Most of us are aware of common business licensing laws -- whether it’s a license to sell alcohol and food, or a permit to expand your business premises. But business licensing is a lot more complex and broad than it first appears. For example, did you know that if you choose to quit your day job and set up a home-based business, you will need a permit from your local government to do so?
Unfortunately, business license and permit violations occur all the time -- leading to costly penalties, tax problems, and even the closure of your operation.
So if you are starting a company be sure not to overlook federal, state and local licensing requirements for you business or industry. Here are some tools and resources you can put to work for you to ensure you are compliant from the get-go.
Get the Right License and Permit in One Simple Step with "Permit Me"
Every business has different licensing and permit requirements depending on its location and industry, so it can be difficult to know where to start.
There are actually companies who make a living out of selling business license application packages. But these can be costly and are usually unnecessary. Much of the information you need to quickly understand and take care of your regulatory obligations is freely available in the public domain.
Meet "Permit Me." This government-developed online tool helps small business owners understand their regulatory requirements by matching basic information about your business type and location to the state and local permits, licenses, and registrations you’ll need to run a business in your locality. (If you don’t see your industry listed, just select "General Licensing.”
What About Federal Licenses?
If you operate a business that is regulated by the federal government, you will need to be aware of federal licensing requirements such as those that govern alcohol, tobacco, firearms, broadcasting, transportation, and so on.
The Permit Me tool also points to other business and employer requirements that are specific to your industry, such as what workplace posters you need to display, the types of business insurance you need, and so on.
What about Tax Permits?
While the IRS doesn’t license your business, it does require that certain businesses register to receive a federal tax identification number (this link helps you determine whether your need and EIN or not). You also need to register with state and local government agencies for applicable tax permits, such as a sales tax license, income tax withholding, and unemployment insurance tax. The Permit Me tool can point you to your local state revenue office.
Licensing and Permit Guidance for Home-Based Businesses
Home-based businesses often suffer from permit violations, simply because one size does not fit all. For starters you will need a Home Occupation Permit just to do business out of your home. And depending on your business type, whether you operate an online business, an in-home child care facility or are involved with at-home food production -- you are going to need a permit. Read "Licensing Requirements for Home Based Businesses" for more guidance on these regulations.
If you live in a community managed by a home owner’s association (HOA), it’s a good idea to check whether they can restrict your business activities. Read "Can a Homeowners' Association Ban Your Home-Based Business?"
Managing and Maintaining your License or Permit
As with most areas of business law, licenses and permits need to be managed and maintained. Business.gov offers the following advice:
- When signing up for a license, permit or registration, keep track of those that need to be renewed on a regular basis and keep a calendar of renewal dates.
- Maintain a copy of all licensing applications and forms in your business records.
- Make sure you follow rules for displaying your licenses or permits. Most states and localities require businesses to prominently display their business licenses so customers can see them.
- If you are thinking of expanding your business, whether it be expanding your building or launching a new product or service, you may need additional business licenses.
Additional Resources
- Business.gov’s Business Law Guide provides an overview of business laws and regulations.
- State Government Agencies – Includes links to all state government agencies.
- Essential Government Forms - This directory categorizes forms by what you’re trying to accomplish (starting a business, operating a business, etc.).
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- Operating a Restaurant within the Law: A 101 in Compliance (Part 1) and Part 2
Small Business Matters is brought to you by Business.gov to provide helpful and easy-to-understand tips for small and home businesses, including direct links to resources that help business owners to navigate the government maze. Business.gov is sponsored by the U.S. Small Business Administration to provide small business owners with access to federal, state and local government resources from a single access point. Business.gov creates a dialogue among business owners and the organizations serving them, making government resources and information more accessible to the nation's small business community. The U.S. Government and the U.S. Small Business Administration neither endorses nor guarantees in any way the external organizations, services, advice, or products included in any external website links. Furthermore, the U.S. government neither controls nor guarantees the accuracy, relevance, timeliness or completeness of the information contained in non-government website links.
