Do You Need a Business License?

Do You Need a Business License?

Whether or not you need a business license upon starting your companyfirm will really depend upon a few factors. Not to mention, the requirements as far as business licensing go do vary from state to state. That said, if your industry and state require you to have a license then you absolutely need to do your due diligence as far as procuring the necessary licenses/permits, otherwise, you may not be operating legally and could consequently be penalized.

Essentially, licenses and permits of this nature are put in place for the protection of the consumer primarily--to increase consumer confidence in businesses as well as to ensure that regulations are being met. Again, the SBA does oversee licensing to a degree, but the actual requirements are issued at the state level—fees also vary between states. In this article, we look at why you might need a license and review the business licensing process.

Understanding Business Licenses

The term business license itself has been somewhat loosely defined historically speaking. It can encompass permits as well as a variety of different types of licenses. What it comes down to is that a business license is issued by a government agency and grants you permission to operate as a business entity within your state. And again, what exactly this permission is in the form of a license varies--from a seller's license to an operating license to everything in between. Regardless, most states and localities will require you to have some type of license in order to conduct your business. This is why you need to stay abreast of all such requirements before hanging that open sign on the front door.

Different Types of Licenses

As noted, the two driving factors in regard to whether or not you will need a business license and consequently what type of license that will be, are going to be your company location and the industry you're in. You may also have to comply with a commission tasked with overseeing your specific industry; this may mean that you have to be certified through that commission in order to even get a business license to be with. So there may be more than one hoop that you have to jump through depending on what your sector is.

Also, keep in mind that there are certain industries that require federal regulation and thus a federal license. This federal license will definitely be at the top of the list prior to obtaining any state or local permitting. The list of industries below require some form of federal license or permit:

  • Agriculture
  • Alcohol
  • Firearms
  • Aviation
  • Fish/wildlife
  • Mining
  • Nuclear
  • Radio/TV
  • Maritime
  • Transportation

What's Involved with Getting a Business License?

There are generally fees associated with getting any type of license along these lines. Such fees will be determined largely by your home state. Business licenses can start as low as fifty dollars and can go into the hundreds if not more depending on your type of business endeavor. You will also likely pay a filing fee with the state office that issues the license. Most business licenses will need to be renewed annually, so expect to pay a yearly renewal fee as well.

You definitely want to be prepared and ensure that you pay all requisite costs associated with your license so as to ensure timely processing. If you are not sure of the fees, you can always check with the relevant state department to figure out ahead of time how much a license/permit is going to cost you.

The actual process that you go through in order to procure the necessary licensing also varies by state. That said, there are some steps common to all states that you can expect when applying for your business license.

  1. First off, do your homework. Research what your state requires as well as what your specific industry may require. And of course, figure out if there are any federal implications concerning your business license. Contacting your state agency in this regard is probably going to be your best bet.
  2. Fill out the application and submit it, making sure to include any additional paperwork that is asked for. This is also the point at which you will usually pay your filing fees as well.
  3. The waiting process can be lengthy depending on your state and how they handle such applications. Once they do approve your business license application then you will need to pay for the actual license itself.
  4. And again, keep tabs on the renewal process. Figure out exactly when you need to renew and subsequently how you need to renew.

How Long Can You Expect to Wait?

The process will be different depending on your industry and state and also how busy the state department might be at any given time. It could take only a few days or on the flip side a month or more. Industry though will be a big factor in terms of wait time. Getting a license as a retail-based outfit will involve a significantly less wait time than getting a liquor license for instance.

In order to help speed the process along, there are a few things, you can do to help. If there are online shortcuts, such as applications, use them. Online documentation often gets processed faster than traditional paperwork simply in light of convenience and ease. It makes it easier for you to fill out as the applicant and easier for the relevant department to review. Also, make sure you turn in everything required and that there are no errors or omissions—such will only slow the process down.

First Union Lending has been working with small business owners across the country for years now. We believe in helping our clients thrive and grow. Offering short term loans and lines of credit, among other products, we have the resources you need for whatever project you may have in mind. Call today!

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