Well, starting a business in India is one of the best steps you can take toward success. However, realize that the process of setting up your business is not as easy as you think.
To set up your business successfully, you need to go through various steps and get a business license in India.
Don’t know how to do it? Don’t worry, in this post, you will learn about the different types of business licenses in India and how to get license for business.
- What is a business license in India?
- Why do you need a business license in India?
- Types of business licenses
- Business types and the license they need
- How to apply for a business license in India
- 1. Business structure
- 2. Learn about government regulations
- 3. Legal organization
- 4. Learn what documents are needed
- 5. Complete the document work
- 6. Receive the license
What is a business license in India?
A business license in India is generally a government-issued license that allows you to legally carry out your business or carry out commercial activities
It gives you the legal right to start and run a particular business.
One thing to keep in mind is that not all businesses always need to be licensed. Some require licenses from multiple jurisdictions while others do not.
However, if your business requires a license and you don’t, you will likely be fined or even forced to close the company.
Why do you need a business license in India?
If you have just started your business, one thing you really need is a business license.
There are several reasons why business licenses are important in India:
1. Legality and compliance
You see, getting a business license in India is important as it ensures that your business follows all kinds of rules and regulations.
In short, it is like a legal stamp given to your business that shows that you’ve met the requirement to start and set up and run a business in India.
Operating without a license can lead to penalties or fines.
2. Consumer protection
Having a business license is pretty important in India as it helps protect consumers.
How? So when your business gets a license, it means that it has gone through all the checks and inspections and has met all the standards and regulations.
It’s like a stamp of approval that says, “Hey, we’re authorized to operate!”
This gives your consumers some confidence to engage with your business as your license shows them your legitimacy.
3. Tax compliance
A business license does not only help you legally operate your business but also stay on top of your taxes.
Many licenses, like the GST registration, are directly linked to tax registration. When you have a valid license, it makes tax reporting and compliance a breeze.
With this, you can also maintain clean financial records which comes in handy during tax filings. It also keeps you out of any financial troubles.
4. Building trust and credibility
If you want your business to look trustworthy and legitimate, you need a business license. The license shows your customers, partners, and other people that you are a legitimate business operating within legal boundaries.
People are more likely to trust and do business with you when they know you’ve got all the necessary paperwork sorted. It’s like doing things the right way.
5. Access to government benefits and support
Having a business license in India also comes with a lot of amazing perks such as getting government benefits and support.
Along with making your business legal, you will also open your doors to various government schemes, incentives, grants, etc.
Types of business licenses
Now let us talk about the most common types of business license registration in India.
In India, most businesses are set up as sole proprietorships or general partnerships, and they do not require a license from the central government.
The Ministry of Corporate Affairs oversees the formation of businesses and limited liability partnerships (LLPs). If you plan to run a business with annual revenue exceeding Rs. 20 lakhs, it is recommended to register it as an LLP or a Pvt. Ltd. company.
Once your company or LLP is registered, it obtains a legal existence, and you, as the promoter, receive protection from liabilities. Additionally, the firm becomes easily transferable, ensuring its continuity in the long run.
So in India, almost all businesses that have an annual turnover of more than Rs.20 Lakhs in most states and Rs.10 Lakhs in some, must register for the Goods and Services Tax (GST).
Further, anyone who is delivering goods for intra-state sales also needs to register for GST, regardless of the revenue.
New firms and sole proprietorship businesses must complete the GST registration within a certain period.
There are four types of GST:
- SGST (State Goods and Services Tax)
- CGST (Central Goods and Services Tax)
- IGST (Integrated Goods and Services Tax)
- UGST (Union Territory Goods and Services)
Udyam Aadhar registration
Businesses that need to run as independent companies that include micro, small, and medium-scale businesses, can get the opportunity to register under Udyam.
The businesses that have registered under Udyam become eligible for various government benefits and initiatives designed to support small enterprises throughout India.
