Does an LLC Need A Business License: Everything You Need to Know
Whether an LLC needs a business license is a consideration for anyone planning to operate a business. Whether you need a business license usually depends on the type of business you plan to operate.3 min read
Updated October 8,2020:
Whether an LLC needs a business license is a consideration for anyone planning to operate a business. Whether you need a business license usually depends on the type of business you plan to operate. This is the case whether the business is or isn't an LLC.
The business license gives the owner of the LLC the authority given by the state and /or local government to operate a business in that jurisdiction.
Things to Consider When Getting a Business License
The state where the company will be doing business determines if a business license is needed. The laws for each state vary regarding business licenses. Some states may require a separate business license while others will not.
An LLC will be required to conform to the specific regulations involving taxes, zoning, and other regulatory requirements the state, city, and county may have in place to operate legally.
To form an LLC, a business license is not required but it may be necessary to register the LLC with the state and obtain an occupational license before the LLC can legally operate as a business.
Some fields issue professional licenses that have their own set of requirements. This would be the case with bar associations or medical boards for businesses such as law and medicine.
The type of occupation you have and plan for your LLC may require additional requirements to get a business license. This would include businesses such as a firearms store or a liquor store. Opening a beauty salon or child care center would also need to be in compliance with the requirements by the state for a business license.
Obtaining these licenses does not include the steps necessary to create and register an LLC.
Once a business license is obtained, you may be required to file a renewal biannually or annually.
There are several types of licenses/permits/registrations, each with a set of requirements that include the business structure, type of business, geographic location of the business, and number of employees.
The license types are a general business license, sales tax registration, professional/occupational licenses, unemployment and worker's compensation registration, weights and measures registration, alarm permit, and a health inspection certification.
When getting a business license, your state may also require registration for LLC taxes.
Why is a Business License Necessary?
- A business license holds the business responsible for its actions and the protection of the public's safety and health.
- For a professional operating a business, a professional license is an indication of their expertise in a particular field.
- If a business is selling taxable goods a sales tax license is required before those goods can be sold.
- Licenses are the government's way of tracking a business's revenue for tax purposes.
- A business license, registration, or permit is necessary for most companies that have an income stream. The license allows the business to operate legally and in compliance with government regulations.
Steps for Getting a Business License
- Determine which state, city, and county the LLC will be operating in.
- Visit the U. S. Small Business Administration website for information about the city and state regulations for your location.
- Have your Employer Identification Number (EIN) available. If you need an EIN, visit the Internal Revenue Service website.
- Use one of the free website searches to find your business code. Also, check if a permit is needed in addition to the business license.
- Be prepared to pay the required filing fee, which can be from $50 to $400, or possibly more.
- In some states, it may be necessary to be fingerprinted. This will depend on the type of business and the specific regulations for the state.
Repercussions of Not Obtaining a Business License
- Failure to obtain a business license may result in incurring damages and/or penalties.
- Federal, state, or local ordinances will not be in effect to protect the owner of the business.
- Most likely a fine will be administered.
- With no business license in place, you run the risk of having your company permanently or temporarily shut down.
- The reputation of your company may be negatively impacted.
- As the owner, you stand the chance of being held personally liable.
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