How to Start a Trade License

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An Overview of Trade License

A Trade License is a license that gives permission to an entity to start a particular trade or business in a particular area. Moreover, this license ensures that there is no harm caused to the health of the citizens through the activities carried out. This license is issued only after the due abidance of safety guidelines, standards, and pertinent laws. The business entities not complying with the prescribed rules of this License will be liable to face a heavy penalty. Thus, it is obligatory and compulsory for every business owner to get this license without any subsequent delay.

Nowadays, every business must obtain a Trade License to commence its business operations in a specific location. It is issued either by the State Government or by the respective Municipal Corporation. It acts as permission for the business to carry out its functions and business activities. However, this license does not confer any other right on the applicant than the one specified. The applicant is required to obtain a license by applying for the same to the Municipal Corporation. The said application must be submitted along with the necessary documents 30 days before starting the business. Moreover, regardless of the business activity, every business is required to obtain a Trade License. The State Governments have the ultimate authority to regulate and administer the Trade License issued to a business. The same is done with the assistance of the Municipal Corporation of that respective area.

Why is it necessary to obtain Trade License in India?

Listed below are the reasons why one must obtain this License:

  • The main aim of acquiring a Trade License in India is to control and regulate the businesses flourishing in the market.
  • Through this license, the State Government can check and regulate the business activities. The same is done to ensure that none of the business activities will cause any harm or injury to the citizens living in that area.
  • It helps the government to keep an eye on all the business activities.
  • Moreover, this license also assures both people and authorities that all the rules and regulations are followed.
  • This license is needed to restrict people from carrying out certain business activities at home. The same is done to maintain both the locality and the business environment.

What are the Different Categories of Trade License?

This License has been further categorised into three parts:

  • Industrial License: This specific license is applied by those businesses which are engaged in the field of manufacturing industries irrespective of their size, i.e., small, medium, and large size.
  • Shop License: Shop License is required by the businesses willing to start a retail shop. Moreover, the businesses engaged in carrying out hazardous activities like the cracker manufacturer, firewood shops, candle manufacturers, etc., are also required to obtain Shop License.
  • Food and Establishment License: This type of Trade License is needed by the businesses involved in food businesses like hotels, restaurants, food stalls, canteens, etc.

Points to be considered for obtaining Trade License

The points that are to be considered while obtaining a License for Trade in India are mentioned below:

  • It is granted by the Municipal Authority of the area where the said business is registered.
  • It can only be used for the activities for which it is exclusively issued.
  • The rules, regulation, standard, time-limit, procedure, and fee structure concerning a trade license vary from one state to another.
  • A business which is having a Trade License will have comparatively Better Goodwill, Brand Image, and Competitive Advantage than a business with no license.
  • The Business having such a license denotes that it is carrying out a business activity of legal nature.

Eligibility Criteria for Trade License

The following listed are some of the requirements prescribed by the Government for obtaining an online Trade License:

  • The applicant must have attained the age of 18 years;
  • The applicant must not have any previous criminal records;
  • Done on a state-wide basis and as per the regulations set out by the Municipal Corporation;
  • The Business should have legal status.

Who can apply for Trade License in India?

Following business entities are mandated to obtain Trade License from the respective Municipal Corporation before starting business operations:

  • Local Commercial;
  • Commercial Shopping Complex (CSC);
  • Commercial areas;
  • Community Centres;
  • Pedestrian shopping streets;
  • Metropolitan city centre;
  • Local Shopping Complex (LSC);
  • Mixed Land Use (MLU);
  • District Centres;
  • Service Centre or Service Market.

Documents required for Trade License in India

The set of documents required for obtaining a Trade License in India is enumerated below:

  • Application Form according to the prescribed format.
  • Address proof of the business.
  • Identity proof of the applicant.
  • In case the applicant is a Company, a copy of the Memorandum of Association (MOA) & Article of Association (AOA) and Certificate of Incorporation is required.
  • A copy of the LLP agreement is required in the case of LLP.
  • In the case of Proprietorship, PAN of the individual is required else PAN of the Company;
  • In the case of a Partnership Firm, a copy of the Partnership Deed is required.
  • PAN of the company.
  • An individual applicant must submit their Aadhar Card & PAN.
  • A No Objection Certificate (NOC) is required from the immediate neighbour of the place used for the business or trade.
  • A latest municipal property tax receipt in case the premises are owned, else lease document or consent letter of the Property owner where the business is registered.
  • Certified layout plan of the office.

Procedure for Trade License

Following is the procedure for an online Trade License:

Step 1: Register: First, the applicant needs to register details such as full name, email id, mobile number, address, etc. Once all the details are registered, you will get login credentials.

Step 2: Filling Application: Once your login credentials are generated, sign in and fill out the application form correctly.

