Do I Need A Business License?
Yes.
Many people make money by starting out with a little side hustle that they don't intend to turn into a business. They make a few bucks selling their goods or services to friends and family to do what they love while taking home a bit of extra income. Because they don't intend to run a business, they often don't look into getting a business license or sometimes they forget to prioritize the licensing process as the business organically grows.
However, even if the idea is to just make a little bit on the side, there are a lot of benefits to the business license. First, you get the piece of mind that you are operating legally. Secondly, a license offers validation and confidence to your customers, and lastly, it gives you the documentation necessary to apply for a business bank account or business loans, if needed.
What happens if I don’t get a Business License?
The problem with starting a business without a license is that if you get caught, there might be penalties and/or legal hassles. That potential risk is not worth it taking a bit of extra time to oblige the legal requirements for running a business in your city, county and state. In most cases, you'll fill out a form, pay a fee, and you'll be in business. Most localities that regulate business require a license.
Why Do We Have Business Licenses?
Put simply, it gives notice to your local government what you're doing and therefore will hold you accountable for what you do, and insure you don't do anything to harm the public. It's also a source of revenue for your city or county, through which it funds schools, libraries and other resources with.
How to Get a Business License
Getting a business license is usually easy and affordable. You can find out about registering your business by visiting your city or county's website online and looking for information regarding small business. You might be able to register online. The Small Business Administration has business license resources for all 50 states.
Before applying for a business license, you need to have a business name and determine your business structure. The steps to getting your license usually involve:
Go online or call your city or county office that deals with business licenses to learn the process.
Fill out a form with your business information.
Pay a fee, usually between $25 and $100.
Once you have your license, you're in business. Each year you do business, you pay a fee based on your earnings.
Other Registrations or Permits You May Need
Having a business license puts you in business, but depending on the business you start, there are other licenses and permits you may need. Here's a list of possible additional registrations that may be required:
Occupational license. Many states regulate certain types of businesses. For example, you may need a permit to sell food, work with people (daycare, therapy etc), and financial work. Search your state and "occupational licenses" (i.e. California Occupational Licenses) on your favorite search engine to find information for your state.
Sales tax permit. If you're selling tangible goods (items you can hold in your hand) and your state collects sales tax, you'll need to obtain a sales tax permit through your state's tax comptroller or tax office. You can probably apply and submit sales tax you collect from customers online.
Zoning permit or waiver. Zoning dictates what types of establishments can exist in areas of your city, town or county. In most cases, areas zoned residential don't allow for businesses. However, if your business doesn't require a sign, increase traffic, or involve dangerous items, you can likely get a waiver. Contact your city or county's zoning department to find out what, if anything, you need. Don't skip this. If you fail to get the proper zoning okays, you can end up paying fees or having to close down if your locality finds out about your business.
Federal Employer ID Number (FEIN). An FEIN is like a social security number for a business. It is free and can be obtained online. Sole proprietorships don't need one, but it's recommended so you don't have to use your social security number for business purposes (i.e. to fill out W-9 if you're a freelancer or doing contract work). LLCs and other business structures, especially if you have employees, require an FEIN.
Health Department Permit. If you sell food that you create in your home or run a home-based catering business, you may need a health department permit and be required to adhere to a set of rules, such as storing ingredients for home and business separately.
Doing Business As (sometimes called "assumed name" or "fictitious name" statement). If your business name doesn't include your given name, your city or county may require you to file a doing-business-as statement with your county clerk. This statement is also published in the local newspaper letting the community know who owns the business.
VAT tax for EU sales. If you sell goods to EU consumers, you might be required to pay a VAT tax. If you don't want the hassle, use a payment provider that collects and pays it for you, such as Amazon or ClickBank.