Types of Business License Registration in India 2024

Types of Business License Registration in India?

When starting a business, many individuals prioritize planning their business activities, marketing, and funding. However, they often overlook the crucial step of obtaining business licenses, sometimes leaving it until the last minute. The reasons for this can include the lengthy process, extensive documentation requirements, and the need to submit applications to various authorities. Consequently, businesses often delay the registration process, focusing on other aspects first.

Different types of business licenses depend on the nature and location of the business. These licenses are obtained from different jurisdictions and authorities, and obtaining them is essential for gaining market significance as they are government-regulated. Below are the different types of business licenses covered for various businesses.

What is a Business License?

A business license is a permit issued by government agencies that allows individuals or companies to conduct business within a specific geographical jurisdiction. The requirement for business licenses can depend on the country, state, and local municipalities. To legally operate a business, build credibility, and access business loans, you must have the necessary business licenses. Below are some reasons why obtaining a business license is crucial.

Why are Business Licenses Important for Companies?

Types of Business License Registration in India

The following reasons highlight the importance of obtaining business licenses:

Legitimacy: A business license builds the legality of the business because it is issued by government authorities, granting permission to operate within a specific jurisdiction.
Legal Protection: Registering a business provides protection against legal disputes. For instance, you can file an official claim regarding the theft of your brand logo, product, or service.
Enhanced Credibility: Some licenses provide credibility to business products and services. Before obtaining a license, businesses must undergo certain tests, which builds customer trust in the services or products offered.
Tax Benefits: Officially registered companies can obtain tax benefits, including tax exemptions in some countries. By having a license, businesses can avail of these tax benefits.

Types of Business License Registration in India

The following are different business licenses in India based on the nature and requirements of the business:

Udyam Aadhar Registration

The Udyam registration is important for Micro, Small, and Medium Enterprises (MSMEs). The registration process is completely online and mandatory for all MSMEs. It provides a certificate and a twelve-digit Unique Number. After registration, a permanent identification number and e-certificate are provided. Since July 1st, 2020, Udyog Aadhar Registration has been converted to Udyam Aadhar, and every existing MSME should convert their Udyog to Udyam certificate.

GST Registration

The Goods and Services Tax (GST) is an indirect tax on the consumption of goods and services, divided into Central GST and State GST. Integrated GST is taken by the central government for every interstate transaction. Any person or entity with an annual turnover exceeding Rs. 20 lakhs must acquire GST registration. In some states, the turnover threshold is Rs. 10 lakhs, and for businesses involved in the supply of goods, the threshold is Rs. 40 lakhs per year.

FSSAI License

The Food Standards and Safety Authority of India (FSSAI) regulates food safety in India. To operate a food business, you must acquire an FSSAI license. The registration process is online and can be done through the FSSAI portal. There are three types of FSSAI licenses: FSSAI Central License, FSSAI State License, and Basic FSSAI Registration. Ensuring compliance and maintaining hygiene and quality are crucial, and the FSSAI department oversees these aspects.

Import Export Code

An Import Export Code (IEC) is a unique 10-digit alphanumeric code required for businesses involved in international trade. Without an IEC, import and export activities cannot be conducted in India. The code is issued by the Director General of Foreign Trade (DGFT) under the Ministry of Commerce, Government of India.

Shop and Establishment Act

The Shop and Establishment Act, regulated by the Department of Labour, ensures that working conditions and employment of workers are improved in shops, commercial establishments, hotels, theatres, etc. Each state has its own shop act, and businesses must obtain the license within 30 days of commencing operations.

Trade License for Indian Online Business

A trade license is essential for businesses to operate ethically. Issued by the local administration, it ensures that businesses do not engage in unethical practices. This license is required for businesses involved in trading, repairing, manufacturing, and rendering services connected with the import and export of goods.

Indian Factory License

Factory owners must register their factories with local authorities before the Factories Act, 1948, came into force. The Act provides licenses to factories that meet specific conditions. For example, factories with ten or more workers involved in manufacturing activities with the aid of power, or factories with 20 or more workers involved in manufacturing activities without the aid of power, must obtain a factory license.

Other Licenses and Registrations

Businesses in sectors such as insurance, financial services, broadcasting, defence, etc., must obtain licenses from regulatory bodies like the Reserve Bank of India (IRDAI). Additional permits, such as those from the fire department, pollution control board, or local healthcare system, may also be necessary depending on the nature of the business.

Conclusion

In conclusion, small businesses require comparatively fewer licenses than private limited or partnership firms. Business licenses help companies comply with Indian laws and permits. While it is possible to start a business without registration, the benefits provided to those registered with government authorities make obtaining the necessary licenses a wise decision.