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What goes into getting a business license?
Local government controls the issuance of a business license within its territory. The business license has several purposes, including regulation, accountability, and taxation. This article gives a brief overview of what to expect when filing for a business license.
Business License Overview
Nearly all cities and counties require that a business obtain a business license prior to carrying on business or commercial activity within its territory. There is also a litany of federally regulated businesses. For a list of federally regulated industries and associated laws, see Business Permits and Associate Licenses from the SBA. This article focuses on the local requirements for obtaining a business permit.
Business licenses have a variety of purposes. Most importantly, a license is are a form of city or county tax that goes to provide government support and services. Likewise, the permit allows the government to regulate and account for business activity within its territory.
Local government has the authority granted by the state constitution (taxing power) to require a license to carry on business activity.
General Requirements for a Business Permit
As is the case with any administrative filing, a business permit generally requires a laundry list of information and documents. The most common types of information required for issuance of a permit are as follows:
- Written Application – This will be a government authorized form. Submitting the application requires proof of identification at the time of filing.
- Business Name – If you plan to conduct business as a sole proprietor, then you can list your personal name as the name of the business. If you have a business entity (such as an LLC or Corporation) you will have to produce evidence of your incorporation within the state. If you carry on business as a sole proprietor or as a partnership under a business name, you will have to produce proof of a fictitious name filing. Depending on your jurisdiction, you either file at the local courthouse or with the secretary of state’s office. The fictitious name filing gives notice to the public of the nature and owners of the business.
- Statement of purpose – You must supply a statement of purpose that indicates the type or nature of the business you hope to conduct. Your business activity will generally be categorized (with a code) into some form of previously recognized business activity.
- Proof of License for Specialized Activity – If you conduct any sort of activity that requires a Federal, State, or Professional license, then the local agency will require proof of license.
- Location of Business – You will obviously have to identify the location of your business. The important thing to remember is that you should verify the area zoning ahead of time. Regardless, the agency will conduct zoning verification. In some cases, the agency may require proof or ownership or control (rental) of the identified location.
- Proof of Sewage and Waste Service – You may be required to provide proof of sanitation services at the listed location. Generally, a copy of the location’s sanitation bill statement is sufficient.
- Filing and Associated Fees – Each locality is different in its filing and other fees. There may be a fixed fee for filing. Further, there may be an annual fee based on the percentage of income produced from operations throughout a fiscal year.
Other permits, such as Environmental inspection, Health Inspection permit, fire department permit, and state occupation licenses (ex., liquor license)may apply.
Maintaining a Business License
Below is a list of recommendations for maintaining compliance and legality of your business operations.
- Make certain you renew your business license on or before the annual deadline. Failure to do so could result in revocation or additional license fees. Operating without a valid license could lead to a significant fine.
- Maintain a copy of all records relating to filing for your business permit or paying your permit fees.
- Make certain that you display your business license within your place of business in accordance with local requirements.
- If you expand your services or alter the nature of your business you will need to update your business license. Depending on the jurisdiction, this may require a completely new application.
Conclusion: Preparing ahead of time before applying for a business application can save significant time and effort.