In many cities, new firms are legally required to license your business. Some businesses may be tempted to forgo the business license application or postpone it until they make enough money to justify the expense. While an entrepreneur is unlikely to be found operating without a license before her firm takes off, she must meet business licensing criteria before opening her doors for the first time. Business licenses not only make a business legal to run, but they also increase credibility and allow the entrepreneur to qualify for citywide funding. This blog will discuss the importance of business licensing, its benefits, and how to license your business.
What Is Business Licensing?
A business license is a government document that confirms that a company is safe for the public to patronize. The kind of licenses you need is determined by the type of business and where you run it. A business license is a government-issued permit that allows a company to operate within a given jurisdiction. This license, in addition to the registration, is a state-level need for a business to operate. Typically, business activity and the location of the organization determine which licenses are required to operate legally. Regrettably, there is no common clearinghouse for all essential permits based on the nature of your business and jurisdiction.
Why You Need a Business License?
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Business licenses hold firms accountable for their activities and behavior and protect the public's health and safety. Professional licenses indicate the amount of competence and knowledge that a specific professional possesses. In addition, for the sale of taxable goods or services, businesses must obtain sales tax permits. Grants are used by the government to track revenue for tax purposes. These are the three primary reasons why you need to license your business:
- Recognize your company and ensure you are accountable for your activities
- To ensure public safety and health
- To keep track of your finances for tax considerations
Who Is Required to Have a Business License?
Almost every business with an income stream requires some kind of business license, grant, permit, or registration to operate legally and in full accordance with government rules. Payroll Tax Registration, Basic Business Permits, Sales Tax Registration, and additional licenses are necessary for all businesses operating inside a jurisdiction. Similarly, several business licenses are industry-specific, such as those for Healthcare, Debt, Insurance, Construction, Retail Sales, Tobacco, Charities, and many others.
Who Grants Business Licenses?
State, federal, local, county, and municipal governments issue and oversee business licenses, permits, and tax registrations. A firm may frequently be required to obtain licenses at each governmental level. Furthermore, the business licensing process involves a slew of government authorities and departments. There are about 40,000 unique business licensing jurisdictions in the United States, each with its own set of licensing regulations.
Benefits of Business License
Of course, as previously said in this post, acquiring a license can be quite advantageous when running a business. Once you get your license, you will be able to take advantage of the privileges listed below.
∙ You are Legally Safeguarded
To obtain a business license, a company must meet all of the city's licensing standards. When you license your business, you ensure that the new business owner's structure, strategies, and methods follow city requirements. In contrast, you cannot be certain of any of these things if you do not intend to apply for a business license. Furthermore, most localities require enterprises to be licensed by law. It is also critical to understand that the legal requirements for acquiring a permit may vary from city to city. As a result, when you apply for a business license, make certain that your company meets all of the conditions. Furthermore, having a license will safeguard you from being shut down for operating an unauthorized business.
∙ Credibility is Increased Through Licensing
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Consumers are frequently apprehensive when it comes to obtaining services or purchasing products from a new firm. They want to ensure that the website or service is trustworthy, especially when purchasing from online merchants. When you display your business licensing in stores or on the company's website, you establish their trust so that people can buy with you without hesitation. It also helps to reassure clients that they are working with a legitimate company and not a scammer. Not only will the license help you create credibility with customers, but you will also need a business permit before working with other companies. In contrast, if you do not have a business license, you will find it difficult to sell your products to clients and establish new arrangements with other companies.
∙ Lowers the Risk for both Parties
Regardless of who is involved in the firm, business licensing mitigates all of the risks associated with doing business for everyone involved. From a business owner’s standpoint, there are very few risks in product creation, manufacturing, market testing, and distribution. Similarly, risks such as selling and servicing what is being given can be included for a licensor. When neither party has a business license, both parties are in danger. On the other hand, business licensing ensures that both the licensee and the licensor are legally protected.
∙ Simple Entry into a Foreign Market
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With the correct business licensing arrangements, you may take your product or service into new markets far more easily than if you did the work yourself. Suppose you have invented a product or service with a trademark, patent, or copyright. In that case, you may be granted restricted rights to manufacture and sell the product or provide your services to a foreign business. This is known as Manufacturing Under License (MUL). Because when you license your business, it allows the intellectual property (IP) to cross borders. It is a much more relaxed and cost-effective approach to entering a foreign market and expanding your firm. This means that tariff barriers to entry can be avoided since a domestic company utilizes the IP, just as the licensor may be using the IP domestically.
How to Obtain a Business License
While some aspects of the process will differ depending on the regulatory entity and your industry, these are the fundamental stages to obtaining business licensing.
1. Determine Whether You Need to Apply
Your industry and business type will determine whether you must apply to the federal, state, or municipal governments – or most likely all three. This phase may require a significant amount of "research," such as determining where to obtain a business license. You'll need to go to the websites of federal authorities, licensing bureaus, or county clerks - and you may need to contact them personally for more information.
2. Have the Necessary Documentation on Hand
When applying for a business license, make sure you have all of the relevant paperwork about your company and its employees, which may include:
- General information about your company (for example, organizational structure, day-to-day operations, management list, and so on).
- Tax status information
- Any pertinent papers about the employer and employee training or background checks (e.g., for a salon or child care center)
3. Fill Out and Submit Your Application
Applications can be mailed or submitted online. Processing and obtaining business licensing may take some time, possibly a month or more. Send your application well in advance of the beginning of your business or when your present license expires.
4. Have Your License Renewed
Many licenses must be renewed regularly; make sure you are aware of the expiration dates of your licenses. To secure future license renewals, you must also comply with needed training or business procedures.
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Final Thoughts
Now that you understand the importance of business license, finally, we will come to the answer to your inquiry, "Do I need a business licensing to sell online?" is a resounding YES. Whether it is required in your jurisdiction or not, it is never unnecessary to obtain a business license when starting a new online small business. License your business act as a benefit to make your company appear more legitimate to the public and ensure compliance with trading laws. Aside from the licenses and permits stated above, your online business may require a variety of other business licenses and permits, such as health permits, environmental permits, professional and trade licenses, and so on. Whatever licenses or permissions you want, the only rule is to always verify with your state and local authorities about the requirements for each license or permit before operating your business to avoid unwarranted fines and penalties.
