of August 2022, Section 19 (1) (b) of the Companies Act, 2013, which is the law regulating companies across the country, regards them as distinct legal entities, and all the funds in corporate accounts belong to the organisation rather than to specific board members. This means you can keep funds and assets belonging to the firm separate from the owner's personal assets in a corporate account. It also implies that it does not entitle the personal creditors of the board of directors to the contents of the corporate account of a company.
A corporate account can facilitate money transfers for firms. When the business is profitable, it can safely put the money in the account for holding or investing demands. The company can utilise the cash to offset losses if it loses money in a venture or experiences a spike in temporary expenses.
For instance, if a business decides to build a new office at a different location or develop a promotional campaign to market a new collection of products, it might require more resources than usual to pay for the facility. In such an event, you can use the money in the account to handle this expense.
Who Can Open A Corporate Account?
Organisations that include a board of directors can open a corporate account. You may look into various possibilities, such as opening a business account, if you work for a smaller company, such as a sole proprietorship or partnership. Corporations or companies generally require and obtain the board of directors' approval before opening a corporate account. The board of directors typically conducts a vote and reaches a consensus or makes a corporate resolution to open the account.
They might also discuss the account's primary objective, features and access options. For instance, they can choose whether the account is mostly for investing or saving. The company-appointed treasurer generally opens the account on behalf of the company at the selected bank after reviewing their options.
Tips To Help You Manage A Corporate Account
Here are some tips that you may choose to follow to help you manage a corporate account:
Select an ideal investment strategy
Consider potential investment strategy options and choose the right one to protect the company's funds and generate more revenue. Depending on your interests, you may get a variety of investment possibilities with different financial institutions. Banks frequently provide the following investment options for businesses:
Reinvesting funds: Reinvesting dividends or additional capital enables businesses to increase their earnings. Even though you can choose the types of investments that you may want to make, such as real estate purchases or stock purchases, this process can also happen automatically.
Portfolio rebalancing: The bank often employs a special adviser who periodically evaluates the company's investment portfolio in the portfolio rebalancing option. Depending on the market's state and the firm's success and goals, they may form individualised assessments and advise you on the company's best options.
Study different interest options
You might look at various interest options, depending on your company's objectives. Some institutions and accounts may offer higher interest rates. As a result, you might be able to increase your savings. Consider the possibility of researching various choices and discussing them with your team and the company's board of directors.
Examine access options
When managing a corporate account, be mindful of who can access the money in the account and when they might require it. This is crucial if you intend to utilise the account for transactions or savings. For instance, certain professionals may require immediate access to the funds to perform important transactions if the organisation intends to use the account to pay for business expenses such as staff salaries and equipment purchases. Depending on your objectives and plan, you might include access to key managers or corporate executives.
Review internal and government regulations
Corporate accounts might be subject to different tax laws and rules. Depending on your specific industry, area and account type, this may change from time to time. It is crucial to confirm the rules with the company's certified and trained experts in the many business and tax laws and consult corporate lawyers to ensure the company abides by all the internal policies and governmental regulations, both on a local and national level.
Examine special features
Various banks and accounts might provide extra features. You may, for instance, look into options for mobile access. Some businesses choose accounts with mobile applications and internet banking options to make transactions simpler. Some banks may charge additional fees for specific transactions or exceeding specified balance amounts, while others may offer higher interest rates for keeping a minimum specified amount of funds. You can think about these opportunities and the objectives of your business to help you choose the best account for your corporation.
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