THE BUSINESS LICENSE HANDBOOK

Summary: Virtually every business must obtain a variety of business licenses, permits and registrations before
opening its doors to the public. And, most licenses must be renewed periodically and updated when any
information about the company or the business changes. If the business expands —either to new locations or by
offering new products or services—additional permits will be needed. Failure to have the necessary permits can
result in fines or even a business shut-down.

Business license requirements are a fact of life for nearly every size and type of busi ness in the United States.
Certain types of businesses, such as restaurants, may face numerous federal, state and local requirements, but
even businesses operated from home may require licenses.

What’s more, business license compliance goes beyond starting a business. Many licenses and permits require
periodic renewals. Beyond periodic renewals, any change in business operations, whether it’s a change in the
name of the business or the opening of a new location, can trigger the need for new or amended lice nses. Even
going out of business may have licensing ramifications.

This White Paper explores the types of licenses, permits and registrations that your business may require in
preparation for opening your business for customers. It also discusses on-going compliance, provides pointers
on compliance and alerts you to the potential consequences of non-compliance.

Obtaining Licenses: Be Ready for Opening Day

Although the need for licensing exists throughout the business life cycle, it is most critical to address licensing
needs during the start-up stage. Failure to determine what licenses are required and to allow sufficient time to
obtain them can mean a delayed opening.

Locating and obtaining all the necessary licenses required for your business is one of the m ost challenging and
time-consuming tasks a business owner will face. Why? Because multiple governments (federal, state, local) and
multiple agencies require different types of permits, licenses or registrations.

The best way to determine what licenses your business requires is to start at the federal level and to work your
way down to your street address.

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Top-Down Approach to Licensing Needs

• Highly regulated Industries

• General, Broad permits

• Wide variety, Highly specific

In addition to licensing requirements imposed on businesses, states usually require certain professions (s uch as
attorneys, hair stylists and tattoo artists) to have state-issued licenses or certifications. If you plan to operate
such a business, make sure that you understand which of your employees require licenses.

An Example of Licensing Complexity

How do federal, state and local requirements translate into the license requirements for a particular business?
As an example, here is a list of what is likely to be needed if you are starting a restaurant.
 Business licenses and tax permits (federal EIN and state permits, such as sales tax and employment tax)
 Occupancy permit (from the locality where the restaurant is located)
 Signage permit (from the locality; some locations have very strict rules regarding permitted signage)
 Alarm permit (if you have installed a commercial alarm system—this may be from a “fire protection
district” or the local government)
 Zoning and/or building permit (from the local government, if you are building or remodeling your
business property)
 Health inspection certification (state, county or local)
 Server training certifications (state, usually)
 Alcohol licenses (federal, state and often local)

It’s important to be aware of all the activities that your business will undertake. You may need permits for
different activities, even if they are all conducted within your business. For example, a res taurant that sells
alcohol will need federal and state (and maybe local) liquor licenses and permits in addition to the permits
required to serve food. Add cigarette sales into the mix, and another set of licenses are going to be required.
Similarly, if you operate a hair salon, you may not need a sales tax permit if you are only providing services.
However, if you also sell hair and nail products, you will be required to have one.

Certain Industries Require Federal Permits

A small business is far more likely to need an array of state and local permits than it is to need a federal permit.
There are exceptions to this rule, however. One federal registration that virtually every corporation and LLC is

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required to have is a federal EIN. (A sole proprietorship is only required to have an EIN if the business has an
employee.)

Another exception that affects many small businesses is the registration and permit requirements related to
alcoholic beverages. If your business is involved in the manufacture, wholesale, importation, or retail sale of
alcoholic beverages, then you must register your business with the U.S. Treasury’s Alcohol and Tobacco Tax and
Trade Bureau (TTB). You must also obtain federal permits from the TTB for excise tax purposes.

As with any business, you must make sure you account for all your alcohol-related business activities and comply
with the permitting process for each one. For example, operating a microbrewery and selling beer at retail will
require separate registrations and licenses. (And, of course, you will need state and local licens es as well.) You
face similar federal regulations if you plan to sell tobacco products.

