Are you aware of the licences required to start a business in India? You may be aware that starting a business requires various compliances and licences. In India, obtaining a business licence is dependent on factors like business’s size, kind, industry, and location. While obtaining a licence can be difficult for small enterprises with limited resources, the government of India has taken several measures to make this process easier and affordable.
This article will discuss business licences in India and its importance, types of licences and registrations required for starting a business in India, and the process of applying for a licence.
What is a business licence in India?
A business licence refers to a permission or permit that business must mandatorily possess to run a business in a particular region. There are various types of licences and permits that are issued to businesses by the central, state, and municipal governments for different commercial activities.
A business licence grants the licencee the legal authority to run a business within its jurisdictional scope. Before you start a business, you need to find out whether you are required to have a licence and what are the documents required for the same. A business is liable for fines or may even be forced to shut down without the necessary licences.
Why are business licences important for companies?
Business licences are important and made mandatory by the government to increase accountability, transparency, and consumer protection. Any business – be it home or industry based, come under the compliance of a business licence. While obtaining a licence may be time consuming, it helps in the long run to reduce stress and costs.
Here are some benefits of obtaining a business licence:
- A business that is compliant with licences are eligible for various government schemes, facilities, and subsidies.
- Businesses with licences have a competitive edge over others during negotiation processes.
- A licenced business instills faith in their stakeholders as one that is accountable for their actions.
Common documents required for acquiring a business licence
- PAN Card
- Driving licence/Voter ID/Aadhaar Card
- Bank statement
- Address proof or a no-objection certificate from the landlord
- Rent Agreement or Lease Agreement
- Authority Letter of Business
- Memorandum of Association and Article of Association.
- Partnership deed
What are the business licences in India?
Here is the concise list of business licences in India:
1. Company registration
The first requirement for a new business entity in India is company registration. Based on the company structure and the partners involved, the following are the different forms of companies as per the Companies Act, 2013 and you need to complete your registration based on your form of business.
- One Person Company (OPC) that enables a sole proprietor to form their company and conduct lawful commercial operations.
- Private Limited Company (PLC) that limit its owners to particular social classes.
- Public Limited Company that can invite the public to become shareholders without any preference.
- Sole Proprietorship Company (SPC), that is, a business entity that is owned, controlled and managed by a single person
- Partnership Firm where two or more partners agree on the roles, responsibilities, authority, and number of shares owned.
- Limited Liability Partnership where business assets provide limited liability protection, and the partners depend on the quantity of share to pay the liabilities.
- Section 8 Company, commonly known as NGOs or Non-Profit Organisations, that are actively participate in charity works.
It may be noted that the Government has waived off the Government fee for incorporation of company in India on 26th January 2019. If all the documents are in place, it takes 10 – 15 days to register a company formally.
2. Registration for GST
The Goods and Services Tax or the GST registration is mandatory for all businesses with annual revenue of more than ₹20 lakh across most regions and ₹10 lakh under the Special Category Provinces category. Additionally, if you are delivering goods for intra-state sale, you are required to register for GST.
If you are a new firm, you must complete the GST registration online within a certain time frame. It is free of charge and takes 2-6 working days.
3. Udyam registration
Every micro, small, and medium businesses is eligible to apply for this licence. The eligibility criteria for getting Udyog Aadhaar/Udyam MSME registration is determined by the business owners’ investment in plant and machinery or a services provider’s investment in machinery. When you register and obtain a Udyog Aadhaar licence, you are eligible for different schemes and benefits the government has initiated for MSMEs.
It may be noted that Udyam registration is free of cost.
4. Import Export Code
Any business that deals in import or export of goods or services from India should obtain an Import Export Code. You must possess a PAN as well as a bank account to receive an Import Export Code.
The Government fees for Import export code(IEC License) registration is ₹500 and it takes around 10 to 15 days after submitting the application to receive the code.
5. Licence Under the Shop and Establishment Act
This licence comes under the Shop and Establishments Act, adopted to streamline business practices such as working hours, child labor, salary payment, etc. You can connect with your local state governments to get a Shop and Establishment Act Licence.
6. Gumastha registration
Any new business in the state of Maharashtra needs a Gumastha licence. To obtain it, you must have a PAN card, residence proof, application letter to municipality of Greater Mumbai, authority letter for business, among others.
The cost of a Gamustha licence varies depending on the number of employees from ₹680 to ₹21800/-
7. FSSAI licence for food business
If you are planning to start a food business in any form – be it packaged food, restaurant, cloud kitchen, etc., you must obtain a licence from FSSAI. Food Safety and Standard Authority of India or FSSAI is a Govt of India undertaking responsible for the safety and standardisation of every food product sold anywhere in India.
The basic fee for basic FSSAI License is fixed at ₹100 for one year. Moreover, the fees for FSSAI Central license is fixed at ₹7500/- per year. The time to obtain an FSSAI licence is 7 working days while it takes State 30 days for a central licence.
There are three types of FSSAI licences:
- FSSAI Central Licence
- FSSAI State Licence
- FSSAI State Registration
Again, FSSAI licences are classified further based on business turnover as:
- Turnover up to ₹12 lakh: Basic FSSAI registration
- Turnover between ₹12 lakh and ₹20 crore: State FSSAI registration
- Turnover more than ₹ 20 crore: FSSAI Central registration
Eligibility to apply for a business license
- The applicant must be at least eighteen years old
- There should be no criminal records on the candidate
- The company should be lawful to operate
How to apply for a business licence?
This is the standard procedure to apply for a business licence though it may vary depending on location and type of business.
- Research on government’s regulations regarding business licences in your sector.
- Identify the organisation which you need to approach for the licence.
- Arrange for the required documents that you will need to furnish and provide the same.
- Make prompt payment of all cost involved to complete the process.
- Keep track of whether a renewal is required and do the needful to avail invalid licences.
To sum up: How to apply for a business licence in India?
Starting a business requires various compliances and licences. A business that is compliant with licences is eligible for various facilities, schemes and subsidies by the government of India. There may be different procedures to secure a business license based on the location, nature, and size of the business. Research well to understand the licences that you need to apply for to be eligible for government loans and other benefits to grow your business.
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