Trade Licence

trade license 

Trade Licence – Permission or License issued by the municipal corporation as permission to carry on a particular business at a particular address for a specified period of time after ensuring that the citizens are not adversely affected either as health hazard or nuisance created by the business carrying the trade is called a trade license.

Essentially, it is managing a business in a specific locality. The trade license is an instrument for ensuring that the manner and locality in which the business is being carried on in adherence to the relevant rules, standards and safety guidelines. 

The state government laid down the concept of Trade License to monitor and regulate the trade within a city. The municipal corporation of the particular place where the business is located issues the trade license. Substantial penalty and subsequent prosecution may be given as a result of unauthorized trade, which is an offense and hence, the owner of the businesses must obtain a trade license if required. An application in this regard must be filed before the commencement of the activity of business or trade.

Once a trade owner gets the License, it should be renewed periodically. Annual renewal of the License is required on a regular basis after the issuance of the License. For the renewal of the Trade License, the Application required for renewal must be filed at least 30 days before the expiry of License. 

The limitation to the trade license is that no kind of property ownership is transferred with the Trade License.

Since, it is an important part of public interest, to avoid bulking of license form, it has been divided into three categories:

  1. Industries license: small, medium and large-scale manufacturing factories
  2. Shop license: Dangerous and Offensive trades like a sale of firewood, cracker manufacturer, candle manufacturer, barbershop, dhobi shop etc.
  3. Food establishment license: Restaurants, hotels, food stall, canteen, the sale of meat & vegetables, bakeries etc.

But not everyone can get the trade license issued, certain criteria for eligibility for applying for the trade license is laid down: 

  1. The age of the owner must be above 18 years. 
  2. No criminal records must be there. 
  3. All permission must be obtained already.

ADVANTAGES

There are four broad advantages of Trade Licence 

Legal Protection: Getting a Trade License issued, may lead to penalties based on the nature and duration of the company as it ultimately classifies the business as illegal. The main reason is to keep in check unethical and illegal trade practices and check adherence to the applicable rules, standards, and safety guidelines. It provides protection to owners of business against any certain types of liability and limits it to the trade or business liability. Not getting a trade license can lead to the imposition of penalty and punishment and, ultimately, closing down of business. When you have a trade license, you will be liable to enjoy the rights of bragging it.

Implies Competence: Increase in commercial setup for India, the main concern was to avoid commercial activities running in a residential area or commercial area and creating a health hazard and hence, the initiative of Trade license was put forward to keep a check on such activities. No municipal authority has the right to shut down the activity without proper notice and time for adherence with the presence of a Trade License. This instills competence within entrepreneurs.

Goodwill, Public and Personal Benefit: We compare licensed and non-licensed businesses, it is effortless to decide which business we will choose, which is basically one of the most significant advantages of a Trade license, it creates a better image and goodwill of the business which attracts more customers and hence more business than an unregistered entity. Goodwill attracts various investment groups and other business organizations, helping in growing the prestige of the firm.

License separates personal identity with that of business identity and limits the legal liability, it does the same with personal and business finance by separating them.

DOCUMENT REQUIRED

Signed copies of 

  1. Pan Card of company, LLP, or Firm.
  2. Canceled Cheque or bank statement of the entity.
  3. COI along with MOA and AOA of the company.
  4. Proof of Premises of the establishment in the form of Sale Deed, Electricity Bill/water bill and NOC from the owner.
  5. Colour Photograph, ID Proof, Pan Cards along with Address Proof of all Directors/ Partners.
  6. Front-Facia Photograph of the entity 

PROCESS OF REGISTRATION / RENEWAL

Form 353 is to be duly filled and submitted along with all the above-mentioned documents to the Municipal Corporation after the type of Trade License is finalized.

The Application for the same is to be made to the State or Municipal Corporation under whose local jurisdiction does the business lie, which is different for different states.

Trade License can be downloaded online after approval, the processing time for which on an average is 10-15 days or might differ for different states.

January 1st to March 31st is the time usually when the license renewal applications are made and has to be renewed annually since the validity of the License is of one year.

As mentioned above, the Application of renewal should be made 30 days before the expiry of the License, delaying might lead to fine according to the rules and regulation of the issuing authority and the State.

Documents that are needed for the renewal of the Trade Licence are–

  1. Original copy of the trade License;
  2. Previous year challan;
  3. The latest Property tax paid receipt.

IMPORTANT INFORMATION

  1. Municipal Corporation issues the trade license exclusively for trade or business and cannot be used for any other purposes.
  2. Every State of India has a different set of rules and regulations for the issuance of a Trade Licence.
  3. The nature of the business decides the fee structure for the issuance of a Trade license.
  4. A business granted with this License will enjoy more considerable goodwill than an unregistered entity and subsequently attracts more customers and investors.

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