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Clueless about Business Licenses? 5 Tips to Consider
Published on Apr 12, 2013
Read 'Clueless about Business Licenses? 5 Tips to Consider' at 'Time to Start Up,' the small business blog by BizFilings.
There’s a scene from the 90’s movie Clueless, when the lead character, Cher’s dad tells her to stop cruising around with her friend, Dionne, because “two permits do not equal a license.”
As far-removed as Clueless might seem from the business world, there’s actually some truth here when it comes to the importance of compliance. Most states require businesses obtain a license to legally operate and comply with government mandates for safety, soundness and tax – and you definitely don’t want to get off on the wrong foot by neglecting proper licensure. Incorporation of a business is a separate process, and is not equal to a business license. New entrepreneurs must educate themselves around license requirements relevant to their business to avoid both legal and financial penalties that may result. Here are five tips to keep in mind:
Regulations vary by state. There are many different types of state licenses that are typically granted by state agencies or the state department of taxation. To find out which mandates pertain to your business specifically, be sure to get in touch with the appropriate state and local agencies. The Small Business Association (SBA) is a great resource for determining what rules apply to you.
Restaurants and bars are usually required to have licenses, and most retail businesses will need a sales tax license as well. There can be costly penalties for operating without these licenses, so be sure to keep appropriate documentation on file.
Maybe this goes without saying, but certain professions also require specific licensure. Whether you have a medical practice, a real estate agency or an accounting firm – it’s required and expected that you have formal certification.
Be sure to look into local zoning requirements, as some cities prohibit certain business activities in residential areas.
There are different types of permits necessary depending on the type of business and location. Permits from the fire department, for example, are required for safety reasons. The same goes for health permits, which are mandated for every business involved with food preparation. The SBA has a great “Permit Me” tool to find out which permits are required for your specific business.
In addition to state regulations, some businesses are also required to obtain a federal license. This typically only applies to those businesses regulated by a federal agency, such as the Securities and Exchange Commission or the Bureau of Alcohol, Tobacco and Firearms.
In the excitement of starting and managing a business, it’s extremely easy for laws to slip through the cracks, and you might get ahead of yourself before having all of the proper certifications in place. Deciding which type of incorporation is best for you, followed by the actual incorporation process is confusing enough. However, you can avoid these easy mishaps by creating a startup checklist, staying organized and ensuring that all matters relating to laws, taxes and licensure are squared away before your business officially takes off.