Licenses Required for Business in India

Starting is the first step toward success. Setting up a business in India isn’t an easy task, but the country has made significant progress over the years, making it much easier for businesses to get started.

Licenses and permits are issued by the government of a certain municipality or state to allow firms to operate. For a specific individual to start a business in India, obtaining a business license is necessary. This is an important and needed document issued by a municipal council. Businesses are allowed to engage in defined activities in a given area. These licenses and permits are also used to check on businesses to determine whether or not they are following the law’s standards.

Why do You Need a Business License and Permits?

Business licenses and permits have been used in the country for the past forty years, and state governments manage them via municipal corporation laws. This ensures that no one is harmed in any way due to a commerce or business’s disturbance and health danger. This also ensures that the business or trade is being held in a particular area, in a specific location and that no one is engaging in illegal business activities.

Let us go over the business license, its uses, and its advantages in more detail.

The process of getting a license differs from one type of industry to the next, depending on a variety of criteria such as the number of workers, the sector, the type of business, the location of the firm, and so on. In this article, we’ll look for some of the most popular company licenses and registrations and delve into this more.

Eligibility to Apply for a Business License

The following are the requirements for applying 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.

Broad Categories of Licenses & Tax Registration in India

Popular Licenses
Central Licenses
State Licenses
Goods & Service Tax
Popular Licenses

To begin is to succeed. Starting a business in India is not a fairy tale story, but the Nation has made tremendous progress in the recent days and made starting a business, very easy for Entrepreneurs. Today, we will look at the most commonly referred to licenses and registrations required for a business in India which we have categorised as "Popular Licenses" that are commonly needed when we start a busines in India.

Popular Licenses in India
Central Licenses

The process of obtaining license changes from one type of business to the other,  based on various determining factors like the number of employees, sector, the type of business, the place of business etc. Although there are lot many number of Licenses in India, To determine the exact requirement for your business, get in touch with  TAXAJ Business Advisor. We have categorised these licenses as Central Licenses because of the usability, i.e these licenses can be used in more than one States.

Central Licenses in India
State Licenses

Business Licenses and permits have been used in the country for the past forty years, and state governments manage them via municipal corporation laws.

This ensures that no one is harmed in any way due to a commerce or business’s disturbance and health danger. This also ensures that the business or trade is being held in a particular area, in a specific location and that no one is engaging in illegal business activities.

Let us go over the State License, its uses, and its advantages in more detail.

State Licenses in India
Goods & Service Tax

All types of entities and individuals who have an aggregate annual turnover of more than Rs.20 lakhs in most State and Rs.10 lakhs in Special Category States are required to obtain GST Registration. Further, any person supplying goods involved in intra-state supply is required to obtain GST Registration, irrespective of turnover. In addition to the above criteria, various other criteria has been provided under the GST Act, establishing the criteria’s for GST registration. It is important for all Entrepreneurs to understand the criteria’s and obtain GST registration within 30 days of starting a business.

goods and service tax

Detailed Steps for Launching a New Company

In order to initiate and launch any business in India, there are certain steps that has to be followed which can be explained as follows

Step 1: Choose the Correct Type & Register your Company

The first and foremost requirement for a new business entity in India is company registration. Based on the company structure and the partners involved.

Following are the types of new company registration categories that exist in India:

  • Proprietorship Firm

When a single person runs a business, such a Business is called a proprietary Business, and the company owner is named proprietor. A proprietorship is a common form of Business in India. You can start and operate the Business with minimum regulatory compliance. However, there is no complete-fledged way available to register your proprietorship by the Indian Government. Tax registration and other business registration is the right way to show your proprietary Business's existence. Following registrations can be used to indicate the presence of your proprietary Business

→ Professional Tax Registration. 

→ GST Registration. 

→ Shop and Establishment Registration. 

The owner of a sole proprietorship business typically signs contracts in their name because the sole proprietorship business has no separate identity under the law. The sole proprietor owner will generally have customers write checks in the owner's name, even if the company uses a fictitious name. Sole proprietor owners can mix personal and business property and funds, something that partnershipsLLP's, and Private Limited Companies cannot do. 

