Do I Need a Business License?

You may be wondering, “Do I need a business license for my business?” To get a business license or permit for online and home-based businesses, you must go through the same regulatory channels as traditional businesses. The goal of any business is to generate revenue through the sale of goods and services to potential customers, and the same regulations apply to home-based/online businesses for the purpose of tax collection and to safeguard the public. Whether you are establishing a home or online business, you must keep in mind the following:

  • Gain license, zoning approvals and permits
  • Applying an LLC or Corp. to your business
  • Establish a trustworthy reputation

Conduct research before establishing a home-based or online business. Heavy research is necessary because the license/permit can be an undertaking if you are not prepared. Failure to gain the necessary permits in time can delay the start of your business. The type of licenses and permits you need depends on the following:

  • Business Location
  • Nature of Your Business
  • Employee Numbers
  • Business Structure

For home businesses, you may need to register a standard business license.

Business licenses are necessary for two reasons:

  1. Protection: Licenses are necessary for the purposes of identifying businesses dealing with the general public in a particular area.
  2. Income: Business licenses also generate revenue for local governments.

Business licenses require little maintenance and must be renewed each year.

For online businesses, collecting taxes from your customers may be necessary. Ask your state officials if your business needs to impose a sales tax. To collect taxes, you need to get a tax permit.

In most instances, you need to get what is known as a Sales Tax Registration before you engage in commerce. To find out more about Sales Tax Registration, visit the Department of Revenue website for your state.

State-based licenses and certificates are applicable to the following professions:

  1. Architects
  2. Lawyers
  3. Hair Stylists
  4. Tattoo Artists

To find out if your business needs a special certificate or license, research your state’s business laws.

Special Permits

Certain states may require you to get a permit even if you have no other employees than yourself. Further, you’ll need a special permit if your business weighs items that are for sale. You also need a permit from your local country or “fire protection district” if you intend to have a commercial fire alarm on your business site.

For home-based childcare services, a local fire inspector may check your home before you open for business. Inspections are also necessary if your business involves the preparation of food. State and local permits may be necessary in other cases.

Permit Cases

Special license requirements apply for businesses operating in a residential zone, but your local government grants general permits on a case by case basis. For example, you need a special permit if you wish to operate a salon from your home. There are two types of licenses for home-based businesses: signage and occupation.

What is an Occupation Permit?

Occupation permits are known as “Home Occupation Permits,” which restrict excess noise, additional traffic and hazardous environments to prevent the interruption of residential life in the area. Local permits are subject to the jurisdiction of local ordinances.

Ordinance restrictions may come in the form of:

  • Designated space
  • Client or customer visitations to the business site
  • Property modifications
  • Employee numbers
  • Number of vehicles on the property

What is a Signage Permit?

Signage restrictions are common in most counties. Strict signage normally applies when your business operates in a residential district. For this reason, check with your local government and local ordinances before ordering any type of sign for your business.

Local Permits

Businesses not subject to federal or state oversight, but adhere to local permit standards. Permits may be necessary for businesses that garner car or heavy foot traffic. Ask your local office if you plan to have foot traffic coming to your location.

Also, businesses in the business of food preparation are subject to permit regulation and undergo regular inspections from the Health Department. A DBA certificate may also be necessary for businesses that solely operate via computer or phone. A DBA certificate is also necessary if you operate your business through a fictitious name, including names that are not your legal name.

The nature of your business is key when it comes government regulation. You can also create a separate business name while ensuring products to give yourself additional legal protection. Contact an attorney or accountant to determine if you need an LLC or corporation and what type of permits or licenses you may need for your business.

Importance of Zoning

Certain business activity in residential zones are barred entirely, such as an auto repair shops. Your first step is to contact your zoning office. To find out if your business would be banned due to zoning issues, contact your local zoning officials.

If you encounter zoning issues, you could fix the issue with small adjustments to your business plan. If local zoning restrictions prevent business operations, a variance may be necessary. A variance is a permission from local authorities to operate a business outside of zoning parameters.

