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How to Get a Business License

Posted on by Dawna M. Roberts in LawApril 17, 2023

It takes a specific type of person to run a small business. It takes a courageous person who is both a problem-solver and a potential instigator. It takes a steadfast person who can see the trees and the forest. It takes a person committed to their industry, driven to succeed, and willing to sign their name across government paperwork.

Business licensing is likely not your first thought when considering a start-up's necessities. Start-up owners usually have concerns with stock, sales, and reviews. However, licensing is the most critical element of any business; licenses keep the company within government regulations, but they also indirectly benefit the owner.

What is a Business License?

Licenses and permits are interchangeable terms, which refer to revocable permissions granted to a specific person or entity. Business licenses are those permits required to oversee a company’s operations legally; they are required in most cases, although it depends on many factors. There are thousands of business licenses, ranging from a professional license to practice to zoning variance requests. The fact that they are legally required is one reason to get licensed—but there are others:

  • They assist in recording finances for tax purposes.
  • They ensure the company stays within environmental and public health standards.
  • They also hold the owner and public investors accountable for obligations.
  • They legally safeguard the owner and specific parties.
  • They increase the credibility of the business and specific employees.
  • They mitigate the liability risk for all parties.
  • Some even offer a company entry into a foreign market.

Do You Need a Business License?

business license

Not all companies require licensing; it depends on where the business is physically and the goods or services for sale. Licensing follows successful assessments proctored by government officials, industry experts, county offices, city commissions, or municipalities.

The most common permit business owners acquire is the general business license. Also called the business operating license is a legal requirement for some localized areas but rarely for state regulations. If a business requires licensing, it starts with this permit; it is not legal to operate in some locations otherwise.

Negligence in satisfying standards set by permit assessments will result in irreparable consequences if discovered. Defying regulations means fines, legal penalties, and the possible closure of the business. It’s always better to over-research the industry and physical location bylaws before starting any serious business venture.

Types of Business Licenses and Permits

The most required permit is the aforementioned business operating license. These open the doors to every other permit your business will need. Some business owners file them multiple times, once for each overlapping jurisdiction.

Businesses selling goods or services will need a seller’s permit; e-commerce and state regulations may require these to collect sales tax on customer transactions.

Those business owners who legally operate under another name have fulfilled a fictitious name statement. Also called a “Doing Business As” (DBA) permit allows the registered party to conduct business under a company name or alias.

Every business that reaches a significant value must consider situation-specific permits. Physical locations require buildings, zoning, and health permits. E-commerce shops need zoning variance and active DBA licenses. Simultaneously, many industries require professional qualifications or expert experience to find marketability.

Many industries require special licenses and permits or insurance. These industries include florists, salons, childcare, cosmetology, and repossessions. Federally regulated businesses (below) must fill out additional paperwork.

Some industries follow guidelines created by state laws, like alcohol creation and sales. Business owners should check their status with the U.S. Department of Transportation if they employ drivers; and the U.S. Fish and Wildlife Service if their processes impact the environment.

How to Get a Business License

The path to gaining all the necessary permits for a business is arduous. It is difficult and, if poorly undertaken, can result in legal battles that kill the company socially and financially. It is best approached proactively finding a qualified professional in cases involving companies of significant value.

Otherwise, start today by filing independently or consulting a third party to do the paperwork. Before you file, carefully consider the type of business you are operating; different types of business ownership constitute distinct legal liabilities. A business with a sole proprietor has one owner—with all the liability; a corporation puts a screen between personal assets and the legal vulnerabilities of a company.

A person registers to be a government-recognized business owner; this process naturally requires government engagement. Depending on the state, a prospective business owner must obtain a state tax ID numberor a federal employer identification number; these allow a business owner to hire employees and collect payroll taxes.

Every licensing process is different, with similar degrees of formality. Most require a verification process or probation followed by an assessment. Other requirements for licensing include proof of state and local tax status, copies of corporate records, and a list of ownership.

How Much Does a Business License Cost?

Business licenses can cost a significant amount of money, between $50-$500, depending on the industry, processing fees, recurring fees, license type, and location. Those figures also do not include renewal requirements, which may have yearly financial impacts into the hundreds

Location licensing is particularly difficult for start-ups; many states and cities have a predetermined number of licenses. Subsequently, potential business owners are limited by their options. Cities with similar business competitors (like sub-sandwiches) have wait lists, where potential business owners sit in financial and emotional limbo.

Where to Get a Business License

There are many avenues to apply for business licenses because of the many types of permits (above). Some business owners may require a single permit, but as a company grows, so do its obligations. Businesses must juggle multiple valid permits at once to operate at scale legally; this means applying for licenses with the state, county, city, or industry officials—and keeping cautious of their expiration dates. Most business licenses and their requirements can be found by searching your state’s professional licensing bureau.

Want More Business Advice?

Business licensing is the most important aspect of a successful venture. It grants the holder the credibility their competitors require while holding them accountable. Refer to our blog page to read about business-to-business advice, business-to-customer advice, commercial cybersecurity, and more.

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