Does my Company Need a Business License?

Every business needs licenses and permits. New ventures often run into problems because they haven’t thoroughly researched which of these they must have in order to satisfy the legal requirements of their state.

If you fail to secure licenses before starting a new business, it is no less than a crime. There are different types of licenses one requires to start with, and basically they fall into three categories: local, state and federal.

Regarding local licenses, if you want to generate a business of your choice in a particular locality or city, a general business license is your starting point. It grants you permission to operate in that particular city, and is usually related to your tax status. They simply allow you to operate with confirmation that you’re operating according to the safety and appearance of the community where you’re based. In other words, they guard the interest of the public in your business. You may need a specialized permit according to your profession: health department permits for food preparation, for example, or sign permits relating to the appearance of your business, or even a fire department permit regarding the health and safety of your company are some of the major permissions you’ll need to obtain.

For a home-based business, you should be aware that some kinds of businesses are prohibited from operating in certain areas. If still you want to trade in that area and your business is prohibited from it, you can file a petition for a variance. For all this information, contact your county zoning office or local governing body.

Concerning state licenses, some occupations require certain training or education, and professionals need to have license to operate in these fields. Good examples are doctors, lawyers, real estate agents, accountants, or even barbers, are required to hold licenses as evidence that they can effectively and safely carry out their practices. Many bars and restaurants need licenses from the state in which they operate. If you are running a retail business, you need to have an additional sales tax license. The state agencies or the state department of taxation usually delivers these licenses, and they have fixed regulatory measures covering your businesses.

Those businesses that are governed by federal agencies require federal licenses. The Bureau of Alcohol, tobacco and firearms and Securities and Exchange Commission, are some examples of those that need federal licenses. The respective agencies are responsible for granting the licenses

For making your business hassle-free, there are certain permits that can be beneficial. Although they can’t be called business licenses as such, they are helpful for a business.

  • The Federal Tax Identification Number- This is nothing but an Employer Identification Number (EIN). It’s a social security number that’s necessary for your federal tax return filing of the business. Internal Revenue Service (IRS) is responsible for issuing this number.
  • A State Tax Identification Number- In addition to EIN, the state tax number is required in some areas.
  • DBA- A ‘Doing Business As’ filing is necessary if you want to operate your business with a fictitious name or a name other than an official name. Corporations, LLCs and some state formed businesses can file DBAs.

Whichever license you need, you have to be acquainted with the application procedures and requirements. You can contact the appropriate state and local agencies to inquire about these. Obviously it’s in your best interests to make sure your business is complying with all necessary legalities and ethics, so your most useful practice is to keep brushing up your knowledge of the sometimes rapidly changing requirements

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