Step 3: Documentation: After the above step, the applicant must arrange all the vital documents mentioned above and submit them. Also, remember that the concerned authority must duly sign all the documents

Step 4: Verification: Once the applicant submits the documents and application, the Urban Local Bodies Officials verify the same. After the verification, a Unique Application Number is generated.

Step 5: Payment of Fees: Once all the above steps are completed, the applicant must pay the fees.

Step 6: Issuance of License Number: Once all the documentation & online process is done successfully, then the License Number will be issued. The Trade License issued to a business entity remains valid for one year. After that, the same license is needed to be timely renewed for carrying on business activities.

Important Note: The Licensing Process may involve an on-site inspection. In such as case, the concerned authority appoints an official to inspect the business place to ensure everything is in line with underlying conditions.

How much is the Fee charged for obtaining an Online Trade License?

The fee for obtaining an online Trade License varies from state to state. The same is determined based on the rules and regulations prevailing in that state. In some states, the fee is charged on an annual basis. Whereas, in other states, the same is calculated and levied based on the percentage of annual business turnover. It shall be relevant to note that there are a few states which have exempted some departments from acquiring a License for Trade. For example- MSME is located in Delhi.

How to obtain a Renewal of Trade License in India?

This license should be renewed on an annual basis. The same is possible only after applying for renewal. Usually, the period for renewing the license is from 01st January to 31st March of every year.

The application for the license renewal is submitted within 30 days before the license expiry date. Any delay caused in filing the application for the license renewal may lead to the levying of late ,fees which is 50 percent of the prescribed license fees.

Listed below are the set of documents needed for obtaining the renewal of a license:

  • Original copy of this License
  • Address and the Identity proof
  • A copy of previous year's Challan
  • Old G-8 receipt
  • Property tax receipt

Documents required for the issue of a Duplicate Trade License:

  • FIR or First Information Report
  • Indemnity Bond in the prescribed format.

Difference Between a Trade License and Company Registration

Listed below are the key differences between a Trade License and Company Registrations:

Basis of Difference

Company Registration

Trade License

Structure

 

It is required to start a new business entity.

It is required for any existing entity to carry out the business activity.

Eligibility

The Shareholders, as well as the Directors, must not be minor in age. Further, the shareholders have to power to determine the objective and purpose of the concerned business.

However, in order to start business activity, this registration is required.

 

The following listed are some of the requirements prescribed by the Government for obtaining an online trade license:

a)  The applicant must have attained the age of 18 years.

b)  The applicant must not have any previous criminal records.

c)  The Business concerned must be legal.

Registration

It must be registered with the ROC (Registrar of Companies).

 

It is obtained by applying for Trade License to the respective state Municipal Corporation.

Types

Listed below are the different types of Companies:

·         Private Limited Company,

·         Public Limited Company,

·         One Person Company

Listed below are the different categories of a Trade License:

§  Shop License,

§  Industrial License,

·         c) Food and Establishment License, etc.

Validity

It shall remain valid for a lifetime.

It needs renewal after a specified time.

Frequently Asked Questions

The procedure for filing a Trade License Application is state-specific. Hence, it varies from one state to another. Obtaining a trade license has been made compulsory by some states. In contrast, there are some states which have made it an optional choice for the businesses.

Normally, the processing time for obtaining a Trade License varies from one state to another. And usually, it takes around 9 to10 days to process the application in metro cities. However, in the case of small cities, or rural areas, the same may go around 15 to 20 days or even longer than that.

A Trade License can be acquired by filing an application form to the respective Municipal Corporation. The application form is required to be filed within thirty days of commencing the business.

The listed below are the eligibility criteria for obtaining a Trade License:

  • The concerned applicant should be of the age of 18 years.
  • The applicant shall not have any previous criminal records.
  • The business concerned must be of legal nature.

A Trade License is used for carrying out the trade activities for the Industrial Business, Food Establishment Business, and for the local shops.

A Trade License is required to make sure that no kind of adverse effect or harm is caused while carrying out the trade activities in a particular area.

A Trade License can be revoked is liable to be revoked by the Municipal Corporation, if in case the trader has violated or infringed the guidelines specified by the MCD Act.

The term KMC Trade Licence stands for the Kolkata Municipal Corporation Trade License.

The term BBMP Trade License stands for the Bruhat Bengaluru Mahanagara Palika Trade License.

Yes, getting the license renewed has been made compulsory requirement by the government. Failing to do so, will attract either a penalty or a fine.

An individual is required to apply for the license thirty days before the commencement of his or her business.

If for any reason the applicant has been denied of the Trade License, he can then submit a request to the Standing Committee along with a copy of his denial letter.

The prescribed renewal period is from 1st January to 31st March of every year.

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