2022 is full of new possibilities — including starting a new business. But before you get started, you may first need to apply for a business license.
Dealing with all the red tape and regulations can be challenging, which is why Greg Gillman is here to help with this guide to getting a business license in 2022.
What Is a Business License?
Just as a driver’s license permits you to operate a vehicle, a business license permits you to operate a business. These licenses are issued by local, county, and state governments in most cases. However, licenses are also issued by the federal government in sensitive fields.
Why Do You Need a Business License?
Even though you might think that a business license is just a waste of unnecessary paperwork, time, and money, it’s quite useful and important.
For example, getting a business license shows your customers that you’re a serious and trustworthy business rather than a sketchy business that will rip them off. But don’t just take our word for it — surveys have shown that a vast majority (75%) of consumers value brands that hold business licenses.
Getting a business license can also help you limit your liability since you’re effectively separating yourself from your business. Such a license can also help you when it comes time to file your taxes. Finally, it can help you access funding since most investors will only consider working with a licensed business.
What Are Some Different Types of Business Licenses?
There’s more than one type of business license, and depending on the kind of business you’re looking to start, you may be required to obtain several different licenses. Here are the six types of business licenses that you should know about:
1. General Business License
Most states require that all businesses receive a general business license regardless of type or industry. In addition to registering with the state, you may also have to register with your county or city. That being said, not all locations require that you get a business license.
For example, Florida does not require or issue statewide business operating licenses. However, individual counties in Florida may require and issue business operating licenses.
2. Doing Business As (DBA) License
If you’re going to be using a business name other than the one you’ve registered under, then you’ll need a “Doing Business As” or DBA license. This license is often used by sole proprietors who do not wish to operate their business solely under their name.
For example, let’s say that John Doe is a sole proprietor and has an electronics business. Technically, the name of his business would be “John Doe” since he’s a sole proprietor. So if he wanted to name his business “John’s Tech Fixes,” he would need a DBA.
3. Sales Tax License
If your business is going to be offering products or services in a state or county that charges sales tax, then you’ll need a sales tax license. This license allows you to collect sales tax from customers. Also known as a seller’s permit, it may be required on state, county, and city levels.
4. Special Industry License
Depending on your industry, you may need to obtain a special business license. For example, you will need a liquor license to sell or serve liquor. You will need a cosmetology license if you’re opening a nail salon. If you’re opening a restaurant, you will need a food service license.
These licenses are designed to protect consumers and regulate specific businesses that can impact the health and safety of consumers. For example, unsanitary practices in a nail salon can cause infections whereas unsanitary practices in a restaurant can cause food poisoning.
5. Professional License
Certain types of professional service businesses also require special licenses. Known as professional licenses, these are necessary to ensure that anyone offering these services is qualified to do so.
Some examples of professional service businesses that may need a professional license include accountants, real estate agents, cosmetologists, medical professionals, legal professionals, and more.
6. Direct Sales License
If you’re going to be conducting direct sales, then you’ll need a direct sales license. A direct sale is considered any sale conducted away from your actual place of business. For example, if you close a sale at your customer’s office instead of your own, you’ll need a direct sales license. Or, if you’re a door-to-door salesman, you’ll also need a direct sales license.
How to Get a Business License?
Now that you know more about the different types of business licenses, let’s cover how you can apply for and receive these licenses so that you can get your business up and running in the new year:
Step 1: Determine Which License(s) You Need
For starters, you need to determine which business licenses you need based on the list above — while keeping in mind that it’s not a comprehensive list.
Step 2: Determine Who Issues the License(s)
Next, you need to determine who issues the licenses you need. Licensing authorities can be at the federal, state, county, or even city level. At the state level, businesses licenses are usually issued by the Secretary of State. At the local level, business licenses are usually issued by the Tax Collector.
Step 3: Gather Necessary Documentation
Before moving forward, you need to familiarize yourself with each license’s application requirements and gather all necessary documentation according to these requirements. The level of documentation required usually corresponds to the type of license.
For example, if you’re applying for a general business license, you likely won’t need much documentation beyond a tax form and proof of insurance. However, if you’re applying for a professional license such as a legal license, you may need to provide your driving record, character references, official transcripts, credit report, fingerprints, and more.
Step 4: Fill Out the Application
Once you have all the required documentation, it’s time to fill out the business license application. The exact format of each application varies depending on issuing authority and type. For example, the application form for a California business license likely looks different from one in New York.
The good news is that for convenience’s sake, most applications can be completed entirely online, so there’s no need to print out an application, fill it out by hand, and mail it to the proper authority. This allows you to complete your application as soon as possible and helps the issuing authority process it faster than they’d be able to by mail.
Step 5: Pay Any Necessary Application Fees
Before your business license application can be considered, you will most likely have to pay a fee. Again, these fees vary based on license and location. Generally speaking, you can expect to pay anywhere between $50 to $100, however, expect to pay more for professional licenses that come with more application requirements.
Start Your Business in 2022
So don’t delay your 2022 business journey and apply for your business license today. If you ever need any help along the way, feel free to reach out to Greg Gillman for tailored guidance or check out my blog for more helpful articles.
Sources:
How to Get a Business License | Business News Daily
Types of Business Licenses for Small Businesses | Yelp for Business
