Why You Should Have A Joint or Independent Account With Your Business Partner?

. 6 min read
Why You Should Have A Joint or Independent Account With Your Business Partner?

India is still considered a developing economy, and in any developing economy, there are many micro, small, and medium enterprises (MSMEs). These small businesses have a high scope of growth in such an economy. Even the government has taken many steps to support such businesses and help them grow.

Currently, India has nearly 6.3 crore MSMEs. The Indian MSME sector contributes approximately 29% toward the GDP through its national and international trade. The number of registered MSMEs grew 18.5% Y-o-Y units in 2020.

These statistics indicate that India as an economy has a large number of such small businesses. To run any business, business owners need to handle business finances for that they need to have a separate business account to manage the finances of the business.

Any business can be solely owned or have two or more partners as equal shareholders of the company. In such a situation opening any bank account could lead to the possibility of opening joint or separate business accounts for such purposes.

Herein we will learn about what joint and individual business accounts are and their advantages, disadvantages, and which you should consider according to your business.

Joint Business Account

A joint bank account is an account where two or more parties join to create a partnership for a specific business venture or a purpose or a particular period.

This account can be opened by two close relatives or any business partners who have agreed to have equal rights on an account's finances. This proportion of right of authority can be decided by the number of partners of a joint business account. This proportion might also simply mean the distribution of profit and loss the business incurs in the future.

Conceptual business illustration with the words joint account

Advantages of Joint Business Account

1. Simplified financial management for business

Opening a joint bank account for a business will simplify monitoring business transactions. This will make all transactions related to business in one place rather than collecting data from different accounts

2. Easier to distribute profit and loss

Rather than going through the lengthy process of calculations from different accounts to evaluate profit/loss statements, a joint account provides a platform to simply distribute the amount as per pre-determined ownership.

3. Not full ownership of an individual

In any business, it is good to have two or more account holders who are business owners. As it will make transactions easy in case one partner is not available to approve a transaction, the other will with consent.

Disadvantages of Joint Business Account

1. Can cause conflict between partners

Running a business will require day-to-day transactions and payments. At times both partners might not appreciate any kind of expense on employees, machinery, or some regular office expense. This might cause conflict over expenses between the partners.

2. Misuse of finances

In case one partner made an unethical payment through a joint account and later found out to be guilty, you both or all partners will be held responsible even if they had nothing to do with the transaction.

Now this feature of joint account has its pros and cons as it is good in case all partners are not available; however, if a partner betrays then he/she can transfer all funds to a different account without letting other partners know about it.

Individual Business Account

A separate account is similar to a regular bank account an individual opens to manage his/her funds. An individual business account simply means each business partner will have a separate account to handle the company's finances.

Advantages of Separate Business Accounts

1. Simplified tax return process

As an individual, it will be much easier to go through your expenses and investment at the time of filing for tax return.

2. Safety of funds

Your funds can be transferred by your consent only. This will eliminate the risk of fraud or betrayal. You can even manage personal funds much more conveniently.

3. No conflict of interest

As every partner will have their separate account, expenses will not matter to other partners. Thus, having separate accounts will eliminate unnecessary arguments between partners.

Disadvantages of Separate Business Account

1. Difficult to distribute profit/loss

Contrary to joint accounts, in the case of separate accounts, each partner needs to go through everyone’s bank statements to get consolidated profit/loss statements. Further, it is difficult to later distribute the balance from one partner to another depending on the final statement.

2. Payment will be halted if a partner is not available

In case one partner is not available at the moment to make payment and others might not have enough funds to manage it for a while, this could halt the payment process and lead to delay in further work.

3. Hectic to manage finances

It will be difficult to manage the finances of a running business from two or more separate bank accounts of individual partners. Inflow and outflow of expenses and income will be difficult to tally.

Woman accountant use calculator and computer with holding pen on wooden desk


After learning about the pros and cons of both joint and separate accounts of partners in a business, it is solely up to you and your partner to decide which way to move forward. However, it is advisable to opt for a joint account only when both partners trust each other and know each other for a long time. Discuss this with your partner(s) before making any decision as it is not easy to keep changing business accounts now and then.

Also read:

1) How To Open A Bank Account?
2) What is Online Money Transfer? Changing Contemporary Financial Transaction.
3) What are Mutual Funds? Here's what you should know
4) Difference Between Payout Modes: Wallet vs UPI vs NEFT vs RTGS vs IMPS

5) OkCredit: Simple, Paperless & Secure solution for businesses

Stay updated with new business ideas & business tips with OkCredit blogs in English, Hindi, Malayalam, Marathi & more!
Download OkCredit now & get rid of your bookkeeping hassles.
OkCredit is 100% Made in India.


Q. What will happen if all holders decide to close a joint account?

Ans. To close a joint account, your bank will need approval from all the account holders, and as per agreement the money in that account will be distributed among account holders.

Q. Does a joint account affect an individual’s credit score?

Ans. Yes, joint accounts will affect individual credit scores. It can be a benefit or loss depending upon the credibility of other partners. This will further affect your credibility to get a loan.

Q. What are the requirements to open a bank account?

Ans. If opening a separate account, the bank would require your identity proof, namely, PAN card, passport size photo, Aadhaar card, etc. For a joint account, you and your partner need to submit a consent form and sign a prior agreement of the percentage of ownership along with ID proofs.

Q. Should we open a business account under the company's name?

Ans. Opening a business account under a company's name can be helpful for you and the people from whom you would receive payments. A business account can be a joint account or you could have an individual account other than the company's account as well.

Q. Are there any government schemes to help MSMEs?

Ans. Yes, the Indian government has initiated many schemes to support MSMEs. These schemes are for a reduction in taxes, collateral-free loans, and other subsidy schemes.