  • Partnership Firm

A Partnership is one of the most basic forms of a business organisation. Two or more people come together to form a business and divide the profits thereof in an agreed ratio. A Partnership is easy to start, and the compliance is minimal as compared to companies.

The challenge becomes real when multiple partners decide their terms for the business operation of a firm. This diversification of opinions has many legal and compliance angles to deal with. Leave Such matters to experts like us!

The proprietorship form of ownership has limitations viz—limited resources of human resources, the limited skillset for work & unlimited Liability of losses. More capital, better skills & limited Liability helps in the Expansion of business. A proprietor finds him unable to fulfill these requirements. This call for more persons to come together with different edges and start a business—for example. This person lacks few managerial skills but may have capital compliments your business requirement.

  • Company or Limited Liability Partnership (LLP)

Most enterprises in India are formed as sole proprietorships or general partnerships, with no central government licensing. The Ministry of Corporate Affairs oversees the formation of businesses and limited liability partnerships (LLPs). It is advised that entrepreneurs who aim to operate a business with annual revenue of more than Rs.20 lakhs register as an LLP or a firm.

Once a business or LLP is registered, it will have its legal existence, and the promoters will be protected from liabilities. Moreover, the firm would be easily transferable, and the business would continue to operate forever. As a result, it is best to seek advice from a specialist before starting a business.

The best advantage of being an LLP company is that the business is easily transferable without any legal hassles.

Learn more about –  What Is Limited Liability Partnership? Explanation Of LLP Registration Process

  • One Person Company Or OPC

Introduced in 2013, the One Person Company registration allows a sole-proprietor to register their business and legally carry on his/her business operations.

Learn more about - What is One Person Company & everything related to it

  • Private Limited Company (PLC)

If a company is registered as a Private Limited Company or PLC, then Indian law views the company as a separate legal entity from its founders. Such a company has shareholders, directors, and each entity within the company is regarded as an employee of that company.

Companies and startups looking to raise funds and issue ESOPs to employees often register as PLC.

Learn more about - What is Private Limited Company & everything related to it

  • Public Limited Company (PLC)

In the case of Public Limited Company, the law regards the corporation as a legal entity composed of voluntary association of members. The legal liability of every member is limited to the shares they hold. Businesses with high turnover are registered under Public Limited Company, with or without the aim of issuing IPO in the future.

The Ministry of Corporate Affairs does company registration under either of these classes. More information can be availed here.

Learn more about - What is Public Limited Company & everything related to it

Step 2: Apply for Basic Registration & Licenses

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GST Registration is necessary for all firms and people with annual revenue of more than Rs. 20 lakhs across most regions and Rs.10 lakhs in Special Category Provinces. Moreover, despite revenue, anyone delivering goods for intra-state sale is required to register for GST.

In addition to the foregoing criteria, the GST Act contains many other criteria that define the needs for GST registration. Understanding the conditions and obtaining GST registration within one month of starting up a firm is important for all businessmen.

Startups who want to create and run a small company – micro, small, and medium businesses – can apply for this license. The eligibility criteria for getting Udyog Aadhaar registration are based on a production concern’s investment in plant and machinery or a services provider’s investment in machinery.

Once a firm has gained a Udyog Aadhaar license, it is eligible for various government benefits and initiatives to assist small enterprises in India

The DGFT Department requires everyone dealing in importing or exporting goods or services from India to get an Import Export Code. The firm must have a PAN as well as a bank account to receive an Import Export Code.

The “Shop and Establishments Act” was adopted to control business practices such as working hours, child labor, salary payment, worker safety, and overall health. State governments offer Shop and Establishment Act licenses or registrations, which vary by state. As a result, the relevant State Public authority for getting a Shop and Establishment Act License should be contacted based on the State where the business is located.

Trademark or Brand Registration

Trademark registrations are widely used to protect the brand or slogans or coined words that are unique. Trademark registrations in India can be obtained by individuals or businesses or by non-profit organizations. However, each of the different class of persons or entity that have different requirement while filing the trademark application. The following are eligible for obtaining trademark registration in India.

Step 3: Apply for Business Specific Licenses:

There are innumerable licenses that can be registered in India to run a business, however those vary and are applicable depending upon the nature of business and activities, hence in order to know the exact licenses applicable to your business type, please reach out to us here

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