How will Business License Reform be a game-changer?

Businesses are defined as organisations or enterprises engaged in commercial, industrial or professional activities. Businesses can be for-profit entities or not for profit organisations that are established and functioning to fulfil a charitable task or further a social cause. A business is usually registered as a private limited company. Before starting any business, it is mandatory to obtain company registration and receive a license.

Defining business licenses

Business licenses are documents issued by the government that allow individuals or companies to conduct business by following certain rules and regulations.

Business Registration

A company, corporation or a business must be registered as per rules and regulations mentioned by the Government.

Business Registration Certificate

Four steps that are required to acquire a business registration certificate are as mentioned –

·     Acquire Digital Signature Certificate (DSC)

·     Acquire Director Identification Number (DIN)

·     Creation of a new user account

·     Company Incorporation

What is a business plan?

A business plan is a written description of the activities that will be conducted during a certain period of time. A good business plan serves as a guide for the company and provides information in a systematic way to investors, founders and financial advisors. A plan of business activities includes details of founders, business model, competitor's analysis, market analysis, financial estimates.

Purpose of a business plan

The planning done by managers is aimed at achieving the organisational goals. The planning helps employees and the management in maintaining focus and put in their efforts on the crucial tasks that needs more time, attention rather than the less important tasks. A business plan lays down activities that must be given more priority than others. The purpose of planning is to minimise the cost of performance and eliminate unproductive efforts.

How to set up a business?

Before obtaining a business license, an individual must decide on many important factors.

The steps for setting up a business are as follows –

Significant Licenses Required for starting a business

·     Company or LLP Registration

·     Udyog Aadhar Registration

·     GST Registration

·     FSSAI Registration

·     Shop and Establishment Act License

Types of businesses

An individual must choose the category of business before proceeding to other steps. 

 A business is briefly divided into four categories –

·     Manufacturing Business

·     Service Business

·     Merchandising Business

·     Hybrid business

Manufacturing business

A manufacturing business involves buying products known as raw materials, and produce new products with those raw materials.

Service business

A service business is a business that provides intangible products. They mainly offer professional skills, expertise, advice and other similar products.

Examples of service businesses are institutes, schools, banks, accounting firms and law firms.

Merchandising business

A merchandising business sells a product without changing its form. Examples of a merchandising business are - grocery stores, convenience stores, distributors, and resellers.

Hybrid business

Hybrid businesses are companies that contain features of more than one type of business. A restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a cold bottle of wine (merchandising), and fulfils customer’s orders (service).

Types of Companies in India

There are different types of companies that operate in India. Let is look at some of them and find out their registration processes and documents that must be submitted at the time of registration.

·     Sole Proprietorship

·     Partnership firm

·     Corporation

·     Limited Liability Company

·     One Person Company

·     Limited Liability Partnership

·     Private Limited Company

Defining Sole Proprietorship

Sole proprietorship is defined as a company which is owned and managed by only one individual. The sole proprietor and his business are the same and are not considered as separate entities.

Sole Proprietorship Registration Process

The crucial steps to be taken for sole proprietorship registration are as mentioned below-

• Submission of Aadhar card, PAN Card as a proof of identity

·     Photographs of the applicant

·     Creation of a Bank account

·     If the property is rented, rent agreement and No Objection Certificate(NOC) from the landlord. If the property is owned by the proprietor, submission of property documents

·     Registration under MSME Act

·     Acquire Shop and Establishment Act License

·     GST Registration

·     Bank statement copy that includes bank account number, address, and IFSC code

Documents Required for Sole Proprietorship Registration

If the company is to be registered under Shops & Establishments Act –

·     Copy of PAN of the Sole Proprietor or owner

·     Copy of Identity Proof (Aadhar/ Passport/ Voter ID)

·     Bank Statement

·     Copy of Address Proof

·     Passport Size Photograph of the owner

Defining Partnership firm

Section 4 of ‘The Indian Partnership Act’ of 1932 describes rules and regulations of a partnership firm. Partnership companies are governed by the provisions of the act. According to it, “Partnership is the relation between individuals who have agreed to share the profits and losses of business.”

Steps required for Partnership Registration

·     Drafting Partnership Deed

·     Notary and Stamping of Partnership Deed

·     Filing of Partnership Firm Registration Form

·     Filing of PAN application for Partnership Firm

Documents required for Partnership Firm Registration

·     Partnership Firm Registration application in Form 1.