In India, we have the Food Safety and Standard Authority of India (FSSAI) as the go-to regulatory authority responsible for ensuring the safety and standardization of food products.
So, if you’re running a retail store, trade outlet, kiosk, restaurant, caterer, or even a cloud kitchen, it’s important to comply with FSSAI regulations.
This means you need to get the necessary license and registration from them. And don’t forget, you’ll also need to renew these licenses periodically to stay on the right side of the food safety rules. It’s all about keeping our food safe and up to the mark!
If you’re planning to kickstart an import-export business in India, there’s a special license you’ll need called the Import Export Code (IEC).
It’s issued by the Directorate General of Foreign Trade under the Ministry of Commerce. The cool thing is, you can get this registration online through the DGFT website. Just submit the required documents, and you’re good to go!
Now, let’s talk about those essential documents. You’ll need your trusty PAN card, along with an identity card that has your address proof, your business residence proof as well as proof of your current bank account.
Shop and Establishment Act license
The “Shop and Establishments Act” was put in place to regulate various aspects of business operations, including working hours, child labor, salary payments, worker safety, and overall health standards.
Each state in India offers its own set of licenses or registrations under the Shop and Establishment Act, with variations depending on the specific state.
Therefore, it is necessary to reach out to the relevant state public authority responsible for issuing the Shop and Establishment Act License based on the location of your business. They will provide the necessary information and guidance tailored to the specific state requirements.
A trade license is like the basic ticket that every business needs to legally operate in a specific area or municipality. You can think of it as a permission slip issued by the local municipal corporation.
So, if you’re starting a business, getting a trade license is one of the first things you should check off your to-do list. It ensures that you’re running your business in accordance with local regulations and gives you the green light to kickstart your entrepreneurial journey in that particular area.
In certain fields, like medicine, law, architecture, engineering, and chartered accountancy, professionals need to get licenses from the relevant regulatory bodies or councils.
These licenses are necessary to practice their respective professions legally and ensure compliance with industry standards.
License required for factory in India
If you plan to run a factory in India, it’s important to obtain the necessary licenses and registrations.
Under the Factories Act of 1948, you must register your factory, and this registration is granted by the respective state government.
Additionally, depending on the nature of your business and the regulations of the state, you might need to fulfill additional requirements and obtain permits related to safety, welfare, and labor measures. These measures are in place to ensure the well-being of workers and maintain appropriate standards within the factory.
Now if you want to set up a business in Maharashtra, you would need to obtain the Gumasta license. Gumasta is a mandatory license every business must get before setting up business in Maharashtra.
The documents needed involve:
- A PAN Card
- Director’s Identification (ID) and Proof of Address
- Residence Proof or Owner’s No-Objection Letter
- Application letter of the Greater Mumbai Municipal Corporation
- Authority Letter for Business
- Partnership Deed or Certificate
- Business Incorporation Documents
If you’re involved in selling, manufacturing, or distributing drugs and medicines in India, it is absolutely critical to obtain a pharmaceutical license.
You can get this license both from the state Drugs Control Department or the Central Drugs Standard Control Organization.
So, why is it so critical? Well, this license guarantees that corporations within the pharmaceutical area follow all of the guidelines and maintain the desired standards. It’s all about ensuring that the drugs and medicines being sold or manufactured are secure and reliable for the folks who use them.
Air & water pollution permit
If you are making plans for any manufacturing initiatives that involve using natural resources or you are already in the construction industry, there’s something else you want to know. You should get an air and water pollutants permit.
This permit is issued via the Environment Department, overseen by the State Pollution Control Board.
Its motive is to make sure that your business activities observe environmental policies and take important steps to lessen air and water pollution. It’s all about keeping our environment clean and healthful, that is something we have to all care about.
Other licenses and registrations
Besides these licenses, there are numerous different licensing and registration requirements for businesses in India.
The government puts a whole lot of emphasis on public safety and the well-being of the surroundings. That’s why they issue specific permits and licenses where necessary. It’s all about ensuring that businesses operate responsibly and don’t damage the public or the environment.
