When you start a business, it’s a good idea to register your business to get a license. A business license is certainly very useful for you, as a business owner, so that your business runs properly. If you don’t get a business license yet, consider getting one for better business regulations.
However, keep in mind that this license may be different for each state and city or county government based on their regulations. In fact, the location of the business can also affect it. Therefore, you need to know what a business license is, along with the types and how to obtain them.
This article will explain you a complete guide on how to get a business license and why a license is very important for your business existence. Find out here, then!
Understanding what business license is
So, what is a business license?
A business license is a formal license needed by a business so that the business can operate and run properly in a certain area. This license is related to all business operation licensing regulations so that people believe that the business is run safely, controlled, and legally supervised.
This license will also affect tax payments, employee safety and welfare, and the safety of the environment in which the business operates. In essence, a license can be a guarantee that the company follows industry regulations well.
The reasons why you need a license
The inauguration of a license actually benefits many parties, namely you as the owner of the company, the government, and the employees who work for you. If you are wondering, do you need this license, so here’s an explanation about how this license can offer you benefits.
You, as the owner, benefit from getting the trust of the government, the surrounding community, and the employees who work with you, that the business you run is trusted to be safe and follows government regulations well.
In addition, you can also have the right to sue if one day there is a new company that uses a similar identity to your company. You can use them because you have the patents in the license regulations.
The government benefits from getting revenue from your company through taxes, they also have full control over your company. Meanwhile, employees who work with you would feel safe knowing that you have followed government regulatory standards in operating your business. So, they believe that they won’t be mistreated and will get a proper salary.
If you are serious about planning a large business operation and want to gain the security and trust of your business, try to consider registering your license.
The most common types of business license
Don’t ever think that this license consists of only one type! Fortunately, this license is divided into various types depending on the needs of each business. Here are some types:
1. Federal licenses
Generally, most businesses don’t need a federal license for their business. However, several business industries require this license because they sell products or services that are regulated by the federal government. Such as agriculture, broadcasting, cargo, and transportation industries.
Usually, this license is only applied by larger companies, but if your business is in some of the industries mentioned above, consider contacting the appropriate agency to learn about federal business requirements.
2. State business licenses
State business licenses are the most widely used by many industries, ranging from the construction industry to pet care services. That means, even small businesses sometimes need a license. Try to reach your state department of commerce to find out what kind of stuff you will need due to commerce regulations.
3. Local business licenses
We know that some cities or counties have different regulations. In some cases, you will also need to obtain a license from the local department of commerce. Therefore, try to reach out to your local department of commerce to find out if you need a local license.
4. Professional licenses
Some business fields sometimes require professional licenses and certifications to prove that the business is correctly and precisely an expert. Businesses that usually require a professional license are:
- Real estate agents
- Electricians, etc.
If your business is one of them, then try to take professional licenses so that you can convince your customers and clients more. Check with a professional association to find out more about the rules.
5. Home-based business licenses
This license is suitable for those of you who are starting a home business. This license guarantees that the business you run won’t harm the surroundings, such as environmental pollution, noise, crowds, and other losses that might make the atmosphere around your home-based business uncomfortable.
Try to reach out to your local government with you and find out about the terms and conditions.
6. Sales tax licenses
This license relates to taxes generated from your business activities. If you’re opening a business that deals with selling goods or food, you probably need to charge sales tax.
If a state or locality requires you to charge your business activity, try to check with them to register your business with sales tax licenses. Ask them what the rules are due to registering your business into these licenses.
How much does it cost?
Understanding this type of license isn’t just enough about the definition and types. You must be wondering, “How much does a business license cost?” Well, this section will help you to end your curiosity.
The amount of fees required for a license is affected by several factors, such as license type, location, processing fees, recurring fees, and so on. However, the average license costs between $50 and a few hundred dollars. Sometimes, the renewal fee is excluded.
The number of license fees also varies depending on the state and business activity. For example, licenses in Alaska are $50/year for new and renewal licenses, while Florida costs $87.5 to $1000 for licenses. In short, it depends on where and which business activity you run.
It’s a good thing if you do a lot of research on license financing regulations in the place where your business operates and in which industry you run.
How to get a business license
If you’ve realized the importance of having a license for business, then now you want to try to get one, then here’s a step-by-step how to get one:
1. Establish your business entity
First of all, get to know what kind of business structure you are running. Is your business a sole proprietorship, general partnership, corporation, non-profit corporation, etc.? Absolutely these types of business structures will vary in each country and locality. Also, these affect what kind of license you will get.
Your business structure will determine your business entity, the state also needs your business name to give you a license. For instance, if your business is a sole proprietorship, you can use your own name in the business.
It would be different if you are part of a general partnership. Usually, you have to use the partners’ last name as an official business name.
2. Apply for a Federal Employer ID Number (FEIN)
When registering a license, the government usually requires a tax ID number as a registration requirement. To get FEIN, you can register it online at the IRS (or it can be adapted according to the regulations of each country and localies).
3. Determine which license you need
The type of license you choose will depend on federal, state, and local requirements, and what kind of business you run. But, you can stick with the most common types of licenses mentioned above.
By looking at these types of businesses, you can determine what type of license that is suitable for your business needs. If you are still confused, you can consult with your local government, then open a discussion with them about what kind of license is suitable for your business.
4. Apply for the license
If you already pass all the steps above, then it’s time to start registering for your license!
To register a license, the state or local government usually requires some necessary documents. Such as a sales tax permit, health permit, FEIN, and other important documents. Therefore, start an open conversation with your state or local government to fulfill the document requirements.
5. Renew your license
The last step is to get information about the validity period of your business license. Pay attention and figure out how often you have to pay for license renewal. For instance, do you have to renew annually, every three years, or every five years? Try to figure it out by yourself!
So, a business license is very important for those of you who are serious about running a business and intend to grow it.
The regulation and process may be quite difficult and long, but a license will benefit many parties, whether you as a business owner, the government, and also employees who are loyal to work for you. Go get one for a better business environment!