Although some business owners think that licensing and permitfees are ways for the government to wring even more money from thebusiness sector, most of these programs are intended to protect thegeneral public. In big cities, license bureaus are set up tocontrol business locations–to keep people from operating anauto-repair business next door to a school, or to keep people fromrunning certain types of businesses from their homes. For example,most states forbid certain things from being manufactured in thehome, such as fireworks, drugs, poisons, explosives and medicalproducts.
Failure to comply with the licensing and permit requirements forthe type of business you plan to start in your jurisdictions couldresult in additional fees, penalty payments or operationalrestrictions until conditions specified by the regulating authorityhave been met. So no matter what you think of the licensingprocess, don’t neglect it!
Contact your city’s business license department to find outabout getting a business license. When you file your licenseapplication, the city planning or zoning department will check tomake sure your area is zoned for the purpose you want to use it forand that there are enough parking spaces to meet the codes. Ifyou’re opening your business in a building that previously housed asimilar business, you’re not likely to run into any problems.
Most small-business owners require only a local businesslicense, which allows the business to operate within the city andcounty where it’s located. This business license is either amunicipal license, if your business is located within a city, or acounty license if you’re located in an unincorporated area of thecounty. If you intend to open multiple locations or conductbusiness in different cities or counties, you’ll need to apply fora license in each of those jurisdictions.
Some cities and counties don’t require a business to obtain alicense, while others collect a business-licensing fee on an annualbasis. In addition to the license fee, some cities receive apercentage of a business’ gross sales as well as sales taxes if thebusiness 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 thecounty registrar’s or recorder’s office to find out about theirlicensing requirements and application procedure. This will saveyou time because you can have all the necessary materials readyprior to applying for your license.
Operating some types of businesses may require a state licenseor an occupational permit from the state agency that administersconsumer affairs for people engaged in certain occupations.Licensing is commonly required for auto mechanics, plumbers,electricians, building contractors, collection agents, insuranceagents, real-estate brokers and workers providing services to thehuman body (barbers, cosmetologists, doctors, nurses, funeraldirectors, and so on). Often, these people must pass stateexaminations before they can conduct business.
Some states have licensing requirements based on the productsold, such as liquor, lottery tickets, gasoline or firearms. And ifyour business is food-related, you’ll have to deal with localhealth officials and state regulations. If your state has a”commercial kitchen” law, it may be extremely difficult to set up afood-related business in your home. If your business releasesmaterials into the air and water, you’ll have to get approval fromyour local environmental protection agency. If you plan to workwith flammable or dangerous materials, you’ll need approval fromyour fire department. Your state government can provide a completelist of occupations for which licensing is required in itsjurisdiction.
If the state you operate your business in has a state incometax, you’ll have to register and obtain an employer identificationnumber from your state Department of Revenue or TreasuryDepartment. If your business sells retail, you’ll need a sales taxlicense.
Although most businesses don’t require a federal license orpermit, 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 servicesfor businesses, visit the U.S. Business Advisor, an internet service forentrepreneurs run by the SBA. Through its Business Law Center, youcan get information on both federal and state requirements forlicenses and permits.
