Every business organization needs a trade license from regulators, be it the municipal corporation or the state government. Trade License is a document that gives permission and certifies you to carry on a particular trade or business for which it is issued. It does not give ownership of property or permission for any other activity other than for which it is issued.
The municipal corporation authorizes license department and allots licenses in consultation with other specific consultative departments like Health, Engineering, Estate and others of the same type.
In perspective of this, it is essential for any business establishments to take primary licenses from the License Department before beginning manufacturing, exchange or storage of any activity. The application has to be filed with the Commissioner in the Corporation 30 days before the start of business. While filing, the business has to submit all the mandatory documents.
Eligibility for a Trade License
Applicant must have attained the age of 18 years
Applicant must not have any criminal records
Businesses must be lawfully permissible
The Trade License is issued by the licensing department of the municipal corporation in different departments like industries, engineering, health, etc.
The government of India allows the license in a way to regulate in cities over the country. It permits by the way of letters or documents and certifies to carry on any business or trade wherever it is located. The issuance of the license differs from state to state depending on the local government agencies i.e. Municipals rules and regulations.
Types of Trade License
There are 3 types of trade licenses that a company or individual can apply for based on the type of trade or business they take forward.
In common, it takes 7-10 working days to process the application of Trade license in metro cities. Though, in other small cities and rural areas, it takes a longer time for processing of the Trade license application.
Why Trade License
In the last 40 years, trade license has been included in the country and is being governed by municipal corporation acts by the state governments. This benefits in ensuring that no one is individually affected by the nuisance and health hazard of any trade or business.
It has been made mandatory by the government to carry out any particular business or trade in a particular area and to ensure that no one is carrying out any wrong business practices. This license creates a harmony in the society that all business is following relevant rules, guidelines and adopting the safety measures. This license was made necessary to make sure that the government can regulate different trade activities in the country. The core purpose of issuing this is to control the locations by restricting the people from executing some types of businesses from their home location to maintain the business environment.
Important to regulate the trade to ensure that the citizens are not adversely affected by health hazards & nuisance due to improper carrying of a trade.
A medium to ensure that the business is being carried in accordance with the relevant rules & safety guidelines.
A Licensed business will have higher goodwill and will attract the customers and investors than an unregistered entity.
It protects the owners upon some types of liability.
Companies having better business practice attract different investment groups and other business organizations
To do ethical business, practice the person can apply for getting Trade License Registration which assures the safety measures and guidelines.
If a person does not get a Trade license as needed under the law and begins any business than a government can impose fine and penalty on such person. It can also result in the closing of such a business.
Procedure for Trade License
Documents Required for Trade Licence
Lease documents/agreement in case of premises are on lease
Certificate of Incorporation
PAN of Entity
What is included in Our Trade License Package
Validity of Trade License
Trade license is necessary for every business that carries out a trade or business needs. A trade license is valid only for 1 year.
Many other provisions, rules, and regulations are required to be followed by the registered person. In case of negligence to comply with the registration conditions of trade license and starting any trade activity before the issuance of this license, the person in the default will be responsible to pay the directed penalty. Moreover, legal action can also be taken against the defaulter.
Trade License Renewal
The trade licenses in India are renewed from January 1st to March 31st. The validity of a license issued by the municipal authority is for one year and required to be renewed every year.
The application for renewal of the license is to be done within 30 days from the date of its expiry. In case the renewal process is delayed, then it may attract fine depending upon the rules and regulations of the issuing authority.
Following are the documents that require to be submitted for renewal of the license:
Original copy of the trade License
Previous year Challans
Up to date property tax paid receipt
How is Trade License different from Company Registration?
Company Registration provides the new structure of business while the Trade License is an authorization to an already running business for commencing new activity or business. Any running business can register itself as a legal entity or any person can also form a new structure in the form of a registered company. Trade License is one of the certificates received by an already registered company if it was ready to carry on any added activity. Investors normally hesitate for investing in any sole-proprietor ventures as linked to the entity baked by a legal structure like Company, LLPs, etc.
Differences based on validity, authority, documentation, etc are briefly discussed in the Table below.
|Basis of difference||Company Registration||Trade License|
|Structure||The new business entity is formed to carry on the business.||The existing entity takes the approval for carrying a particular type of activity|
|Eligibility||Directors must not be minor. The company should be registered with a minimum requirement of capital.||The applicant must have crossed 18 years of age with no criminal record. Business shall be legally authorized by its object to carry on such other activity for the trade license is acquired.|
|Types||Following are the types of Company: Private Limited, Public Limited, OPC, etc.||Types of trade license: Shop License, Industrial license, Drug license, etc.|
|Processing time||ROC takes 3-4 days to issue Certificate of Incorporation||Concerned authority takes 7 to 10 days for processing of an application|
|Validity||Valid for lifetime once allotted||Valid for one year|
|Renewal||They are not renewed as they are valid for a lifetime.||They are renewed after their expiry by submission of necessary documents.|