Do You Need a License to Operate Your Business?
The truth is, pretty much every business - whether it is home based or not - needs some form of business license to be legitimate. In most cases you cannot get a business bank account if you don’t have a license. However, localities have different rules and may actually waive the requirement for certain types of businesses. That’s why it’s really important for you to be clear on the type of business you have today, and that you hope to build in the future.
There are different types of licenses and permits for different types of businesses.
General Licenses – To find out if you need this type of license, the best place to look is at your city or county government website for information. If you cannot find the information, try calling the various tax offices that handle business licenses in your area. You can explain to them what type of business you run and they can point you into the right direction.
Professional or Trade Licenses – If you have a license such as a CPA, Law, Cosmetology, and Architect, or you are performing commonly regulated tasks such as child care, then you will likely need a permit to practice in your area. It won’t matter if you conduct your business from your home office or a rented office; you’ll need an additional business license to conduct business.
Home Occupation Permits – In some cities a permit isn’t required if you run a home-based business in which you hold no inventory and see no clients. Be sure to explain carefully to the business tax office what you do so that they can understand and choose the right, if any is needed, license for you. Your neighborhood zoning regulations as well as your home owner’s association rules will be paramount in this case. So be sure to check with any authority that can make rules in this area for you.
Sales Tax Permits – If you sell items that require that you collect tax (and this differs in each state, city and county) then you’ll need a sales tax permit. Sometimes you will be required to collect sales tax even for online digital products and services purchased from those who live in your own state. Your state revenue agency can assist you with these rules and how to be compliant.
Health and Safety Permits – If you have a child care business, a bakery, or deal with potentially dangerous materials, you may need to obtain a health and safety permit of some sort. Some areas are very cognizant of air and water position and will require you to get a permit and have periodic inspections depending on the type of business you are running.
Running your business legally, and obtaining the proper licensing and permits are very important to ensure that you don’t work hard building up a business and then lose it due to taxes and penalties due to unpaid licensure and permits. Seek out information from your local SCORE office or taxing authority to get more information for your particular business idea. In addition, any small business incubator or local college business center can be very helpful.