Small Business Deep-Dive #9: A Guide to Licenses and Permits
When starting a brand new small business, licenses and permits are no game. But just like Pokémon, you gotta catch ‘em all — otherwise you’ll be in danger of running your business illegally. The last thing your new business needs are unexpected fines. Or worse yet, a shutdown until you get the proper documents in order.
The application processes themselves might not be complicated. However, there’s a lot of ground to cover when it comes to making sure you have the go-head to operate your business. Many small business owners end up needing licenses at the local, state, and federal level. So how do you avoid the headache of fines and legal complications before your small business even opens its doors?
It’s time to chug that last bit of coffee and put on your favorite pair of blue light reading glasses, because today we’re talking about small business licenses and permits.
What types of business licenses/permits are required at the local level?
You’ve already gotten off on the right foot with the local government when you registered your DBA. High five!
Now it’s time to consider what permits you'll need according to your city.
This can vary from district to district, so there are no easy answers. However, one thing’s for sure: you will most certainly need a local operating (business) license. This is the green light that says you’re above board. Local operating licenses are usually simple to get and typically require a fee.
Once that’s out of the way, it’s time to consider further permits:
- Zoning to prove that you’re allowed to operate your business at your location, including your home.
- Building in case you want to do a little renovation or build something altogether new. Beware that this can also pull the thread on further permits for plumbing and electricity.
- Fire Department especially if you are open to the public.
- Health Department if you will be serving food, opening a gym, or anything else that might directly affect people’s health.
- Signage to ensure you are following regulations about what’s allowed — make sure to check, no matter how sweet that neon sign is.
- Environmental in order to regulate pollution, air quality, and waste.
What types of business licenses/permits are required at the state level?
You’ve got your operating license and other local permits. Now it’s time to navigate what’s needed at the state level.
Your state may require a state business license in addition to your operating license. This is primarily for taxation purposes. Can’t say those government agencies aren’t thorough!
Remember, requirements vary from state to state. Check out your state’s website for specifics like cost and timeframe.
Other licenses and permits to consider at the state level:
- Seller’s license if you plan on selling alcohol, lotto tickets, gasoline, or firearms. The party doesn’t end there in some states, so look up what else might be regulated in your location.
- Occupational license if your particular profession or practice is regulated by the state. This includes doctors, lawyers, accountants, barbers, real estate agents…it’s a long list which means your business could be on it.
- Tax permits for income tax, certificate of authority (sales tax), unemployment insurance, and workers comp. The good news is you already obtained your EIN which is the first step in these permit processes.
Do I need licensing at the federal level?
A lot of small businesses won’t need licensing at the federal level. However, it’s still important to confirm whether or not your business falls into this category.
Business activities regulated at the federal level are:
- Firearms, Ammunitions, and Explosives
- Fish and Wildlife
- Commercial Fisheries
- Maritime Transportation
- Mining and Drilling
- Nuclear Energy
- Radio and Television Broadcasting
- Transportation and Logistics
If any of the above ring a bell, check in with the corresponding agency for fees and application requirements. The SBA website can help get you to the right agency.
What if I work from home or online?
Think you’re off the hook because you work from home? Not so fast.
Even if you work from the kitchen table and/or your business exists solely online, you’re still a business — hopefully one about to make some serious money. That means you’ll probably still need permits and licensing at the local and state levels. That’s right, zoning permits definitely still apply to you. If you glossed over the first half of this post, time to start over.
In addition to things like business licenses and signage permits, entrepreneurs with a home-based business may need to obtain a home occupation permit to make sure everything’s copacetic.
Is this a one-time deal?
It’s important to note that you’ll need to stay on top of your license and permit renewals. Otherwise you could face some serious consequences.
Unfortunately, these items aren’t a “one and done” deal. If you let your licenses lapse and continue to operate, you could be subject to fines, penalties, or lawsuits. You could even be arrested, depending on what's required for your particular profession — and that’s generally not a good thing for operating a successful small business.
You got all that?
Sorting out the appropriate licenses and permits for your small business can be delicate work. Overlook one and you could unwittingly be setting yourself up for failure down the road.
Organization and a thorough investigation at each government level is your first line of defense against licensing mishaps.
Stay tuned for our final business deep-dive: Opening a Business Bank Account.
Need an extra set of eyes on what you might be missing? Reach out to KYN Accounting to double check that licensing check-list today.
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