Government-issued Trade License and Shop Establishment Licenses grant authorization to operate a specific trade or business. It does not grant approval for any other activity outside what it is issued for or ownership of any property. For the purpose of acquiring the trade license, an application must be presented to the Local Municipal Corporation. It is part of a campaign to control commerce so that health risks and annoyances do not negatively impact the lives of people. It makes sure that the area where it is done complies with all applicable laws, norms, and safety precautions. In this article, we will discuss Trade License and Shop and Establishment License.

What is the Trade License and Shop and Establishment License

Shop and Establishment is a government-approved license that allows business owners to operate a shop or conduct other commercial activities. To safeguard the interests of the workers in the unorganized sector, it was controlled by the Indian Labor Law. According to the Shop and Establishment Act, the proprietor of a shop must declare the following:

• Total number of shop hours worked
• Hours of operation for the store
• Worker breaks
• Federal holidays
• Measures for health and safety (like Sanitation and cleanliness, Firefighting, and Accidental remedies)
• compensation for overtime
• Leave procedures

The Trade License and Shop & Establishment License must be obtained by Profit or Non-Profit organizations such as Societies, Educational Institutions, Charitable Trusts, or any other commercial entities providing banking services.

The definitions of shops and establishments are both spelled forth in the Shop and Establishment Act. Let’s examine each of them individually.

Shop: The Act defines a shop as a location where customers can purchase goods or services. Offices, warehouses, storerooms, and go-downs may also be included.

Establishment: All lodging facilities, dining establishments, theatres, retail stores, and other places offering entertainment to the general public are considered as establishments.

What is the difference between a Trade License and Shop and Establishment License?

The following are the distinctions between a Trade License and Shop Establishment License:

• A trade license is an authority granted to a person to conduct a specific business or trade, whereas a shop establishment registration is a requirement for anyone starting a business or shop with the local government.
• While a trade license can only be obtained on commercial property, a shop and establishment can be opened on residential property.
• To ensure that a person is not engaging in any unethical business operations and is according to the laws and safety directives that were periodically given by the government, it is required by law that they obtain a Trade license. Shop establishment is mostly necessary for small business owners and traders that conduct any type of commercial activity.
• Businesses including hotels, restaurants, canteens, food stalls, manufacturing enterprises, cyber cafés, etc. typically need trade licenses, whereas every shop and commercial institution that does business or offers any services needs a shop establishment permit.
• Every legal business and service activity needs a license, but the minor unorganized sector only needs a shop establishment. Because the act specifies the working hours, opening and closing times, salary rate, weekly vacations, etc., it safeguards the working conditions of both workers and employees. Additionally, it specifies the working hours for both child labor and employment for women.
• Laws governing trade licenses and retail establishments vary from state to state because each has its own set of rules. Every state has a different set of costs associated with the same services.
• Within 30 days after the start of business, a trade license must be obtained. A license may be canceled or terminated if a person violates the terms of the license or creates a nuisance in the community.
• The Shop and Establishment Act controls unorganized workers’ rights and working conditions. This covers wages, time off, holidays, and other work-related matters.

Pros of Trade License and Shop and Establishment License Registration

The following are a few benefits of a Trade License and Shop and Establishment License;

Evidence of Legal Entity: Every store or business should have documentation proving it is a legitimate entity, such as a partnership agreement or sole proprietorship agreement. It provides the owner permission to conduct business in his area.

Continuous Inspection: A store or establishment’s operations are regularly examined by the local municipality and the state government. Therefore, having a license will enable you to pass the inspection more swiftly.

Commercial Bank Account: Every bank requires documentation of a legal entity before opening a current account. Therefore, opening a separate bank account for day-to-day transactions has been mandated by the RBI Compliance for every shop and establishment. If you have a licensed business, opening a current business bank account will be simple.

Government Benefits: There is a DIC Department in every state that develops stringent regulations for all small enterprises. However, you can readily get government benefits if you have a Registration Certificate.

Objective

To ensure that a person is not engaging in unethical business practices and is according to the laws and safety guidelines made by the government from time to time, a trade license is necessary by law. Shop Establishment is primarily essential for small business owners and traders who engage in any form of commercial activity and governs pay, work schedules, lunch breaks, rest periods, and other work circumstances for employees employed in different locations. Except for areas that are already registered under the Factories Act of 1948^[1], every site of a corporation must be registered.

Conclusion 

Since each state has its own set of laws and regulations governing both Trade License and Shop and Establishment License vary from state to state. For similar services, every state has its unique set of costs. Both must typically be registered within 30 days of the start of the company. You must be excited to open a shop now that you have enough knowledge regarding shop registration. However, applying for a license is a complicated process, so you should seek professional advice before doing so. Our Advisor Desk at Bizadvisors.io would provide the best legal advice for you. Our professionals simplify the establishment and shop registration process. Contact us for Trade License and Shop and Establishment License.

Read our article:All You Need to Know About Shop and Establishment Registration