Business licenses: They are everywhere you are

Shiloh Johnson
By Shiloh Johnson

Updated September 2022

On the long checklist of business To-Do’s, getting your business license is an important step. Learn the basics of filing for a business license and fulfilling your licensing requirements.

Of all the tasks you have to check off your business launch To-Do list, filing for a business license may be one of the most crucial steps to your success. In fact, after you register your business, you’ll want to review your local, state, and federal business licensing requirements before you start selling your goods and services to keep your business in compliance — and out of trouble.  

Every year, roughly 65% of license registration requirements change, and thousands of business owners wind up paying for violations including unpaid license fees, and face other penalties — like business closures — for not staying on top of their operating responsibilities. Understanding how to file for a business license ensures you make it to your grand opening party. 

Read on to learn how you can navigate business license regulations and stay up-to-date with changes to requirements in your area.

What is a business license and do I need one?  

A business license is a government-issued document that certifies a business is safe, reputable, and has the approval to operate within a specific geographic jurisdiction. 

The term “business license” is often used interchangeably with the following terms: occupational license, occupational tax, business registration, business permits, business privilege license, occupational tax, business tax, city permits, etc. The titling depends on the government entity that issues it. 

This is where things sometimes get muddy. If you’re a freelance writer, you likely won’t need a business license to operate. Same scenario if you’re selling handmade crafts at your local art fair. However, if you operate a restaurant — you’ll definitely need to secure a business license — stat. That’s because counties and states have special food safety and public health regulations.  

Simply put, if you fail to file for a business license when one is required, your business could be shut down. 

To operate certain businesses, an owner may be required to comply with a combination of licenses and permits from federal, state, or local government agencies. They may also be required to comply with additional permits from the health, police, fire, building, or zoning departments. These requirements vary based on industry, location, and rules in place, like the restaurant mentioned before. 

| Every year, 65% of license registration requirements change, and thousands of business owners wind up paying for violations including unpaid license fees, and face other penalties

For example, the New York Department of State’s Division of Licensing Services (DLS) oversees certain occupations' licensure, registration, and regulation throughout the state. Hence, it would be insufficient to obtain only one level of approval to be engaged in a business. Some examples of occupations that must follow this step include cosmetologists, real estate agents, security guards, and sports agents. 

Businesses of a more complex nature, such as mining, drilling, or nuclear energy, may require the approval of a federal agency. An example may be found in Arizona, where providing or selling a specific service/product may require obtaining the state transaction privilege tax (TPT) license from the Arizona Department of Revenue.

Business licenses serve a variety of purposes for jurisdictions that are responsible for collecting annual license fees. They help a city or county keep track of their business growth and can serve as a major revenue driver. 

There are benefits for business owners, too. A business license can create confidence for customers that your business is well-run and trustworthy, making it easier to bring your business to the negotiating table, charge higher rates, or obtain business funding. 

What can happen if I don’t have a business license?

I used to work for a company that delivered uniforms and business supplies using a company truck (think Amazon Prime but only for businesses). They drove into Mobile, Alabama, to do a daily delivery to a dry-cleaning company. As soon as the driver reached the city limits, getting ready to cross into the town, he noticed a sheriff’s vehicle following him, and he was forced to pull over. 

The sheriff told the driver that the company’s business license had expired, and the company had not complied with attempts to renew. He said the driver would need to follow the sheriff back out of town. Ultimately, the company could not perform deliveries in that city until the license was properly renewed.

What financial requirement warranted a police escort out of town? After checking with the city clerk, the company learned that $80 and a completed renewal form were all that was needed. The form was filled out, and the tax team paid the fee immediately.

However, that was not the end of it. The company’s CEO had been notified, and the executive suite was fuming, wondering why the tax department let this slip between the cracks. 

Managing your business license and staying compliant is critical. Cities and counties are becoming more rigid in their business license regulations enforcement practices and increasing penalties for businesses that fail to comply — or revoking their business licenses altogether.

Get started now if you don’t already have a business license 

While business licensing may seem like a nuisance, it is critical to stay on top of your license requirements to keep your business free from violations. Each license comes with regular renewal fees, usually due at the beginning of the year, so it’s crucial to investigate the licensing process for your city or county.

Not filing can lead to delays in your business. Don’t let a failure to complete the minor task of filing for a business license create a major mess you’ll need to sort out later. If you need help keeping track of your business licensing deadlines, ComplYant can help you create a custom calendar and notify you when your renewal date comes due. 

To ensure a smooth business launch, be sure to get your license so you can get back to what you love doing.

Shiloh Johnson
By Shiloh Johnson
Shiloh Johnson is a long-time CPA and founder of ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements.

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