Virtually every business has an organization or institution that functions as a regulatory body. Getting a business license is one way to protect your business venture. Unfortunately, most entrepreneurs are unaware of what it means to have an authorized license for their businesses.
There is much more to owning a business than paying a shop rent and stocking with goods.
Running business days without a license is not just illegal but callous. Business licenses unlike what the majority thinks, help concerning bodies protect the general public.
It is totally unwise to opine that licensing and permit fees are ways the government wring more money from the business sector. This article explains in detail why it is important to get a business license and a full guide on how to get a business license in lesser time.
What is Business License?
A business license is approval given by the government or its agencies to individuals or corporate organizations to transact business in a particular location or sector. Basically, it is an opportunity issued by the local government to operate a business in a particular location or sector.
Typically, a company’s business activity and physical location (address) determine which licenses are required to operate lawfully. Some services may be profitable but not suit for a particular location.
Other determining factors may include the number of employees and the business, such as sole proprietor or corporation. Government agencies can fine or close a business operating without the required business licenses.
Also Read: How to Start a Dry Cleaning Business
TYPES OF BUSINESS LICENSE
To do business anywhere in the world, you need to get a business license. The type of license you will require depends on the nature of your business and where you are operating.
In some cases, you will need multiple licenses and permit from different levels of government to be allowed to transact business.
In order to get a business license one needs to identify which one(s) applies to your business.
An online search can easily give you this information, but you should also consider checking with your municipal government what the requirements are for a new business.
These types include
#1. General business license
This type of license is required for businesses with a physical location operating within a city. It takes about 45 days to be approved and needs to be renewed after every two years. A general business license cannot be transferred to another business or person. This type of business license attracts a fee for every renewal term.
#2. Special business license
To get this license, a business has to undergo intense scrutiny from the regional Police Department where fingerprints of the owners are taken besides other routine investigations.
This is done to avoid licensing businesses that could engage in illegal and criminal activities or businesses whose activities could imperil consumers or customers.
It also attracts a fee and also it takes three(3) months before it’s approved.
Examples of businesses that is required to get this license are :
friendship clubs and dating services, tobacco retailers, antique dealers, carpet cleaning services,
#3. Doing business as (DBA) license :
Businesses operating under a different name from that of the sole proprietor are required by law to get a DBA license. Work at home businesses is also required to procure this business license. A DBA license comes in handy when filing tax returns besides adhering to other regulatory business requirements.
You can file for a DBA license online or at your regional licensing offices.
#4. Direct Sales License
A direct sale is negotiated and/ or concluded away from a seller’s place of business. For instance, this could be at a customer’s home or office. It includes direct door-to-door sales.
A business license for a direct-selling business will involve additional contract requirements available at your regional business licensing offices.
A consumer can cancel any contract with you if your business is not licensed.
#5. Municipal and provincial license:
Cities do not discriminate on people doing business in the same region. There are, however, different rules and regulations for various businesses within the same province or municipality.
Though, it is illegal to operate a business in a region without the proper license. Hence, you need to get this type of business license.
#6. Sales Tax License:
If you operate in a region that charges sales tax and your business trades in services and goods, you need a sales tax license. To establish if your services or products fall under this category, check with your local provincial or state revenue agent. Sales tax could apply to both products and services.
#7. Federal Business License
Depending on the type of business, you will need to get a federal license. But first, you have to meet certain requirements to get a business license or federal license to practice in a particular trade.
The requirements vary depending on your region and the nature of business you are proposing to start in getting the license. In most cases, only businesses operating across states and regions require a federal business license.
For example, you will need to meet FDA (Food and Drug Administration) requirements if you plan to trade in drugs or process meat. To be granted this type of business license, (federal business license) you must first establish your business as a sole proprietorship, partnership, or LLC.
#8. Professional/Occupational License:
If you transact in cosmetology, real estate, medical care, legal representation, auto repair, provide tax services, etc, you will need to get this license.
However, to practice in any occupation, you need to get this license.
