Starting a new business is an exciting adventure. There are a few things you need to do before you can legally sell your products or offer your services, including obtaining a license. What is a business license? Here is what you need to know about the purpose of this document and some tips to help you get your business license quickly.
What Is a Business License?
A business license is a legal document that establishes the existence of your business. The registration process also allows local entities like cities and counties to keep track of new companies and their locations.
Submitting a business license application allows your city or county to verify that you can conduct your business activity in the type of zone where the physical address of the business is.
Your business license permits you to perform your business activity, and it also establishes your business as a legal entity. From a legal point of view, you can then open a business bank account, enter a contract with a supplier, and pay taxes as a business.
It’s illegal to operate a business without obtaining a valid license. Applying for a license is the first thing you should do if you want to open a business.
Until you obtain your business license, your business doesn’t officially exist.
Who Issues Your Business License?
If you want to launch a small business, you have to apply for a license via your city or county. Your local government will issue a license that allows you to conduct business locally.
If you decide to expand and open a new business location, you will have to obtain an additional license from a different city or county depending on where the new site is.
States can also issue business licenses. Obtaining a license from your local government is sufficient if you operate a small business. However, if you have a business license from your state, you shouldn’t need to get one from your city or county.
States regulate some business categories and activities. You will need to obtain a state permit for a wide range of services. If you plan on working as a contractor or mechanic, you will need to apply for a permit issued by your state.
Additional activities regulated at the state level include real estate, insurance, legal services, cosmetology, and working as a nurse. These different professions require you to complete education requirements and apply for a state license. There is also an exam to pass in some cases.
You might need an additional business license to sell certain types of products. Examples include liquor, lottery items, and firearms.
If your business activities include preparing, handling, or selling food, you will need to obtain additional permits from your state. Depending on the state where you live, you might need to pass a health and safety inspection or complete a training program. You will also have to apply for a federal license if you plan on preparing meat products.
There are other entities that can issue licenses and permits. For instance, your local fire department would grant a license if your business activities include working with flammable products. The U.S. Department of Agriculture will need to issue you a license if your business activities involve transporting animals or animal products.
Find out more about local regulations. Depending on where you open your business, you might need to apply for additional permits, including a building permit, sign permit, or zoning permit. Some cities and counties require you to obtain a home-based business permit to operate a home business.
The Small Business Administration has a lot of useful resources about licenses and permits. You can look up your business category and find out more about the licenses and permits you need, and where to apply for them.
How Can You Apply for a Business License?
Visit the official website of your city or county. Look for a section called business registration or something similar.
You should be able to download a form you can fill out to apply for a license, or request to receive a form by mail. If you can’t find any information online, contact the city or county clerk’s office to ask about the business registration process. Your local Chamber of Commerce should also be able to point you in the right direction.
The application form will vary slightly from one city to another. Here is what you will typically need to include on the form:
Fill out the form and find out where you need to send it back. Don’t forget to include the fee! You will have to pay an initial fee to apply for a license and might need to pay a renewal fee depending on where you live.
You should receive your business license in the mail within a week. What is a business license? The information you will find on this document will help you gain a better understanding of the purpose of this document. Here’s what you can typically find on a business license:
Some local governments have ordinances stating that businesses should display their licenses. You might need to frame your license and keep it in a visible spot in your place of business.
It’s a good practice to display your license even if your city or county doesn’t require you to do it. Showing your license will help build trust with your customers.
What if You Don’t Have a Business License?
It’s illegal to operate a business without a valid license. You need to wait until you receive your license before you begin selling goods or offering services. Pay attention to the expiration date on your license, and make sure you renew it on time.
You can incur penalties if you operate a business without a license. Local authorities can shut down your business. Your local government or customers can also file a lawsuit against you.
There are more penalties if you operate a business that would require additional permits and licenses. You could incur severe penalties and charges if you offer services that require a state license. Your state could also blacklist you from obtaining a license or permit in the future if you provide these services illegally.
Operating a business without a valid license could also hurt your reputation. Obtaining a license is a quick and easy process, and it’s one of the first things you should do if you want to launch a business.
Do You Need to Renew a Business License?
Depending on where you live and on the type of license you have, you will have to renew it every year or every two years. Some cities and counties charge a small renewal fee.
You will also have to renew the different permits and licenses you obtained through your state. Some business activities require you to maintain your eligibility for a license or permit by taking classes.
Other Documents to File
It’s crucial to obtain a business license before opening a business, but there are other documents you should file.
You can register an official name for your business by filing DBA company documents with your state. This document legally establishes the name of your business.
Filing your DBA company documents is an important step. You will have to show your DBA document to open a business bank account since customers will issue payments to your business and write checks with the name of your business. You need a legal document that connects this name to your business entity.
Your state will issue your DBA document. Check the official website of your state to find the form you need to send back.
You should also file for an EIN with the IRS. The EIN, or Employer Identification Number, is the equivalent of a Social Security Number for a business entity.
You can use your EIN to file your business taxes or hire employees. You can also use your EIN to contribute to certain types of retirement plans.
There is a simple online application available on the IRS website. You can operate a business without an EIN because you can use your personal SSN to file your business taxes, but you will need an EIN to hire employees.
What is a business license? All you need to remember is that a business license is a crucial document that establishes your business as a legal entity. It only takes a few minutes to fill out this form, and there is a small fee to pay to register your business with your city or county.