When Your Business Needs A License

Anyone can form and incorporate a business. However, as an entrepreneur, you should know that business license requirements exist for some professional practices. When you're just getting started, things like licenses don't really matter that much, but the more you get into it, the more vital having these licenses become. Before you even begin to operate your business, you need to secure the proper licenses and permits, or else you'd be operating outside of the law. In this article, we'll look at when you need permits and how you can attain them in the easiest possible way.

Where Do You Get a Business License?

You can get business licenses from the county and municipal governments. Some areas have a specific licensing bureau to make it easier to register. According to Entrepreneur, many business owners see licensing bureaus as just another way for the government to control the market and wring taxes out of business owners. It's typical for a business to need licenses at every governmental level, starting from the county and going up to federal. There are over 40,000 different licensing jurisdictions within the US, and you'll have to do a bit of research to determine which one you fall into.

Why Does a Business Need Licenses?

The Balance SMB notes that businesses are licensed for two distinct reasons:

• Businesses are required to be licensed to ensure that the government is aware of what they're doing. This license also allows them to be held accountable if they do anything that may lead to public harm or otherwise damage the environment around their premises.
• Local and federal governments get paid licensing fees that renew every year, bringing much-needed income to the region and ensuring that the business pays taxes every year. Without proper standing with the IRS, the company cannot renew its licensing.

Understanding Local Business Licensing

When you're registering a business, a few local permits and licenses apply before you can begin to operate the company. The local or city government may require you to have a business operation license before your business starts working. You'll also need to ensure that your premises fall within the proper zoning laws and get land-use permits for it. You are also required to contact the local authorities and get licensing for your building and the fire department and health. In some cases, if you're involved in food handling and distribution, permits may be required from your local health authority. Finally, you may need to apply for an environmental license or permit.

State Licenses Businesses May Need

At the state level, you'll need an operating license, but also a seller's license, based on the goods or services you sell. Some common examples of retail businesses that need sellers licenses are firearms, lottery tickets, or gasoline. While the IRS doesn't technically require you to be licensed, you must obtain an EIN for tax purposes. Certain professions require licenses to operate in many states, primarily if a professional board controls them. Some of the more common disciplines that need state licenses are accountants, real estate brokers, contractors, and physicians. Having a degree is not enough to guarantee you an automatic inclusion as members of these boards. Your license may depend on taking another exam or proving your knowledge in the field.

Federal Licenses and Permits

A few industries are regulated by the federal government within the US and require licenses before a professional can operate in these spaces. Among these professions are:

• Agriculture
• Alcohol
• Aviation
• Firearms, Ammunition, and Explosives
• Fish and Wildlife
• Maritime Transportation
• Mining, Drilling, and Nuclear Energy
• Radio and Television
• Transportation and Logistics

Each of these professions is monitored and overseen by a federal regulations committee, and you may require permission as a permit or license to operate in that industry.

Why License a Business At All?

From the business owner's standpoint, licensing seems like more of a chore than an actual benefit. It appears that most of the benefits go to the government, and not the business itself. In some rural districts, business owners operate without seeking state and federal licensing, but they only do so at a very small scale to avoid the authorities' detection. Without the right licenses, operating a business can be dangerous from a legal standpoint. Business structures like LLCs and Corporations may protect members in case of a lawsuit, but when the government sanctions a business owner, these protections become null and void.

Governments have realized that taxing small and medium businesses gives them regular continued income and serves as an alternative income stream. For states that are very easy to do business in and have meager federal tax rates (or none at all), the only way they can profit from companies is by applying licensing and registration fees, renewable annually. Business licensing evaders may have been able to get away with avoiding registration in the past, but the world is becoming more connected, and it's becoming more difficult to hide. There are several significant drawbacks to not being adequately licensed, including:

• Inability to expand from more than a single location
• Penalties in the form of taxes, fines, and even jail time may ensue
• The professional or business isn't granted the protections of the oversight committee set up for the industry

These may seem like insignificant concerns for some business owners, but the impact it could have on a small enterprise's overall functioning can be immense. With small businesses now operating on thin margins, fines or sanctions would likely lead to its closure.

Permits and Licenses are Necessary for a Functional Economy

As much as it may pain some to admit it, industries may become unregulated without oversight in the form of permits and licenses. In the past, unregulated industries slowly evolved into monopolies, which cornered the market and made life difficult for consumers. Small businesses offer individuals choices, and this particular function of the small enterprise shouldn't be overlooked. While the cost of licensing is high, it isn't too much. Businesses should consider being adequately licensed to avoid running afoul of the authorities and maintaining their responsibility to the public.

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