how much does a business license cost
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Starting a business is exciting. There’s so much you have to do to get started, including getting your shop up and running, finding a way to accept payments, setting up your payroll and more. Business owners like you can often forget to register for a business license during all these setup tasks. This article will talk about why business licenses are important, a general overview of the business license process, and how to register for one. To start, let’s talk about business licenses.
What is a business license?
Starting a new business usually requires your company to obtain a business license. A business license is a legal document that registers your company to operate in a particular county, city or state. As a local business owner, you’ll need to acquire the correct local or state business licenses before providing any goods or services to your customers. While the county that offers a business license benefits from it through revenue collection, zoning restrictions and company regulation, they can also be advantageous for businesses like yours.
There is no set standard for business licensing. At the local and state levels, business license fees, requirements and punishments can be established by those governing bodies. Failure to comply with the business licensing requirements can result in fines, late fees, penalties and inability to operate. That’s why licensing is so important, and it’s even more important to know your specific state or county’s requirements before opening up your shop. Go to city hall, the county courthouse or your local small business development agency to better understand the requirements.
You’ll want to check with The U.S. Small Business Administration for a federal business license. They require a federal license or permit if your business activities are regulated by a federal agency.
While it may seem straightforward, the licensing process can be tedious, partly because of the disparity between filing requirements. These requirements can change based on business type and some businesses even require extra licensing. Because local rules can vary so much, it’s important that your business finds a trusted local partner to help ensure your business’s compliance.
What are the different types of business licenses and permits?
Again, business licensing can vary quite a bit, but there are some generalities that can help you understand the various types of licenses and permits you need so you can be sure to obtain the right ones depending on your business activity. Let’s take a look at these common business license and permit types.
Business operating license
This type of license permits your business to operate legally in a certain city or state. Sometimes, this is known as a general business license. You may have to apply for a local license and a state license separately. Again, check with your local jurisdictions to understand the requirements.
DBA license or permit
DBA stands for doing business as, and this license or permit allows you to operate a business under a different business name than what you’re legally registered as. DBAs are also known as trade names, fictitious names or assumed names.
Planning and zoning permits
Your municipality will have its own rules and regulations, but you need to verify that the city where you do business has zoning for your type of business. If not, you’ll need to apply for a zoning variance for your business location. With this application, you’ll need to defend your company and prove that it won’t significantly disrupt the surrounding community.
Building and home occupation permits
A building permit verifies that you are operating out of a building that is up to building code. It’s one of the factors for getting business insurance. Similarly, a home occupation permit allows you to conduct business in and from your home, often exempting you from some zoning policies.
Fire department permits
While some jurisdictions require fire inspections and fire department permits before operating, others require regular inspections. This inspection and safety permit from your local fire department helps verify that you’ll be operating your business safely and that you don’t violate any fire codes. That’s especially important for businesses that deal with flammable materials.
You’ll also need to ensure your business meets all the required tax regulations, which may mean acquiring multiple licenses for taxes. In addition to an Employer Identification Number (EIN), you may also need to obtain a seller’s permit (sometimes called a sales tax license). You may also need to include your business structure with either of these.
Health licenses and permits
Depending on your industry, you may need specific health permits. This mostly applies to those businesses that serve food or alcoholic beverages that need to prove they are up to health code standards. Certain businesses also need to comply with safety regulations from the Occupational Safety and Health Administration.
If you’re in certain locations or industries, you may also need to get one or more environmental licenses. These usually protect ecological factors like air or water quality.
Many jurisdictions also have standards for business signage. Therefore, before you put up a business sign, check with your local government to see what regulations they have and enforce.
Lastly, many industries have specific licensing requirements or permits related to that industry. From architecture to beauty salons to child care, there are many different industry standard licenses that your business may need to obtain to operate.
How much does a business license cost?
After reading the last section, it may be clear that there’s no standard business license cost due to local policies and a few other factors. A few different factors influence the cost of your business license: license type, location, processing fees and any applicable recurring fees. But, what’s the average? Most business licenses cost between $50 and a few hundred dollars. That doesn’t include the cost of renewing your business license. Because licensing can vary significantly, it’s important that you contact your local agencies to obtain the necessary information about the exact requirements and costs in your area.
What is the application process for a business license?
So you own your own business, and you’re ready to get a business license. Now what? Let’s look at the general steps you need to take to apply for a business license.
Determine the business licensing you need
The first step is to perform some research. You’ll need to research city, state and federal business licenses to determine which you’ll need for your business type.
This can be time-consuming, as many state and federal agencies lack clarity on their websites. However, this is a necessary evil – you don’t want to risk facing fines for being unlicensed. After figuring out what you need, you’ll want to make sure you have a relevant EIN from the Internal Revenue Service (IRS) before seeking business licensing.
Get together all of the documents you’ll need to apply
After researching all of the requirements for business licenses, you’ll want to pay particularly close attention to the documents you’ll need to apply. While your exact needs may be different, this is a good starting point for what you’ll usually need to provide:
- A business description, including planned activities and physical locations
- Corporate records, including articles of incorporation and/or corporate bylaws
- Proof of state or local tax status
- Ownership and management lists
- Any applicable filing fees, including fees for state, local and federal licensing
For specific licensing, there may be even more requirements, including:
- Surety bonds
- Proof of insurance
- Qualifications of ownership and key staff
- Financial statements or proof of operating capital
Once you compile all of this information, you’ll move on to the actual application.
Apply for the business licensing
Next, it’s time to fill out and submit your business license application, including the business documents you compiled in the last step. Pay attention to the filing requirements during this step. There are often a few different ways to submit, so it’s best to read which forms of filing the local, state or federal government prefers.
Receive your business license
After applying for a business license, it can be a waiting game. Some jurisdictions have an immediate approval process, while others can take days, weeks or months to approve your application. That’s even if you applied properly. It’s also important to note that there are some industries where only a set number of permits or licenses are available. That might mean you have to wait longer than you expected to obtain your business license.
Keep an eye on renewal requirements
When it comes to business license renewal, it’s best to be proactive. That means making sure you know the approval process for renewing your business license, including the cost of renewal fees. You don’t want the renewal process to sneak up on you, especially when trying to manage your business. Starting from scratch can be time consuming, costing you and your business sales.
As you can see, business licensing is a more complex process than it’d seem. The process can be overwhelming, from each jurisdiction having their own rules and regulations to additional licensing requirements for specific industries. But in this article, we’ve outlined the steps you can take to ensure you’re properly licensed. While it may seem cumbersome, getting your business up and running can be rewarding. All your hard work to get licensed will be rewarded when you make your first sale.
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