These are only a few examples, however, there are honestly many industries and agencies that have their own specific licensing and regulatory bodies. It can appear a bit overwhelming, however, it is all in place to ensure that companies function smoothly and responsibly.
Business types and the license they need
You see, all industries in India require their special type of licenses to run legally. A food industry business would need a FSSAI license while a manufacturing business would need an Industrial license.
Here are some most common types of businesses and the type of business license registration they need:
1. Food business
FSSAI: All businesses engaging in the manufacturing, processing, packaging, storage, distribution, and sale of food products require FSSAI registration.
2. Retail business
Trade license: To run a retail store or establishment in a specific jurisdiction.
3. Manufacturing business
Industrial license: The government identifies certain industries as requiring industrial licensing, such as hazardous chemicals, defense equipment, etc.
4. Import/Export business
Import Export Code: For businesses that engage in import and export activities.
5. Pharmaceutical business
Drug license: Businesses that manufacture, distribute, or sell pharmaceutical drugs need this license.
6. Hotel or Restaurant business
Eating House License: For any business that operates a hotel, restaurant, or any kind of food serving and beverage activities.
7. Financial services
License from regulatory authorities: All kinds of financial service businesses such as insurance companies, banks, mutual funds, and other financial institutions need to get licenses from the respective regulatory bodies like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), etc.
8. Liquor business
Liquor license: Businesses that manufacture, distribute, or sell alcoholic beverages require this license.
9. Healthcare business
Medical Establishment License: For hospitals, clinics, diagnostic centers, and other medical establishments.
Pharmacy License: For retail pharmacies or businesses involved in the sale of medicines.
10. Construction business
Contractor License: For businesses engaged in construction, infrastructure development, and related activities.
How to apply for a business license in India
The process of getting a business license entirely depends upon the type of your firm, its location, nature, size, etc.
The procedure generally goes something like this:
1. Business structure
Firstly, start by deciding the legal structure of your business. Decide whether it is a sole proprietorship, partnership, limited liability partnership (LLP), private limited company, or public limited company.
2. Learn about government regulations
Then, try to get an understanding of all levels of government regulations and rules regarding the license of your industry.
3. Legal organization
Check out the organization that’ll oversee all your operations and contact them to arrange the required documents.
4. Learn what documents are needed
Next, gather information about what documents are needed for business license registration in India.
5. Complete the document work
Gather all required documents and complete the work by providing copies of any papers, and respond to all inquiries.
6. Receive the license
If your application is accepted, you’ll get a copy of your license.
We recommend you get expert and professional help when getting the right business license at the right time. This will help you get the right license that will ensure that your business operates legally and complies with all the necessary regulations.
Further, different businesses may require different permits during the setup process. Therefore, getting professional help will reduce your chances of facing penalties and errors.
Eligibility to apply for a business license
There is a certain requirement that you must meet in order to apply for a business license:
- You must be at least 18 years old
- You must not have any criminal record
- Your company must be lawful to operate
Here is a list of all the documents required:
- Pan Card
- Driving License and Voter Id
- Aadhar Card
- Rent Agreement and Lease Agreement’
- Electricity Bill, Water Bill, or Telephone Bill
- Chartered Accountant Certificate
- Memorandum Of Association and Article of Association.
- Partnership Deed
Does a small business need a license in India?
Yes, small businesses need a license in India.
Is a business license the same as a permit?
A business license and a permit are similar in some ways but still have some differences.
Think of a business license as an overall authorization to operate a business legally. On the other hand, a permit is a document granting permission for specific activities of your business.
Can I start a business without registration?
Yes, you can of course start your business without registration in India.
So this was our post on how to get license for business in India. Now we’ve learned everything about business licenses registration from what it is to the types of business licenses in India.
It’s your turn to put your knowledge to work and get your business in the right direction by getting your legal business license registration done.
Feel free to ask questions.