Investing in the stock market is an excellent way to increase your capital, beating inflation, and it becomes more explicit for big corporations with millions of cash reserves. Unlike people opening online Demat accounts to invest in equity and trading, corporates can also open a free Demat account. Yes, you read that right. Corporates must have a special Corporate Demat Account and they can invest in the market as a whole.
This article will cover everything you need to know about a corporate Demat account. You will learn what a corporate account is? What is the difference between a normal Demat account and a corporate Demat account, and how you can open a corporate Demat account? So let’s start with basics first.
What is a Corporate Demat Account
A corporate account is a Demat account for legal entities like Private companies, Corporate houses, Partnership firms, and even Venture Capital Funds. These accounts are operated by an authorized person of the company, such as directors and owners who have a significant stake and holding in the company. They provide many tax benefits to the company or corporate and many more features.
Difference Between Corporate Demat Account and Normal Demat Account
A corporate Demat account provides most of the same functionality as a traditional Demat account with a few key differences:
A legally registered company can only operate a corporate Demat account. Only a non-individual corporation can open these accounts, such as Private Limited companies, Limited Liability Partnerships (LLP), and even Hindu Undivided Family (HUF). On the other hand, a standard account can be opened in an individual’s name.
More than one person can operate a corporate Demat account with authority, while a normal Demat account can only be managed by the individual who opened the account.
A corporate Demat account can avail the company of tax benefits and tax deduction when investing as a whole entity since the government encourages big companies and corporate houses to invest in the economy and hence provide them tax benefits. The individual can’t avail of such benefits for a normal Demat account.
Some brokers even provide corporate Demat accounts with low brokerages and benefits to open a corporate account with them. For an individual who plans to create a financial institution or partnership firm, it’s a must-have.
List of Documents Required to Open Account
Opening an online Demat account for corporates takes more twist and turn than a normal account, as you are asked to produce many documents and multiple KYCs of each stakeholder to get the corporate account. Since the Demat account lists more than one account holder and gives them authority to trade on behalf of the company, a document of both company and each account holder is required.
The documents required are as such:
- Pan Card of the company and individual account holder
- Aadhaar Card of the individual account holder
- Address proof of the company and all the account holder
- Bank account proof of the individual account holder (canceled check/bank statements)
- Corporate bank account proof
- A balance sheet of the partnership of the latest 2 FY
- IT returns declarations
- Account opening Annexures
- Foreign Account Tax Compliance Act Declaration (FATCA)
Depending on the stockbroker, more documents can be asked for in the form of declarations, memorandums and more. It totally depends on the stockbroker, but these are the essential documents.
Opening a corporate Demat account might seem a very daunting experience. As so many documents are required, and multiple KYCs need to be done. But the benefits that a Corporate Demat account will bring you might be the best financial decision for the company.