If you are starting a new business, it is important not to overlook federal, state, and local business license and permit requirements. Almost every business, even one that is home-based, is required to obtain some form of license or permit in order to operate legally. Failure to do so can lead to fines, and in some cases, the closure of your business.
Why Are They Necessary?
The government has two main purposes for requiring licenses and permits: keeping track of a business’s revenue for taxation purposes and safeguarding the public.
For example, in the context of taxation, a state sales tax permit allows the state to oversee the collection, reporting, and payment of sales taxes: A business that sells goods or services collects the sales tax on behalf of the state and is responsible for remitting it to the state.
Other licenses and permits are aimed at protecting the public, either physically or economically. For example, occupations that could impact a person’s health, such as doctors, dentists, hair stylists and barbers, generally require professional licenses establishing that these practitioners have a certain level of expertise in their field.
What Is Required?
The licenses or permits your business must obtain will vary based on the type of business, its location, and the applicable government rules. Although it is important to check with a business planning attorney to verify which licenses and permits are needed for your particular business, the following are among the most common.