What is Trade License?
If you plan to establish a business of your own and you have no idea where to start and what approval is needed, then the first thing you need to look is that –whether you want to deal in goods or services and secondly- what will be your place of business. After being clear about the above mentioned points, the next thing on your to-do list is getting a trade license.
By the way of trade licenses, the government regulates any specific business in a specific locality. The Municipal Corporation of the place grants permission or license to carry on a particular trade in a particular locality. The trade license ensures adherence to relevant rules, standards and safety guidelines prevailing in the land.
Why it is different from Company Registration?
The registration of the business is important for giving it a legal identity of its own. It depends upon the promoter to decide upon the type of entity he wants to establish depending upon his business scale. However, it is mandatory for every entrepreneur to obtain the trade license before the commencement of any business activity. If any person is found conducting the business activity without obtaining the trade license, the business will be considered as illegal and heavy penalty may be levied upon the owner.
When should Trade License be acquired?
Every business entity planning to start its business operations shall be required to obtain the trade license within 15 days of the commencement of any activities. The activity consists of manufacture, exchange or even storage of any commodity. In some states it is mandatory to apply for the trade license 3 months prior to the commencement of any business activity.
Regulator of Trade License
Generally, the state governments regulate the trade licenses in the state with the help of Municipal Corporations of the area. In some states, it is mandatory while it is optional in other states. The fees prescribed for the trade licenses also varies from one state to another. The manner of collection of the fees for trade license is also different. In some cities it is charged as the annual fees while in the other, it is calculated and charged on the basis of percentage of business turnover. Some states have exempted certain departments from getting a trade license, eg. MSME in Delhi.
Minimum Requirements for getting a trade license
The Government has prescribed certain minimum requirements for obtaining a trade license in various states and cities. Some of the general conditions are as follow:
- The individual applying for trade license must be atleast 18 years of age.
- The activities in which the business is going to get engaged shall be legal.
- The applicant shall be of clean image and shall be free from any criminal background.