Definition: A legal document that grants you the right to operate a business in
your city. Depending on your business, there are other licenses
that may also be required.
Although some business owners think that licensing and permit
fees are ways for the government to wring even more money from the
business sector, most of these programs are intended to protect the
general public. In big cities, license bureaus are set up to
control business locations--to keep people from operating an
auto-repair business next door to a school, or to keep people from
running certain types of businesses from their homes. For example,
most states forbid certain things from being manufactured in the
home, such as fireworks, drugs, poisons, explosives and medical
products.
Failure to comply with the licensing and permit requirements for
the type of business you plan to start in your jurisdictions could
result in additional fees, penalty payments or operational
restrictions until conditions specified by the regulating authority
have been met. So no matter what you think of the licensing
process, don't neglect it!
Contact your city's business license department to find out
about getting a business license. When you file your license
application, the city planning or zoning department will check to
make sure your area is zoned for the purpose you want to use it for
and that there are enough parking spaces to meet the codes. If
you're opening your business in a building that previously housed a
similar business, you're not likely to run into any problems.
Most small-business owners require only a local business
license, which allows the business to operate within the city and
county where it's located. This business license is either a
municipal license, if your business is located within a city, or a
county license if you're located in an unincorporated area of the
county. If you intend to open multiple locations or conduct
business in different cities or counties, you'll need to apply for
a license in each of those jurisdictions.
Some cities and counties don't require a business to obtain a
license, while others collect a business-licensing fee on an annual
basis. In addition to the license fee, some cities receive a
percentage of a business' gross sales as well as sales taxes if the
business is required to collect them.
Before visiting city hall or the county administrative building,
call the licensing bureau of the city you plan to operate in or the
county registrar's or recorder's office to find out about their
licensing requirements and application procedure. This will save
you time because you can have all the necessary materials ready
prior to applying for your license.
Operating some types of businesses may require a state license
or an occupational permit from the state agency that administers
consumer affairs for people engaged in certain occupations.
Licensing is commonly required for auto mechanics, plumbers,
electricians, building contractors, collection agents, insurance
agents, real-estate brokers and workers providing services to the
human body (barbers, cosmetologists, doctors, nurses, funeral
directors, and so on). Often, these people must pass state
examinations before they can conduct business.
Some states have licensing requirements based on the product
sold, such as liquor, lottery tickets, gasoline or firearms. And if
your business is food-related, you'll have to deal with local
health officials and state regulations. If your state has a
"commercial kitchen" law, it may be extremely difficult to set up a
food-related business in your home. If your business releases
materials into the air and water, you'll have to get approval from
your local environmental protection agency. If you plan to work
with flammable or dangerous materials, you'll need approval from
your fire department. Your state government can provide a complete
list of occupations for which licensing is required in its
jurisdiction.
If the state you operate your business in has a state income
tax, you'll have to register and obtain an employer identification
number from your state Department of Revenue or Treasury
Department. If your business sells retail, you'll need a sales tax
license.
Although most businesses don't require a federal license or
permit, these do:
- Investment advising
- Drug manufacturing
- Preparation of meat products
- Broadcasting
- Ground transportation
- Selling alcohol, tobacco, or firearms
For information on federal government requirements and services
for businesses, visit the U.S. Business Advisor, an internet service for
entrepreneurs run by the SBA. Through its Business Law Center, you
can get information on both federal and state requirements for
licenses and permits.