How to become a professional caterer Part - 2

Food services and catering businesses have to be registered under the FSSAI Act of India, 2006. These services must comply with the laid down regulations to operate. Further, there will be sales and service tax that the companies will be eligible for paying. From this article you will get all the information required about these aspects of setting up a business.

There are two aspects involved in starting a catering business. The first involves getting organised and getting all the resources ready – putting together pots and pans and other equipment and doing all the groundwork that'll help set up the business. This isn't easy, as there is a lot of detailing involved. There is a lot involved in turning a passion into a business. This aspect has been discussed in minute details in a separate article, listed How to become a professional caterer – Part – 1.

The second and equally important job is of getting all the paperwork in order. This involves applying to various government agencies for obtaining clearances and licences and getting registered. These are mandatory to run a medium to large size, catering business. This article focuses on the licenses and registration and taxes etcetera that will be required, for you to set up and run a catering business in compliance with the laws.

Deciding the entity type

The primary decision you make as an entrepreneur, setting up a catering business, is deciding on the entity type for your venture. There are three options available to you –

Setting up a Limited Liability Partnership (LLP)

You can set up your catering business as an LLP if the capital contribution is less than twenty-five lakh Indian rupees and the yearly income is estimated as being less than forty lakh Indian rupees.

Setting up a Private Limited Company (Pvt. Ltd)

A catering business where the initial capital investment is in excess of twenty-five lakh Indian rupees and the annual profit from the business is in excess of forty lakh Indian rupees then it is best that the business to be a Pvt. Ltd company.

Setting up a One Person Company

This set up is ideal for businesses that aim to remain small, and do not foresee much growth. It must be understood that any business set up under One Person Company that records an annual revenue of over two crore Indian rupees or more, will have to mandatorily be converted into a Pvt. Ltd company.

So, which entity should you choose? What is the best advice?

Frankly, all three are viable options and do not put you at any risk, as the owner. There are in fact advantages to opting from one of the above, even though there are other options available.

  • The entities provide limited liability protection (LLP). What this means, among other things, is that if someone decides to take you to court, the case will be filed against the company and not against you, the owner
  • The next big advantage is that the licences and the entire business are allowed to be transferred to someone else

Food Business Operator License from FSSAI

All businesses that deal with food and other edible items are governed under the Food Safety and Standard Act of India, 2006. The Food Safety and Standard Authority of India (FSSAI) is the governing body. The FSSAI has stipulated standards that must be maintained by all food businesses. Catering businesses and food services also fall under the jurisdiction of the FSSAI and business owners must ensure that they adhere to all the laid down rules and regulations to avoid tough penalties.

According to the law, all food operators must have a license and be registered with the FSSAI. People venturing into the catering business must obtain a Food Business Operator License from the FSSAI. Eligibility and procedural details can be found in this FSSAI official link. The easy to navigate site provides all relevant information that a first-time applicant might need.

The FSSAI Food Business License for food services and catering businesses are issued by respective State Governments where the business/service is going to be based. Therefore all application must be submitted to the office of the FSSAI within the state. The application must be accompanied by the incorporation documents of the business. Apart from that the identity and address proof of the applicant must also be attached.

Tax registration

Your catering business or food service will be taxed based on your yearly income and the state's policy. It may attract sales tax as well as service tax based on the following –

  • If the services delivered by a catering business or food service is more than ten lakh Indian rupees per annum, it will be covered under service tax
  • If the annual income of a food service or catering business exceeds nine lakh Indian rupees the proprietor must apply for service tax registration, and begin collection and payment of the service tax, once the earnings cross ten lakh Indian rupees
  • Value Added Tax (VAT) varies between states, and it is best to check the regulations at the local VAT office

Incorporate the points about setting up a catering/food service business in Part 1 of this series, to have a successul business.

Article by Juana
Juana is a freelance writer, with years of experience, creating content for varied online portals. She holds a degree in English Literature and has worked as a teacher and as a soft skill trainer. An avid reader, she writes on a variety of topics ranging from health, travel, education and personality development.

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