Freelancers generally expand their operations into a business to derive higher income. They need to obtain business licenses and permissions legally and need to hire an attorney to address queries about licenses and compliance measures. But not many know why and how they need to register their business or the right business license they require to operate legally!

A business license is a kind of permission provided by the state or government body that firms need to possess to conduct business lawfully. Business licenses and permits vary based on the kind of government issuing them, along with the range of commercial operations being licensed.

Importance of Business licenses 

Business registration or license increases accountability, ensures financial transparency, and guarantees consumer protection. These organizations retain the power to impose fines and penalties or even shut down non-compliant businesses that operate without licenses and permits.

A freelancer operating as a business could be likened to a home-based or internet firm that also needs business licenses and an actual location of operation. Getting company licenses and permits upfront can reduce hassles and costs in the long run.

Types of Freelancer-Managed Companies

There are different kinds of companies prevalent, but we can stick with freelance businesses here.

According to the Companies Act 2013, you could have a 

1. One Person Company (OPC): Introduced in 2013, this company enables individuals to run a company limited by company shares and perform relevant commercial operations under the legal tenets.
2. Sole Proprietorship Company (SPC): This firm is a business entity owned and managed by an individual as the sole proprietor who receives all profits.
3. Partnership Firm: Freelancers who collaborate with other freelancers can form a partnership firm to decide on a specific role and profit sharing based on the partnership agreement. 

One chooses between an OPC or SPC registration depending on one's intention with the company objectives. If the individual freelancer aspires to keep all profits for themselves, they can register their firm as an SPC. OPC company would have individuals running a company limited by company shares, which implies that the freelancer proprietor can unload some shares and liquidize them into money any time they want.

Types of Business Licenses in India

The Ministry of Corporate Affairs oversees and manages the registration of companies in India. A company's registration enables the organization to exist as a legal identity with limited liability protection. Registration assists firms to grow and expand based on their turnover and its specific threshold. Here are some business licenses and registrations that are crucial for freelance businesses:

GST Registration

Businesses that thrive on intrastate supply with turnover above the threshold limit must register under the Goods and Services (GST) Tax. They have to register with GST to meet several ancillary business hosting requirements. For new firms, GST is a must and needs to be duly completed within a stipulated time frame.

Udyam Aadhar Registration

The Udyam online site hosts the Udyam Aadhar registration, that is pivotal to small businesses in India. Although it is not mandatory across the board, it enables businesses to benefit from government credit programs, handy subsidies, and the like. The requirements span composite criteria considering business revenue and investment in equipment.

Export and Import Code

Export and import companies that span single-person traders need to have an Import Export Code, a unique code delivered by the Directorate General of Foreign Trade that is hierarchically located under the Ministry of Commerce. Businesses can achieve registration online by submitting essential papers on their website. Business owners need a PAN card, an ID card with a verified address, business residency evidence, and bank account proof.

Trade License 

Many small company owners rely on the web for business operations. These simple online businesses depend on loans that are reserved for MSMEs. One can obtain a sole proprietorship so that there are few regulations to follow. The Shop and Establishments Act makes sole proprietors eligible for a trade license like conventional shop owners.

Fundamental Requirements for Business Licenses

Eligibility

1. The candidate must be 18 years old at least.
2. They cannot be in legal probation for any major crime.
3. The company needs to be genuine.

Documents Necessary

Although various government agencies and companies demand different documentation requirements, here is a general list:

1. PAN Card
2. Driving License/Voter ID/Aadhar Card
3. Bank Statement
4. An address confirmation or a landlord's letter of approval
5. Agreement for Rent or Lease
6. Business Authority Letter
7. Partner Agreement (for partnership firms)

How to Apply for a Business License?

1. Start by learning about the government's regulations for business licenses in the domain. 
2. Find organizations that oversee the domain activity and contact them to send required documents. 
3. Be thorough when completing documents and making copies. Respond to all inquiries and pay upfront. 
4. If your application for the license is accepted, you will receive a copy of the license and details of renewal, if required.

What is typical Business License Pricing?

The cost varies based on the business license type. You might have to pay for additional professional fees for application in addition to government fees.

These costs are usually tax-deductible, but consult a tax expert to check for details. Budget for relevant business licenses to maintain your status as an organization without any hassle. 

Conclusion

Businesses need licenses and permit to operate as a business in India and elsewhere. Remember, if any business owner or freelancer is non-compliant with the rules, the governing body has every right to fine the firm or even dictate its closure.