Trade License and Company Registration differences
In the business realm, the terms like Trade license and company registration are often used interchangeably. While both registrations are essential to businesses from a legal standpoint, they serve a different purpose altogether and entail distinct legalities. With that being said, let’s take a closer look at the Trade License and Company Registration differences and other vital details.
An Overview of Trade License and Company Registration
When it comes to obtaining mandatory approvals, trade licenses, and company registration rank among the prominent certifications that apply to almost all business types, no matter the industry. Both approvals adhere to distinct guidelines, scopes, and operational norms.
Whereas a company registration legitimizes the constitutional framework of the entity, a trade license compels entities to pursue fair business practices without disregarding the environment and human life.
Adherence to a trade license means complying with municipal limits to ensure workers’s safety, transparent execution of management affairs, and a safe and hygienic working environment.
The trade license is mandatory for entities operating in commercial settings. Meanwhile, company registration applies to entities falling under the Companies Act 2013.
Trade license is granted on a state-wise basis by the municipal corporation or the local governing body of the city. It falls under the Shop and Establishment Act. Submitting company registration and charter documents is essential while applying for a trade license.
Underlining Trade License and Company Registration differences
The table below clearly illustrates Trade License and Company Registration differences against various grounds, including structures, validity, renewal, etc.
| Particulars | Trade License | Company Registration |
| Structure | It is required by entities that fall under the ambit of the Shop and Establishment Act. | Applying for Company registration refers to a process of legitimizing an unregistered entity under the given legislation. The grant of company registration would cease to exist in the absence of the legal structure. Some common structures available for company registration include private limited company, public limited company, one person company, etc. |
| Validity | Trade license stays valid for one year. | Company registration comes with a lifetime validity. |
| Renewal | Requires yearly renewal | There is no need for a renewal |
| Types | A Trade license does not have any classification. | As such Company registration has no types. Its process varies based on the chosen legal structure. |
| Time | Upon applying, the authority takes 7-10 working days to grant the license provided there is no discrepancy. | The entire process of company registration typically takes 1-2 weeks depending on the chosen legal structure. |
| Eligibility | Availability of company registration is compulsory with an owner belonging to India and having a legal age. | Different company type has distinct eligible criteria. For example: The incorporation of a private limited company necessitates the appointment of at least two directors. Likewise, in case of Public limited company, appointing at least 3 directors is mandatory. |
| Members | Trade license has nothing to do with how many members an entity should appoint | The minimum and maximum number of directors are there in the company registration. But it depends on which type of company one is registering. For example, a private limited company needs a minimum of two directors, and a public limited company needs a minimum of seven directors to get company registration |
| Compulsory | Trade license is compulsory for commercial establishments. | Every company needs to legitimize its constitutional structure with a company registration. |
| Compliances | Adherence to municipal laws and regulations is mandatory. | Each firm with a company registration is required to follow the underlying operational compliances. For example: a company cannot voluntarily appoint or change the director as such endeavours attract specified guidelines cited under the Company Act. Similarly, the management of a company’s fiscal records should align with the norms in force. |
| Capital | Trade license does not underpin any requirement concerning the arrangement of minimum and maximum capital. | Company registration necessitates minimum and maximum capital depending on the chosen structure. |
Trade License and Company Registration differences: Underlining key points
There are various key points that you must ponder while applying for these registrations.
- E form called SPICe+ refers to an application for company registration in India. This form helps with registering several company types including private limited company, public limited company, one person company, etc.
- Upon submitting the above application, the Registrar of Company (RoC) verifies the same for compliance and factual accuracy.
- Meanwhile, the application for a trade license can be submitted on the official portal of the respective competent authority. The applicants are required to create an account on the same before delving into the filing procedure.
- The successful receipt of the application shall initiate the inspection process, which may also involve on-site vetting.
- Document consideration for company registration includes directors’ KYC, company’s address proof, MoA, AoA, tenancy or ownership proof, director’s bank statement, etc.
- The document requirements for trade license remain more or less the same with the only exception being the presence of the company registration.
Conclusion
Knowing Trade License and Company Registration differences can help with addressing operational and registration compliances. At the onset, both certificates appear to be similar, but upon closer inspection, subtle differences become evident.
Read Our Article: How To Get A Company Registration Number In India?