If you need a variance, you can make some solid arguments:

  • Income Restriction: The zoning restriction would prevent you from making a living.
  • No Harm: Convey to officials that your business would not disrupt residential life.
  • Similar Businesses: Highlight other businesses in the area in the same market.

With that, it is always best to conform your business plan to local zoning laws because the variance process can be an expensive and time-draining endeavor.

Homeowner’s Association Rules

In addition to local zoning, your HOA may restrict your business activity. Many HOAs have the authority to manage the activity of single-family homeowners. Research your HOA rules, and try to get a waiver to the rules if necessary.

Needing Permits and Licenses

Licenses are required for three main purposes:

  1. Regulation helps to identify your business and make sure you are accountable for your actions.
  2. Licenses helps to protect the public health and safety.
  3. Licensure helps to keep track of your finances for tax purposes.

Licenses and permits are required. You must have every permit and license in order before legally operating your business. Also, you must register with taxing authorities if your copmany has staff or offers taxable services or goods. Requirements depend where and how your business is conducted, and they differ by niche.

Tax registrations, business licenses, and permits are given out and managed by every level of government, local, state, and federal, which counts municipal and county governments. In a lot of instances, you might require a license in each level of government. Also, there are many different departments and agencies that are part of the process of licensing. There are more than 40,000 individual licensing jurisdictions in the U.S., and every one has specific needs for licensing.

Failing to recognize license, permit, and tax requirements may leave you exposed legally and put your business at risk. With people pushing against increasing traditional taxes, governments are ever on the watch for different streams of revenue, meaning increased vigilance against evaders of business licenses. Some even hire collectors from a third party.

A business may not open its new location if you are not properly licensed. Your property could get a padlock if you are not properly licensed. Moreover, you could be given personal liens or expensive fees and interest if not properly licensed.

Online Business Operation

The same home-based rules apply to online businesses when it comes to regulation. For instance, online businesses that retain employees need to be registered with the unemployment and workers’ compensation departments. Online businesses do not need to worry about zoning and signage laws, but sales may be necessary for some transactions. Online sales tax regulations can be cumbersome, which is why the services of an accountant may be useful before you engage in online commerce.

You might want to research the requirements on your own, but many figure it out its next to impossile. You might get a hold of City Hall, but only doing that will not aid in determining the requirements for licesning on your state and county levels. Governments do not provide a one-size-fits-all solution where you gather your permits, tax registrationsn and licenses.

You Must Decide When to Go Into Business

One of the first decisions you must make when you decide to go into business is the choice of a legal structure for your enterprise. The legal structure of your business should be the first trait of any new business. Small business owners usually choose an LLC, while other start-ups need to acquire business licenses from the local, state or federal government.

Getting an LLC

The location and the nature of your business determines if should register for an LLC. An LLC protects organization members from legal recourse without corporate registration. LLCs are regulated at the state level, whereas corporate registration is subject to state and federal taxation. The LLC itself is not responsible for income taxes, but individual members of the LLC are required to pay personal income taxes.

Federal Regulations

Certain industries are subject to federal jurisdiction, such as alcohol, agricultural, firearms, fish and game, mining, etc. Federal paperwork can be a lengthy process. Further, you could end up dealing with several agencies depending on the nature of your work. For instance, you could find yourself under the umbrella of securities regulation if you are starting an LLC or corporation and have co-owners who are not active participants in the business.

Certification and Training

Additional certification and licensing is necessary for such fields as law, education and medicine. Private investigators, building contractors, auto technicians and real estate agents must get licenses from the Secretary of State department. In the realm of retail sales, a permit is necessary to collect sales taxes.

To learn if you need a business license, you can post your job on UpCounsel’s marketplace. UpCounsel retains top, experienced lawyers from around the country. UpCounsel associates have graduated from Yale and Harvard law schools, and UpCounsel works with such notable companies as Airbnb, Menlo Ventures and Google.