To be licensed, you, your business, and the individuals working with you will need to show proof of their ability to provide such professional services. These professional licenses can be tricky to obtain, so it’s best to consult a business lawyer for their expertise and guidance.
Why Get Business Licenses?
In big cities, license bureaus are set up to control business locations–to keep people from operating an auto-repair business next door to a school, or to keep people from running certain types of businesses from their homes.
For example, most states forbid certain things from being manufactured in the home, such as fireworks, drugs, poisons, explosives, and medical products.
Failure to comply with the licensing and permit requirements for the type of business you plan to start in your jurisdictions could result in additional fees, penalty payments, or operational restrictions.
To be free from these fees, you must fulfill conditions specified by the regulating authority that have been met.
What is the Cost of a Business License?
The cost of your business license or permit depends on several factors, like license type, location, processing fees, and recurring fees. The average business license costs somewhere between $50 plus renewal fees.
It varies as a result of the issuing institutions, agency, business activities etc.
Though when it comes to getting a business license, one has two options:
You can register it as your business name or limited liability.
However, as regards cost, it depends on your country and the requirements needed in the registration of your business.
How Long Does it Take to Get a Business License?
Several factors can influence how long it will take for you to get your business license, including the type of business you are starting, where your business is located, and state regulations that may apply to your business. Depending on your business, obtaining a business license can take as little as a single day or as long as six months.
How to Get A Business License Online
It’s very important to know the licensing rules of where your business is located. Failure to comply can have serious consequences.
Let’s look at the few ways to get your license:
Knowing the local requirements:
#1: Determine where to get your license
You’ll need to get a license from the city in which you’re planning to operate your business. Whether you’ll be renting office space or operating your business from your home, you’ll need to get a license in the place where your business address is located.
#2: Know your business code
Different business types have different codes, and you’ll need to know this information to get a license. Different codes will require specific application processes, and every city has its own set of requirements.
You may need nothing more than a simple Assumed Business Name (often called a DBA), or you may want to start a corporation. Whatever you are searching for, your city will undoubtedly have a form for it.
You can check the license site for more information.
#3: Locate the forms you will need to fill out
Whether you go directly to your city’s website, you’ll be presented with an extensive list of business entity types for your state. Locate the one that is most applicable to your needs.
- To get the forms, you can either download them from the site or go pick them up in person.
- In addition to the basic forms for obtaining or getting a business license, you may need to fill out other forms and apply for permits specific to your situation.
- Follow the links to your form, reading any important information that may be presented along the way—including descriptions, fees, requirements, and so on.
#4: Fill out the forms:
You may do this online or print the forms and fill them out by hand. Some states make provisions for performing these functions directly online but will generally require you to create an account before being able to do so.
You will generally be required to provide the following information about your business, in addition to other information specific to the type of business you are operating:
- Type of business
- Business address
- Name of business owner
- Contact information
- Federal ID number
- Number of employees
Getting your license:
#1: File your forms
Either using an online form or mail, file your forms with your city’s finance department. Your city’s website will contain the proper contact information for form submission.
#2: Pay the filing fee
Each city has its own requirements regarding the filing fee that goes with your business license. It usually ranges from $50 – $400 or more, depending on what type of business you’re operating.
#3: Wait to receive your license
The time it takes to process your license will vary, depending on the type of business entity you are creating. For example, a DBA might take just a couple of days, whereas a corporation could take up to 2 weeks. Each state will vary.
You may need to pick your license in person or give identification to clarify that you are the business owner. You may need to submit your fingerprints.
#4: Follow the ordinances that pertain to your business:
Once you start operating, it’s important to follow the rules of your city for the type of business you’re operating. For example, if you opened a restaurant, be sure to get the required permits, liquor license, and health inspections. Also, you’ll also need to renew your business license according to your city’s laws.
In some cities, you will need to display your license in your business location.
Running a business that puts the lives of many at-risk is callous. Business licenses and regulations help you prevent untold hazards.
Read through this piece to get
- Entrepreneur.com – Business License Definition
- Just Business Trips.com – Different types of business licenses