Proprietorship – Do We Really Need a License for Trade?

Proprietorship – Do We Really Need a License for Trade?

A trade license is an official document that authorizes an individual to operate a specific business or trade within a specific area or location. This ensures that the business or trade complied with all security regulations laid down by the State Municipal Corporation. As a result, residents are protected from health risks. However, it does not allow the owner of the business to engage in any business activities that are not within the scope of the license. Furthermore, the license holder does not own the property under this license.

Registration of sole proprietorships

Since the sole proprietorship is the long version of the proprietorship, there is no formal procedure in India to establish one.hips. Sole proprietorship companies can only exist by opening bank accounts or obtaining licenses needed to conduct business.

In order to open a bank account as a sole proprietorship, the RBI’s KYC guidelines require you to present two documents:

  • Documents issued by sales tax, service tax, or professional tax authorities
  • Income and sales tax returns
  • Municipal authorities issue the certificate/license under the Shop & Establishment Act
  • Certified CST/VAT
  • The Central Government or State Government Authority/Department issues a registration/licensing document in the name of the proprietary concern.
  • The license is issued by the authority that registers, like the Certificate of Practice issued by the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India, the Institute of Cost Accountants of India, the Food and Drug Control Authority, and the Indian Medical Council.
  • For the private company, utility bills such as water, electricity, and telephone bills are sent
  • An official acknowledgment of the company’s earnings in the sole proprietor’s name, where the income tax authorities have authenticated and accepted the earnings.
  • The IEC (Importer Exporter’s Certificate) issued by DGFT to the company’s proprietary business can also be accepted by banks as proof of identity when opening a bank account.

To open a bank account under the proprietorship’s name, any of the above documents are required. To verify the legitimacy of their sole proprietorship companies, proprietors usually get a license or registration/certificate first.

A trade license’s purpose

Trade licenses have become a common practice in the nation over the past forty years. According to the state government, the municipal corporation is now in charge of them. This ensures that no nuisances or health risks are caused by any businesses or trades. Government officials make it a necessity to conduct certain trades or businesses within a particular region and to ensure that no one is engaging in illegal trade or business. Each company must have a license within the community in order to comply with the relevant rules and guidelines. Governments must issue this license in order to regulate trade. It is primarily intended to ensure the safety of the local community and business environment by preventing individuals from operating certain kinds of businesses from their homes.

Trade license benefits

  • Safeguard the interests of consumers from illicit trade to enhance the business’s trustworthiness
  • Prevent fire incidents by implementing appropriate safety measures
  • Ensure that workers on the premises are not exploited
  • Ensure that businesses are conducted fairly and ethically and that everyone’s interests are safeguarded
  • Contribute significantly to the growth and credibility of businesses

Is a trade license required for everyone?

Interested businesses must obtain a trade license from the relevant Municipal Corporation before they can begin trading:

  • Commercial Shopping Complex (CSC)
  • Commercial activity in the local area
  • Central business district of a metropolitan city
  • Local Shopping Complex (LSC)
  • Centers of district
  • Centers for the community
  • Streets with pedestrian traffic
  • Service market/service center
  • Multi-use land (MLU)
  • Zones for commercial activity

Trade License Requirements

Getting the right to trade in a specific state requires:

  • Any previous criminal record must be cleared by the applicant
  • Applicants must not be minors. Applicants must be at least 18 years old to qualify
  • A state-specific business plan and guidelines in the Municipal Corporation must be followed
  • Legal status is required for the business

Trade licenses can be issued by whom?

  1. Trade licenses are handled by the municipal corporation department. The engineering department, the industries department, the health department, and more.
  2. India’s government India allows the license in a way to regulate the cities throughout the nation.
  3. It grants permission by way of letters or documents/certificates to carry on any business or trade where it is located. The licensing process differs from state to state based on local government agencies (Municipals) and rules.

Different Types of Trade Licenses Are Available

  • Industries licenses: small, medium and large manufacturing factories
  • Shop license: dangerous and offensive trades such as the sale of firewood candle manufacturer, barber shop, cracker manufacturer, laundry (dhobi) shop, etc.
  • Food establishment license: Restaurants, food stalls, hotels and canteens, the sale of vegetables and meat, bakeries, etc.

Licensing fees for trade

Each state’s state agencies (Municipals) grant trade licenses, so the cost varies. A license fee is determined by the rules and regulations governing the state. Some states require you to pay an annual fee. The percentage of turnover for businesses is used in other states.

Manufacturing and trading companies

  1. In India, all products and services are subject to Value Added Tax. Regardless of the form of business organization, anyone involved in manufacturing or trading must get VAT registration.
  2. Imagine you want to establish a sole proprietorship company to sell goods and services. It is possible to obtain VAT or TIN registration using the Proprietor’s PAN card from the relevant state government in such a case.
  3. Once you obtain the VAT registration and register your business, you must file monthly, quarterly, half-yearly, or annual VAT returns.
  4. Retail stores, factories, and official places of business require a Shop & Establishment Act license. A state’s Department of Labour usually grants a Shop & Establishment Act license.
  5. Most states require it for businesses to operate. Licenses for establishments and shops prove that a business is a proprietorship.

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