Before incorporating a new business, an authorisation from the local government or municipal authority of the zone or area is a necessity. The proprietor of the company must ensure that the license is obtained before commencing with any business activity.
Without a trade license, the business is considered illegal and may lead to a penalty based on the nature and duration of the company. This is to see that the person is not carrying out any business activity that is unethical and follows the rules and regulation set by the local municipal corporation.
The municipal authority of every jurisdiction has authority to regulate business activity from a particular area. They can put constraint over any commercial activity from running in an area to ascertain the adherence of standards of food and safety guidelines.
With the development of the commercial area in India, the primary goal of MCD was to ensure that no commercial activity runs in a residential area and is not a health hazard even if it has operations in an area set for commercial activity. Hence the trade license was introduced.
Once a business has a permit to perform its operation in an area no municipal authority has right to shut down the activity without proper notice and time for adherence. This instils competence within entrepreneurs.
The appropriate municipal authority of the area mandates obedience from the businesses once the trade license is issued. The entities need to follow the by-laws mentioned and if they are not complied with they attract penalties for the infringement of the provisions such as :