It's the law
Most city, state, and county laws require business owners to operate their establishments
with certain licenses and permits. Many businesses often require more than one license
and permit to legally operate, a process that can be expensive, time-consuming,
and frustrating to deal with. Although it may seem like a tedious process, it is
important a business owner abide by the law and obtain the necessary certification
to operate their business. Going forth with operations without the security of legal
documentation is considered illegal, and it puts the business owner at risk for
permanent closure, heavy penalties and interest, personal liens, IRS troubles, lawsuits,
etc., if they are found in non-compliance.
For new and established businesses
Business licenses are not limited to new business owners. Companies already established
need to file renewal applications after a certain period of time. This ensures the
business is a genuine company operating under local, state, and federal guidelines.
Companies that change their contact information, corporate structure, move to a
new location, put up a business sign, or expand their business to an additional
location must also apply for new licenses and permits. In some states, a business
license can be transferred to a company’s new location if they write a request or
appear in person.
Different licenses and permits
Some of the common certifications that new business owners need to obtain include
a business license (local, state, or federal), a fire department permit, an air
and water pollution control permit, a sign permit, a county permit, a sales tax
license, and a health department permit. Through the consultation of an experienced
new business owner can easily determine which of the licenses and permits
apply to their business. The attorney can even complete the entire application process
for them. In addition, local, state, and federal offices can provide the business
owner with an abundance of resources, including the application materials and fees
needed to apply for licensure. Due to all the charges that may accumulate from the
entire licensure process, it is crucial business owners include licensure and
permit expenses as part of their startup costs.
The importance of DBA (Doing Business As… or Fictitious business name)
Many states require business owners to register their DBA (or fictitious name) for
their business before they obtain any licensure, especially if their company is
a sole proprietor or general partnership. A DBA stands for Doing Business As and
is a designated name of the company other than that of the owners. With a DBA, a
company’s name of choice will be completely protected by law, provided that other
businesses within the same state of operations have not chosen that company name.
In addition, companies with DBA’s can open and maintain bank accounts as well as
process financial transactions under their company’s name.
Your DBA and the local paper
The DBA process differs from state to state. Some business owners could just easily
register their DBA or fictitious name at their county office and pay a fee. Other
states, including California, require business owners to contact their local newspapers
to help assist with the DBA process. By making a news paper announcement with their
fictitious name (chosen company name), they are merely informing the public of the
business owner’s intent to operate their business under the chosen name. In addition,
this public announcement protects the public from fraud since the business owner
registers his/her name with the county offices. Local newspapers can publish this
statement and file a company’s DBA request. There is a required fee that must be
paid to the newspaper, and the posting may need to be placed for a certain amount
of time to take effect.
Once a company’s DBA is registered, business owners can then apply for various licenses
Local licensure (basic business operation license)
A local business license is one of several different licenses that allows the business
owner to legally conduct business operations. This license basically acknowledges
that a particular business is operating within city and county zoning compliances.
If a business does not comply within city limits, then a county business license
can be issued. Local licensure can also apply to many home-based businesses and
establishments considering building/property renovations and upgrades.
To obtain a local business license, the business owner must go to their City Hall,
courthouse, or county government offices to obtain information and proper application
materials. The business owner will also be asked to submit a fee with the application.
State licensure (special state-issued license or occupational/professional license)
Some businesses and professions need a state license for operation since the products
and services they offer are heavily regulated by state law. For example, physicians,
realtors, lawyers, etc. are all professions that require specialized training and
certification. They all need a state license to conduct business in order to make
sure they comply with state-specific standards and regulations.
State licenses are crucial for any new business. Before issuing any new business
licenses, some states may require the owner to get licensing for their staff: auto
mechanics, plumbers, electricians, building contractors, collection agents, insurance
agents, real estate brokers, and repossessors. In addition, businesses that sell
liquor, firearms, and lottery tickets also need state approval and licensure.
Since each state has different applications and regulations, the business owner
must go to their local government office to find out about any requirements and
application materials. As with any license, a fee is requested to process the application
and obtain licensure.
Sales tax license
In addition to state licensure, most retail businesses require a sales tax license
(seller’s permit), which grants permission to charge customers a state sales tax
when they purchase products. This collected amount differs with each state and will
be collected by the state. This license also applies to businesses selling products
exempt from sales tax. All businesses that fall within this category are encouraged
to contact the State Franchise Tax Board, the Board of Equalization, or the Franchise
Tax Board for further information and requirements.
Other businesses are regulated by government law and require a federal business
license to operate. Businesses that encompass television and radio broadcasting,
metal processing, drug manufacturing, and meat preparation must all fall within
federal guidelines. In addition, interstate shipping companies and investment firms
require clearance from federal licenses.
To obtain a federal business license, certain government agencies should be contacted.
For example, business owners of a meat packing or drug manufacturing company should
contact the U.S. Food and Drug Administration (FDA). Businesses that offer investment
advising should contact the Securities and Exchange Commission (SEC). Businesses
that involve interstate freight should contact the U.S. Department of Transportation
(DOT) for their federal requirements and license.
In addition to the different licenses needed, most companies also require permits
for the daily operations of their businesses. Here are some of the most common permits:
Health department permit
Any business that deals with food (restaurants, wholesale manufacturers, vending
machines, etc.), housing (apartments, condominiums, town houses, etc.), community
structures (public swimming pools, shelters, camps, etc.), water and septic systems
(small water systems, liquid waste haulers, etc.), and medical waste products (hospitals,
clinics, tattoo parlors, etc.) all need a health permit to operate. In addition,
any establishment, within these fields, intent on rebuilding should also have an
updated health permit to conduct business.
Fire department permit
A fire department permit is one of the most important licenses new business owners
need to obtain. To acquire this permit, a company must pass inspection for any potential
hazards that may pose a threat to employees, customers, and neighboring buildings.
This permit also approves the storing, use, maintenance, and handling of materials
within company premises and the requirement to install necessary protective equipment
to prevent fire hazards. Depending on the location and city of the business, many
owners will not be entitled to apply for other business licenses or to set up their
operations until a fire permit is approved. Some cities may not even require permits,
but will periodically inspect these businesses to see if they meet fire safety regulations.
Air and water pollution control permit
Another crucial permit for every new business is the air and water pollution control
permit. This permit ensures the company in operation is not discharging polluted
water or air. New businesses applying for this permit need to contact their state
environmental agencies for more information.
Business sign permit
Depending on the city location of the business, a sign permit may be required. This
permit works in accordance with zoning regulations and may restrict the size, location,
and type of sign that is posted on the building’s exterior. Sign permits also need
to be obtained for any temporary real estate and construction signs or permanent
identification signs for schools, churches, apartment buildings, etc. Individuals
who seek a business sign permit are encouraged to contact their county’s Planning
and Zoning Department for further details.
new business owner should take the time out to conduct research on the different
licenses their company needs for daily business operations. If they move forward
with their business operations and decide not to obtain the required licensures
and permits for their establishments, their company is at a high risk for permanent
shut down. In addition, if one or more of their licenses are not approved, their
business is still considered in non-compliance with county, local, state, and federal
law, and this is a criminal misdemeanor. Not only are they at risk for possible
jail time but they are also subjected to hefty fines, liens, lawsuits, etc. Before
setting up a new business, owners need to invest time and money in making sure their
business establishment complies with all local, state, and federal ordinances.