Starting a business takes a lot of work. No matter which direction you turn, there seems to be a hundred different things to do with a million little details to figure out. Getting your business set up correctly from the start means you’ll be off on the right foot and not have to back track to do things right after you’re business starts to grow. But what do you need to start a business? It might not seem so simple if this is your first time launching a new venture, so we’ll start by covering the basics of licenses and permits.
Finding the Right License or Permit for Your Business
It’s true that one of the main reasons for licenses and permits is so that the government can track your revenue for tax purposes. However, it’s not the only reason you’ll want to make sure you have the right business license or permit. Licenses and permits also help protect the public (and that includes you when you’re acting as a consumer of products and services from the businesses around you).
Every type of business has varied requirements for the type of business permits and licensing that it requires. A lot of it depends on the type of industry and the location you’re operating in. The best thing you can do is figure out the type of business you fall under and then work from there.
What Type of Business Do You Have?
There are a variety of business types, but we’ll go through the most common ones and you’re sure to find that you fall into at least one category. Grab a piece of paper and a pencil so you can jot down notes and make a to do list so you hit the ground running.
- Home based businesses or sole proprietorships typically need a permit from their local government to operate legally. If you operate under your name, you may not need a DBA, but if you’re using a business name and still filing as a sole proprietor, you’ll need to find out the specifics of filing for a DBA.
- If you’re selling goods or services, you’ll more than likely need to get a sales tax license or a permit.
- Professional licenses, signify the expertise level that an employee or business owner has – veterinarians, doctors, hair dressers, etc. – they all have professional licenses that need to be kept up to date.
- Federally regulated industries, such as aviation, alcohol, agriculture also require specific federal licenses or permits.
Once you know what type of business you fall under, you’ll need to check your local state government page to see the specifics of what’s required for your state. You can access license and permit info for your state here.
Making Sure You Keep Up With Licensing and Permit Renewals
Once you’ve filed for and obtained the proper licensing and permits, you’ll need to be a responsible business owner and make sure to maintain them. These expenses can be counted as the cost of doing business and can be used as tax write-offs come tax time. Here’s what we recommend to manage the paperwork that comes with our business license and permits:
- keep track fo renewal dates – set an appointment a week or two in advance in your phone so you make sure you don’t miss the deadline. It’s also smart to keep the links to the appropriate paperwork and web pages you might need so that you don’t have to waste a lot of time searching.
- keep a copy of the paperwork you submitted for your current license/permit. That way you have it on record and if you have to reapply as part of the renewal process the majority of the information can be easily transferred over from your last application.
- Make sure to display your licenses and permits in an easy to view location and that they’re properly protected. Some states actually require that you display them in a prominent location so customers can see them.
- Pay attention to what’s needed if you expand your business. You may need to apply for additional permits or reapply or a different type of business license if you’re growing quickly.
- Tax permits are different than the normal business license or permit, but you will need to also check out what types of things you’ll need to do to register for the appropriate tax permits and whether or not you need an EIN.
Operating a Home-Based Business – Make Sure You’re in Compliance
Out of all the business types, home-based businesses are often those that are found not in compliance when it comes to business licenses, permits, and keeping up on taxes. Our guess, is that often, the owners consider their business a hobby, aren’t looking to grow it to a substantial size or even think of what they’re doing as a business. We get that, but as accountants, we’d recommend filing for and maintaining the proper licenses so that your business can flourish.
So what type of business do you have or are thinking about starting? Have you started working to obtain the proper licenses and permits? How can we help?