What Is the Importance of Obtaining a Trade License?

Narendra Kumar

09 Oct, 2019

Trade License is a permission granted by the state government to carry on any business or trade for which it is issued. It is governed by the respective state laws under the Municipal Corporation^[1]. It is enacted to ensure that no person is running any unethical business practices.  The licenses are issued by the authorized departments of the municipal corporations. Operating a business without an Obtaining trade license may result in a penalty or even closure of a business.

The trade that one is not carrying out any unethical business practices and is following relevant rules, safety measures and guidelines. A trade license gives you a right to operate your business in a particular area. We can say that Trade license is the same as a Driving license which requires when one needs to drive a car. If a person has not got the license and still operating his business than it will cause a penalty and fine from the government department.

What Are the Categories of Trade License?

Mainly these three types of business require a Trade License

• Food Establishments like hotels, restaurants, canteen, food stall, bakeries, etc
• Industries license like manufacturing, cyber café, factories, flour mills, etc
• Some of the trades like the Arber shop, dhobi shop, timber wood, so ale of firewood, etc

The main motive of Trade license is to restrict the people to control business location from doing any kind of business activity from the residential areas. It maintains the business environment and avoids hurdles and nuisance to the persons residing in the society. Trade License can only be obtained at commercial premises where the government has not restricted to doing any trade activity. In some industries which are into hazardous activity, the government has framed various safety guidelines to operate such industries only in some specific zones which are at a particular distance from the city.

What is the Eligibility Criteria?

• The person must be above the age of 18 years.
• A person must not have any criminal records
• The business must be eligible for executing legal work

What Are the Documents Required?

• Rent/lease agreement if the premise is on lease and ownership documents if it is owned by the person
• Identity Proof and Address Proof of applicant
• Registration certificate from the concerned authority
• In the case of company MOA and AOA of company and certificate of incorporation
• Municipal tax receipts

What Are the Benefits of Trade License?

• A Licensed business will enjoy greater goodwill and will attract the customers and investors than an unregistered entity.
• It protects the owners against certain types of liability
• Companies having better business practice attract various investment groups and other business organizations
• In order to do ethical business, practice the person can apply for obtaining Trade License Registration which ensures the safety measures and guidelines
• If a person does not get a Trade license as required under law and starts any business than a government can impose fine and penalty on such person. It can also result in the closure of such a business.