Virtually every business needs some form of permit or license to operate legally. However, finding the right permits and licenses required can be tricky. Different types of businesses require different types of permits. Additionally, where a business is located can dictate what type of permits are necessary. Obtaining the right licenses and permits doesn’t have to be confusing, and it doesn’t have to cost an arm and a leg.
Why Every Business Needs Licenses and Permits
The biggest reason that business owners must obtain licensing and permits for their business is revenue tracking. The government must be able to track a business’s revenue for tax purposes, but licenses and permits may also be used to protect the public.
Businesses that are involved in federally regulated industries often require licensing and permits. For instance, the federal government keeps close tabs on the following industries for safety reasons:
- Transportation & Logistics
- Radio & TV Broadcasting
- Alcohol & Tobacco
- Mining & Drilling
- Nuclear Energy
- Fish & Wildlife
- Firearms, Ammunition, & Explosives
Sometimes other types of licenses are required of professionals to ensure they perform at certain levels of competence. Some of the following professions require licensing and permits:
- Medical Doctors
- Hair Stylists
Businesses involved in selling goods or services may need sales tax licensing or permits. Surprisingly, even home-based businesses and sole proprietorships may need licensing or permits to operate legally.
Locating the Right Types of Licenses and Permits for a Business
Different types of businesses have various licensing and permit requirements. These permits and licensing requirements depend on the businesses location and industry. Finding what type of license and permit may appear to be complicated, but it does not have to be.
There are various online services businesses can use to discover what types of permits and licenses might be needed. SBA.gov offers a free service dubbed “Permit Me” that can help business owners ascertain what type of business license or permit might be needed. Additionally, calling state and federal organizations in charge of various industries can assist business owners in determining what type of licenses and permits are required for a specific industry.
Tax Permits May Be Required
The IRS doesn’t license businesses, but most businesses are required to register with the IRS and receive a federal tax identification number.(EIN) State governments and government agencies might also require tax permits for certain types of businesses. It is best to contact the state revenue office in the state a business operates to determine if registration is necessary.
Home Based Businesses Need Licenses and Permits
The majority of violations are issued to home based business owners. Often, business owners aren’t aware of the need of a permit to operate a business out of the home.
At the basic level, a Home Occupation Permit could be required. This is usually the only requirement for freelancers or consultants. However, businesses that directly impact the public, such as child care facilities or at-home food production may need additional permits and licensing.
Home owners associations may also restrict the business activities of home based business owners. Before opening a business from home, home based business owners should read over any material provided by the Homeowner’s Association they belong to.
Maintaining and Managing Licenses and Permits
Obtaining a license or permit is never the final step. Business owners are responsible for maintaining and managing licenses and permits. In order to do so, it is necessary to:
1. Keep a schedule posted of renewal dates
2. Maintain copies of licensing forms and applications in business records
3. Display licenses and permits correctly, as instructed.
Before engaging in any expansion or building projects, it may be necessary to obtain additional licenses and permits. Never move forward without checking if additional licensing and permitting is required. Businesses are regularly shut down for ignoring requirements and restrictions.