Why does a business need to have licenses and permits?

Almost all businesses need some type of permit or license to operate legally. However, finding the necessary permits and licenses can be difficult. Different types of businesses require different types of permits. Also, where a business is located can dictate what types of permits are required. Getting the correct licenses and permits doesn’t have to be confusing, and it doesn’t have to cost an arm and a leg.

Why does every business need licenses and permits?

The biggest reason business owners must obtain licenses and permits to open a business is income tracking. The government must be able to track the income of a business for tax purposes, but licenses and permits can also be used to protect the public.

Businesses that are involved in federally regulated industries often require licenses and permits. For example, the federal government closely monitors the following industries for safety reasons:

  • Transport and logistics
  • Radio and television broadcasting
  • Aviation
  • Alcohol and Tobacco
  • Mining and Drilling
  • Nuclear energy
  • Fish and Wildlife
  • Firearms, ammunition and explosives

Other types of licenses are sometimes required for professionals to ensure that they perform at certain levels of competence. Some of the following professions require licenses and permits:

  • Doctors
  • Hair stylists
  • Veterinarians
  • Dentists
  • Plumbers
  • Contractors

Businesses involved in the sale of goods or services may need sales tax licenses or permits. Surprisingly, even home-based businesses and sole proprietorships may need licenses or permits to legally operate.

Finding the right types of licenses and permits for a business

Different types of businesses have various licensing and permitting requirements. These permits and licensing requirements depend on the location of the business and the industry. Finding what type of license and permit a business needs may seem complicated, but it doesn’t have to be.

There are several online services that businesses can use to find out what types of permits and licenses might be required. SBA.gov offers a free service called «Allow me»Which can help business owners determine what type of business license or permit might be required. Additionally, calling the state and federal organizations in charge of various industries can help employers determine what types of licenses and permits are required for a specific industry.

Tax permits may be required

The IRS It does not license businesses, but most businesses are required to register with the IRS and receive a federal tax identification number (EIN). State governments and government agencies may also require tax permits for certain types of businesses. It is best to contact the state tax office in the state where a business operates to determine if registration is necessary.

Home-based businesses need licenses and permits

Most violations are issued to home-based business owners. Often times, business owners are unaware of the need for a permit to operate a business away from home.

At the basic level, a Home Occupation Permit. This is generally the only requirement for freelancers or consultants. However, businesses that have a direct impact on the public, such as child care facilities or the home food production, may require additional permits and licenses.

Homeowners associations can also restrict the business activities of home-based business owners. Before opening a home-based business, home-based business owners should read up on any materials provided by the Homeowner’s Association to which they belong.

Maintenance and management of licenses and permits

Obtaining a license or permit is never the final step. Business owners are responsible for maintaining and managing licenses and permits. To do this, it is necessary:

1. Keep an up-to-date schedule of renewal dates

2. Maintain copies of license forms and applications in business records

3. Display licenses and permits correctly, as indicated.

Before undertaking any expansion or construction project, it may be necessary to obtain additional licenses and permits. Never go ahead without checking to see if additional licenses and permits are required. Businesses are regularly closed for ignoring requirements and restrictions.