·     Certified Copy of certified Partnership Deed on stamp paper.

·     Affidavit sample

·     Ownership documents if the property is owned by the partners.

·     In case of rented property, a rental agreement as a proof.

·     ID Proof and Address proof of all partners that includes PAN Card, Aadhar Card, Driving License, Copy of voter ID/ Passport.

Defining Corporation

A corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy many benefits as mentioned in the rules and regulations.

A form of business operation that declares the business as a separate, legal entity managed by a group of individuals known as the board of directors.

Types of Corporations

·     C Corporation

·     S Corporation

·     Limited Liability Companies and

·     Nonprofit organisations

Defining Limited Liability Company(LLC)

A limited liability company is a combination of a partnership firm and a corporation.

A limited liability company (LLC) is a corporate where the owners are not liable for company's debts. Limited Liability Companies are hybrid establishments that are a combination of a corporation, a partnership or sole proprietorship firms. The aspects of the mentioned companies are similar to the characteristics of LLC.

Defining One Person Company

A One Person Company is owned and operated just by a single person who manages all the activities of the business.

The Companies Act states rules regarding the registration procedure of a one-person company.

The registration process of one-person company is as follows –

·     Apply and obtain Digital Signature Certificate (DSC)

·     Acquire Director Identification Number (DIN)

·     File the application for Company Name Approval

·     Draft MOA and AOA

·     Sign Memorandum and Article of Association

Documents required for One-Person Company

·     Passport size photos of the directors

·     Address proof of the directors

·     Photo ID proof of directors

·     Self-declaration about directorship in other companies

·     Rent agreement of your registered office

·     No objection certificate from the owner of the property

·     PAN card copy of the applicant as a proof of identity

Defining Limited Liability Partnership

Limited Liability Partnerships are preferred by Professionals, Small Business Owners and businesses that lack adequate capital or a business idea where the individual is looking to start a company with a minimum amount of investment.

Limited Liability Partnerships Registration Process

·     Appoint partners and significant members

·     Acquire Digital Signature Certificate (DSC)

·     Filing an application for DPIN (Designated Partner Identification Number)

·      Name reservation of the company

·     Draft the LLP Agreement

·     File Incorporation Application form

·     File FiLLiP Form

Documents required for Limited Liability Partnerships

From the designated partners

·     A copy of PAN card of designated partners,

·     A copy of Aadhaar card of partners,

·     Address proof which includes mobile or telephone bill, bank statement,

·     Identity proof of all partners including Passport /Driving license/Voter’s ID card ,

·     Passport-size photograph of directors and shareholders,

·     If any of the partners is an NRI or a foreign national, then he should present the certified passport.

For the proposed registered office (Residential / Commercial)

·     Current address proof of the registered office,

·     NOC (No-Objection Certificate) from the owner, if the office is situated on a rented location,

·     A copy of Notarized Rental Agreement, if the property is rented.

Defining Private Limited Company

The Private Company is defined under Section 2 (68) of the Companies Act 2013, as a company which has the minimum paid-up capital of Rs 1 Lakhs.

·     Private Limited Company Registration Process

·     File an application for Digital Signature Certificate (DSC)

·     File an application for Director Identification Number

·     Name Approval

·     Company Incorporation Form

·     Evaluation of documents and company registration certificate issuance

·     Creation of a Bank account

Documents required for Private Limited Company Registration

The Shareholders and Directors must submit below documents-

·     Scanned copy of PAN card or Passport copy

·     Address proof copy of both the Shareholders and Directors

·     Passport size photograph of the applicant

·     Rental agreement if the company is situated in a rented property

From company’s Directors/ Members

If the Director or Member is an Indian, the documents he needs to submit are

·     ID proof in any form–Passport, Driving License, Voter ID card, Aadhaar Card

·     PAN card of the applicant

·     Copy of bank statement

·     Email ID and mobile number

If the applicant is a foreigner, he must submit the below documents

·     Passport copy of the applicant

·     Residential/address proof of the applicant

·     Email id and mobile number

·     Attested copy of Visa

·     Attested copy of Resident Permit certificate

Latest News on Business License Reforms

PMC permits home-based business without license

The small entrepreneurs find it difficult to raise funds required to start a business and thus Pune Municipal Corporation(PMC) had taken the decision that they do not require any license from them. It is good initiative by the corporation as it will boost and motivate these small business entrepreneurs.

These changes undertaken are crucial, especially for the small business owners and entrepreneurs.