Starting your own business, as exciting as it may sound, requires you to obtain a license to operate legally. You may have a lucrative home business running without one.However, there’s a possibility you’ll need a business licence even for your home business and of course, for any business for that matter. It’s like permission given by the government to run business activities and concentrate wholly on expansion.
Why a Business License is Needed?
A glaring issue with running a business without a license is, you are susceptible to penalties and legal hassles in case of an investigation.Due to the potential risks involved, it’s advisable to check out all the legal requirements and fulfil them to start a business.
A business license is like a notice to the Government about your activities to ensure you don’t do anything illegal. It’s also the source of revenue to the nation. A business license keeps track of your finances required for tax purposes.
Registering your business has multiple benefits, including validation and is the document through which you can apply for and obtain a business bank account. It’s a legal document by which you can also obtain a business loan.
However, obtaining a business license is inexpensive and is not time-consuming. Get your basic in place, fulfil the requirements and, you are there.
Know Your Local Requirements
Know where to get your business license from
Irrespective of whether you are starting a home business or renting/buying an office space, you have to get the license from the city where your business is located. You have to browse through the database of addresses that come under a specific municipality. You can search for your city and the license specific to your domain or industry. Authorized websites provide complete information specific to your locality and the type of industry.
Know the business code
No two business types have the same code and, they also have different application processes with distinct requirements. Whatever the type of business, there will be a form for it. Your city’s business license website will provide all the information about your business code.
Fill out the forms
Once you locate the required form for your business license, download it and fill in all the details. Check out for any important information and make sure you stick to them. There can be other support forms you may need to fill depending on the type of your business.
Meanwhile, go through the links provided and read all related descriptions and other requirements carefully. Some forms may be required to be filled and submitted online. You need to provide the basic requirements in addition to other specific requirements.
Getting Your Business License
File your forms
All the forms should be filed with the city’s finance department. You have to check your city’s website to obtain the contact information required to submit the forms.
Pay filing fees
The filing fee varies from city to city and, can go up to $400 depending on the type of your business. Some cities will also have an additional processing fee.
Follow up periodically
Different business types require different time duration to process the license. It can range from a couple of days to a couple of weeks. Keep a track of your business license and be available in person to receive it. You have to provide a valid ID to receive the business license.
Follow the rules and regulations
Post operations, you should stick to specific rules set by the city laws for the type of business you own and operate. Remember to renew your business license according to the city’s laws. Select cities require you to display your business license at all times in the business location.
Permits You May Require
Obtaining only a business license will not always do the job. Some business types require other permits and registrations. These permits prove to be more beneficial to society and insulate your business against possible loopholes. The permits roll out additional rules and regulations to be followed, some at the state level and others at the federal level. These include:
Certain businesses like a restaurant, day care centres and therapy centres require you to hold an occupational license along with the business license.
Sales tax permit
In case your business is about selling products and the state you are operating in collects sales tax, you should hold a sales tax permit available at the tax office.
This is all about the type of business that can exist in specific areas in a particular city. Some businesses can operate in zoned areas like residential areas provided they meet all the specific requirements. This is a special case where your business should obtain a zoning permit.
Federal employer ID number
This is just like your social security number and, is available free of cost. It’s not mandatory to hold one but, its recommended. This way, you need not use your social security number for business purposes.
Health department permit
This permit is required for a home-based catering business or for selling food prepared at home.
Fire department permit
Some business may use flammable materials or can also be open to the public. Businesses like these require a permit from the fire department to ensure they meet fire safety requirements.
Air and water pollution control permit
Certain businesses discharge materials and wastes into sewers and waterways or burn some materials. There are other businesses thatrelease gas into the environment. To protect the environment, these businesses must obtain this permit from the environmental protection agency.
License and permit for alcohol
A liquor license is mandatory and, is available at the state level if your business is about selling alcohol. You have to obtain a federal permit if you are manufacturing alcohol.
If your business requires parking spaces, especially on the street, a parking permit is needed from the city government. Meanwhile, you have to approach the municipal government and apply for a land use permit to construct a parking lot.
Sales tax license
Businesses should pay sales tax for selling taxable goods and services. It is set at the retail level and, in most states, it’s a criminal offence to sell products and services without a sales tax permit. Also, it’s important to apply and obtain a sales tax permit separately for each place in case you have your business in multiple locations.
Sign and building exterior permit
Often, you come across situations in certain cities that restrict the size of your building or the type of lighting. This also includes restrictions on the appearance of the building. To avoid any issues, the sign permit should be included along with your business license.
You may have your business outside a city or a jurisdiction. County permits apply and are not as stringent as city permits.
Federal Business License
The government requires only select and specialized industries to obtain federal level permits. Industries with a very high level of liability must obtain a federal business license. Some of these industries include:
- Manufacturing, selling or importing alcoholic beverages
- Importing or transporting farm animals across state lines
- Have commercial fishing activities
- Provide transportation across the ocean
- Produce commercial energy
- Broadcasting services
- Operate oversized vehicles
- Manufacturing and dealing with firearms and ammunition
State License and Permits
Depending on your business activities, licenses and permits vary from state to state. They cover a broad spectrum of industries and activities compared to the federal government. Most of these licenses and permits expire after a specified period of time and, are very easy to renew.
Importance of Business License – In a Nutshell
While it’s easy to overlook the importance of a business license thinking you can move ahead scot-free, you are open to welcome legal liabilities and fines in case something goes wrong. As a business owner, it’s a complicated and time-consuming task to keep all your licenses and permits up to date. However, it comes packed with the business territory and, cannot be ignored.
A business license provides security for you and your employees and helps maintain privacy and builds trust. Customers will particularly trust a company that is licensed, and it enhances trustworthiness even if your business doesn’t require one.
In other words, licensing helps a business develop and maintain credibility and enhances the brand image amongst potential customers. It also offers legal protection to the business owner, especially those businesses that are prone to high liability and involve sensitive activities.
Registering your business also helps in economic welfare and keeps it strong and protected. Most businesses can get funding and protection only if they are legally licensed.
A business license is more than just a piece of paper. It’s the lifeblood and the backbone of robust business activities that run smoothly despite the small hiccups. A business license can also help you save a fortune during turbulent times.