Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Something is refreshing about the freedom of being an entrepreneur. Building a business and being your boss gives you the freedom and flexibility to make your own rules and choices to help your business thrive.
When you leap, you’ll need to ensure that your business is properly licensed and insured before launching. Some companies require extra permits and temporary event licenses, so you’ll need to perform due diligence in finding out what licenses and permits you’ll need.
Business Assessment
Securing your basic business license is incredibly easy in most states. However, it’s just the tip of the iceberg; lurking under the surface are municipal and federal licenses, Doing Business As licenses, safety permits, OSHA permits, Land Use Permits, and more.
Take a look at your business type, and make a list of licenses, permits, and legally required insurance policies you may need. You can always call your local business counsel or permit office to double-check your assessment.
Tax Coverage
In most states, sales tax is charged on all revenue for products, and this means that you will need to register your business with the tax authority in your local jurisdiction by applying for a “Seller’s Permit.”
This permit may be required even for small businesses like farmers’ market stalls and artist booths in a co-op. Further, your contract business may need this permit, used for freelancers, photographers, accountants, housekeeping services, and similar non-product companies.
This permit allows you to charge for products or services and tracks your revenue so that your taxes are easier to process and you don’t end up undercharging. You’ll receive a sales tax permit number (each state calls it something slightly different). This permit is usually free of charge, but some municipalities will charge a small registration fee.
General Business License
You’ll need to register your business with the state, regardless of what you sell or do. This is to ensure that someone else doesn’t take your business idea or name, that someone isn’t doing business as you, and that the local government can put the proper legal protections into place around your operation.
This process is simple and can be done online in most cases. When you discuss your business license with the authorizing office, you can ask additional questions about permit and license requirements.
Additional Licenses
Deciding on additional licenses and permits will depend entirely on the type of business, services provided, and location of your business. Some licenses you may need to purchase and carry are related to the industry, while others will be related to the place of business.
- Doing Business As (DBA)
- Zoning and construction permits
- Health & hazard, electrical permits
- Food and Liquor licenses
- Medical, fundraising, farming, or real estate licenses
Some counties and cities require additional business licenses or permit registration to keep track of your business practices and taxation. There are local varieties of the general business license, most permits, and professional licenses.
Federal Requirements
Some industries and business operations will require federal-level registration of licenses and permits. Sectors that may see this involve interstate transport beyond the postal service.
Further, anything involving alcohol, drugs, firearms, agriculture, or other things that may endanger people or the environment or require background checks through federal agencies will need to see you register with their databases.
How Does the Structure of My Business Affect My Licensing Needs?
Regardless of the business structure you choose, you’ll usually still need to register the business. You may be a sole proprietor, doing business as “Fictitious Name,” you’ll usually still need to purchase and register a business license to for some industries.
If your annual revenue is below a specific number or your business is seasonal, you won’t need a full business license in some states and counties. This will depend entirely on the local government requirements and vary from place to place. Some places don’t require registration at all for freelancers or independent contractors operating under their name and without any employees. Check with your local government for the requirements in your area.
Costs of Business Licenses and Permits
The cost of a business permit will vary from location to location. Most base licenses are under $100; some are even free of charge. The fees will start building when you add additional licenses and permits, such as zoning permits for your home business and building permits for your office remodel.
What’s the Process for Getting a Business License?
While every business is different, the basics are the same for this process. You can find an online registry for business licenses in most states, and most city or county websites have online resources.
Legal Startup Documents
Getting your documents in order will make the process of registering your business more streamlined. You’ll want to cover all bases to protect yourself and your business assets from legal repercussions by filing a Founder’s Agreement and Business Entity declaration with your business license.
Choosing a Sole Proprietorship, Partnership, S Corp, or LLC will dictate what paperwork needs to be on file for your business. It will also determine how you file and process taxes, how you hire staff or contractors, and more.
Official Business Name Registration
If you want to protect your business name from others using or altering it, you will want to trademark the name, logo, icons, and any other design assets you wish to protect. If you’re a sole proprietor, you may also want to file a DBA to operate under a name separate from your legal name.
Trademarking your intellectual property is an important step for protecting your business against fraud and copyright infringement. Depending on your state, you can trademark your business name for around $300.
Apply for Necessary Permits and Industry Specific Licenses
Work through the list of licenses and permits offered in your local business counsel or permits office and decide which ones are relevant to your business. Have these legally in place before you launch to avoid tempting fate on opening weekend.
Sort Out Your Finances
Opening a separate bank for your business transactions will prevent the commingling of personal and business funds and make tracking spending and revenue much more accessible. This process creates a more straightforward bookkeeping process and reduces the liability should your business be audited.
More Legal Requirements
No matter how large or small your business is, you’ll want to protect it from identity theft and make it possible to differentiate the taxes and finances of the company from your essential files. Obtain an EIN, even if you plan to run the business entirely independently.
Insuring Your Business
Most cities or counties require you to carry insurance on your business regardless of the size or inherent danger in it. They want to protect your assets and the community participants in said businesses. Providing insurance will also keep your business in good standing, as it is often a pillar consideration for granting and maintaining a business license.
Hiring Policies
If you plan on hiring help to run your business, you’ll need to ensure you have HR software in place to keep you compliant with licensing and payroll restrictions.
Further, you’ll want to decide if you’re hiring freelancers or plan on staffing the new people as standard employees. You’ll need to check with your bookkeeper on how they want you to maintain records and how to file 1099s, I-9s, and W-2s for each staff member or contractor.
Professional Retainers
Most people can manage the logistics and administration side of a business. However, some are more likely to get lost or forget essential parts in the licensing and permit process, leaving them open to damages, lawsuits, and other legal difficulties.
Keeping meticulous records and seeking professional advice or consultation when you’re confused or need help navigating a new process or form will protect your investment from downfall.
The Last Word
If you’re at the point of registering your business and obtaining a business license, it’s clear you’ll pour in the energy and effort to see your business venture succeed. Avoid burnout and stay on track for success by partnering with someone to help keep things organized.
One way to ensure that you don’t forget or sabotage your business success is to focus on what you’re good at and hire someone to help with other admin-type work. This may be filing forms and paperwork, running your accounting, helping with social media and marketing, or cleaning at the end of each business day.
Remember that you need to protect your business like you watch a child. Maintain their good health and continued positive movement by keeping them in tip-top shape, all licenses and permits in place and current, with adequate insurance, and a Rolodex of references to consult when you run into a hiccup.
Consider joining local business networking groups for seminars on organizing paperwork, how to take the next business step, and general support from your business peers.
Filed under: Advice Columns
