When you think of starting a new business, it can be very easy to overlook the requirement for licenses and permits. However, if your company is working directly with the public in some capacity, there is a possibility that you will have to apply for a business license. It is essential to know that not all businesses require to get a permit or license to manufacture and sell their products or services. They may only need to register the company to pay taxes and get a business bank account for making transactions.
But if your business is required to obtain a permit, then you should get one to avoid getting into any legal situation in the future. Even if your business doesn’t require any permission or license, then it comes highly recommended to run your business having one as it may offer you definite benefits and abilities unattainable if you use your name for the company. In many cities and states, new companies are legally required to obtain a business license. Some businesspersons may want to skip the license application or delay it until they are making enough money.
Though it is not likely that an entrepreneur will be caught working without a license, it is crucial to meet licensing requirements before even starting a business. In addition to protecting your business legally, licenses can boost credibility and allow you to apply for citywide funding. Moreover, if your company has staff or sells taxable products or services, you also need to register with the taxing authorities. Requirements for applying for permits vary from industry to industry and highly depend on how and where you are starting a business. If you are still wondering how beneficial it can be to get a license for your business and how to get one, then be sure to read this article till the end.
What is a Business License?
Before we dive into the importance of obtaining a business license and how to get one, we first need to understand what exactly it is. A business license is necessary permits issued by government agencies that allow a business to run within a particular authority. This license is a state-level additional requirement of a business to operate other than the registration. Typically, business activity and the company’s location concludes which licenses are required to operate lawfully.
Other factors that can determine the type of license may include the number of employees and the sole owner or corporation. Government agencies have the authority to fine or even close a business operating without the required business licenses. Moreover, they also hesitate to give the permit to owners who are or were involved in any criminal case. For this, entrepreneurs with criminal cases require robust legal representation from reliable criminal lawyers in town. Furthermore, you also need to make sure the essential data doesn’t go out in public. For this you can rely on Los Angeles Record Sealing Attorney.
Why Do You Need a Business License?
Business licenses not only hold companies answerable for their actions and behavior but also keep the health and safety of the public in check. Professional licenses point toward the level of skill and knowledge a particular professional holds. In addition to this, for the sale of taxable products or services, companies also require to obtain sales tax licenses. The government uses grants to keep track of revenue for tax purposes. These are three main reasons why your business requires a license:
1. To recognize your business and ensure you are responsible for your actions
2. To protect public safety and health
3. To monitor your finances for tax purposes
Who Needs a Business License?
Almost every business with a revenue stream needs to have some business license, grants, permits, or registration to run legally, in full compliance with regulations defined by the government. A few licenses, including Payroll Tax Registration, Basic Business Licenses, Sales Tax Registration, and others, are required for all companies operating within a jurisdiction. Similarly, a lot of licenses are industry-specific for Healthcare, Debt, Insurance, Construction, Retail Sales, Tobacco, Charities, and many others.
Who Issue Business License?
All levels of government, state, federal, state, and local issues and administer business licenses, permits, and tax registrations, which includes county and municipal governments. A lot of times, a company may require licenses on each governmental level. Additionally, there are numerous government agencies and departments involved in the licensing process. In the United States, there are over 40,000 separate licensing jurisdictions and each one of them has its specific licensing requirements.
How to Obtain a Business License?
Many, if not most, small businesses require a combination of licenses and permits from both state and federal agencies. The requirements and the cost of obtaining it may vary based on your business activities, physical location, and government regulations. If a federal agency controls your business activities, then you will need to get a federal license. The requirements and fees for obtaining this permit depend on your business activity and the agency issuing it.
The state licenses or permits depends on your company’s business activities and location. States are likely to regulate a wide range of activities than that of the federal government. The locally regulated activities include construction, auctions, dry cleaning, farming, restaurants, plumbing, retail, and vending machines. Some licenses and permits expire after a set period. Therefore, you should know when you need to renew them. It is often easier to renew them than it is to apply for a new one. But you have not obtained your first permits and licenses, here is how you can use to get one.
1. Pick your business location.
2. Choose a business structure.
3. Choose your business name.
4. Register your business.
5. Get federal and state tax ID numbers.
6. Apply for licenses and permits.
7. Open a business bank account.
8. Get business insurance.
Advantages of Obtaining a Business License
Of course, as mentioned above in this article, obtaining a license can be extremely beneficial for you when running a business. Once you get your license, you will be able to get the benefits mentioned below.
You are Legally Protected
To get a business license, a business must fulfill all requirements of the city, permitting the license. When you are applying for a business license, then you are making sure that the new business owner’s structure, strategies, and procedures are as per city regulations. Conversely, you cannot be sure of any of these things if you are not considering to apply for a business license. Additionally, most cities legally require businesses to be licensed. It is also imperative to know that the legal requirements for obtaining a permit may differ from city to city. Therefore, when you apply for it, be sure to check your business is complying with all the requirements. Plus, having a license will protect you against being shut down for running an illegal business.
Licensing Build Credibility
When it comes to getting services or buying products from a new business, consumers are often wary. Particularly, when purchasing products from online stores, they want to make sure that the website or service is legitimate. If you are displaying your business license in the stores or on the company’s website, then you are gaining their trust so that they can shop from you without any doubt. It also helps reassure clients that they are dealing with a business and not any scammers. The license will not only help you build your credibility with customers, but you also need a business permit before dealing with other companies as well. Conversely, when you don’t have a license to do business, then you will face the difficulty of selling your products to customers and make new deals with other companies.
Reduces Risk for Both Parties
No matter whoever is involved in the business, licensing mitigate all the risks linked to doing business for everyone involved. From a proprietor perspective, there are very few risks in product development, manufacturing, market testing, and distribution. Similarly, for a licensor, risks like selling and service of what is being offered can be involved. When you don’t have any business license, then both parties will always be at risk. On the other hand, with licensing, both the licensee and licensor will do business knowing they are legally protected.
Easy Entry into Foreign Market
With the proper licensing arrangements, you can take your product or services into new markets much easier as compared to if you were doing the work on your own. If you have developed a product or service with a trademark, patent, or copyright, then you can be given a foreign business limited rights to manufacture and sell the product or deliver your services. This is called MANUFACTURING UNDER LICENCE (MUL). It is a much more relaxed and inexpensive way of entering into a foreign market and expanding your business, as the license enables the intellectual property (IP) to jump border requirements. This means you can avoid tariff barriers to entry because a domestic company is using the IP, just like the licensor might be using the IP domestically.