Other types of business activities that may require federal licenses and be subject to federal excise taxes are:
 Agriculture (U.S. Department of Agriculture)
 Aviation (Federal Aviation Administration)
 Firearms, ammunition and explosives (Bureau of Alcohol, Tobacco, Firearms and Explosives )
 Fish and wildlife related activities (U.S. Fish and Wildlife Service)
 Fisheries (NOAA Fisheries Service)
 Maritime transportation (Federal Maritime Commission)
 Mining and drilling (Bureau of Ocean Energy Management, Regulation and Enforcement)
 Nuclear energy (U.S. Nuclear Regulatory Commission)
 Radio and Television broadcasting (Federal Communications Commission)

State and Local Licenses Requirements Abound

Every state has numerous licensing requirements. For example, North Carolina has more than 700 regulatory,
state-issued occupational licenses and permits. In addition, one or more local licenses may be required for your
business. The permutations involved in state and local licensing make it impossible to provide anything more
than a high-level summary of what may be required. State license requirements often reflect the economic
conditions and history of the state. For instance, there are more likely to be licenses (and fees) related to
agriculture in states where that industry is a key economic driver.
If you plan to negotiate the maze of state license requirements on your own, it is imperative that you begin on
the website for each state where you plan to do business. This will often (but not always) point you to the
localities that you need to contact. While the following list is only illustrative, it is important to be aware that the
following state licenses may be needed.
 State tax identification number. Some states use the federal tax id number; some do not. Most states
require a sales tax identification number if your business involves retail sales. States vary on what
services are subject to sales tax.
 Unemployment and worker’s compensation registration. You may need this, even if you are the only
employee of a business
 Minor work permits. Necessary in many states if you have employees under age 18.

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 Weights & Measures registration. If you weigh items for sale, you may need this type of permit
 Specialty licenses. These vary widely from state-to-state based on the concerns of state legislatures.
 Professional/Occupation licenses. States license a wide variety of professions, ranging from
accountants to wrestlers.

Many licenses and permits must be obtained at the county and city level. It’s this level that poses the most
challenges for the business owner in terms of time, money and aggravation. While the federal government and
most state governments have websites that provide online information regarding license requirements, the
quality of information and services provided at the county and city level often lags far behind.

Food handling and health inspection certificates, as well as alcohol licenses are generally handled at the county
level, although some cities and towns have requirements as well. Your general license to operate, as well as
occupancy permits, signage permits, and fire alarm certifications, are likely to be from your city, village or town
unless your business is in an unincorporated area.

In most cases, you can be fined if you open your business before all the necessary inspections have been
completed and the paperwork has been issued. These fines can be pretty steep (several hundred dollars a day)
and can add up quickly.

Obtaining Required Licenses Require Time & Money

Identifying the licenses that you need can be challenging because so many jurisdictions and agencies can be
involved. Many states have guidebooks for new businesses to help identify business licensing requirements, and
the Small Business Administration has an online tool, but the information is usually very generic.

Business licensing takes time—in some cases, several months. Ideally, you should begin seeking information
about business license requirements when you start thinking about your business. In fact, many business
decisions may be shaped by license requirements. For example, many counties set limits on the number of
establishments that can serve alcohol. If all the available liquor licenses have been issued, you may need to
change your business plan or your planned location. Similarly, certain localities have strict signage requirements.
If you are planning to open a franchise that demands a certain type of sign, you may have to battle the zoning
commission before you can open your doors.

Tip: Acquiring all the necessary licenses and permits can be very expensive. The costs of obtaining the
licenses needed to operate your business are tax-deductible startup expenses. (Once your business
opens its doors, the expenses of maintaining the licenses are deductible business expenses.) So, make
sure that you keep a copy of all of your license applications, along with a receipt showing payment of
any fees, with your business records

Once you have all the licenses, permits and registrations necessary to open your doors, make sure you know
which licenses must be displayed and follow those rules.

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Maintaining Licenses: Don't Fall Out of Compliance

Obtaining the necessary pre-opening licenses is just the start. Unfortunately, it’s easy to forget about on-going
business license compliance responsibilities. This oversight can prove costly. Staying in compliance requires that
you pay attention to these factors:

Renewal requirements. Nearly every license is valid only for a specific period of time. Many licenses must be
renewed annually. But, just as licensing requirements vary widely, so do license renewal fees and charges.

Changes in your business operations. If you expand your business—whether it is by remodeling your building,
opening a second location, or launching a new product or service line —you may need to obtain new licenses or
amend existing ones. For example, remodeling will require building permits, could require zoning variances, and
may require re-inspection for a new occupancy permit.

Similarly, adding new products can result in the need for new licenses. For example, if you operate a beauty
salon, the stylists’ charges may not be subject to sales tax. (State rules vary widely on what services are taxable.)
But, if you decide to sell a line of beauty products, you will need to apply for sales tax identification numbers. As
noted earlier, many licenses are highly specific. One class of liquor license may only permit the sale of wine or
beer. Adding the sale of liquor would require a new, or amended, license.

Most business licenses, particularly local licenses, are valid only for one location. If you add a new location,
especially if it is in a different city, you may need to start from square one with licensing applications. Other
business changes that can trigger the need for new or amended licenses can include: adding an additional
business owner, changing the business name, changing the operating hours, or hiring minors. Closing a location
or going out of business generally requires you to cancel existing licenses.

Changes in laws and regulations. Granting licenses to operate serves a number of purposes for governments—
raising revenue, controlling certain types of activities, ensuring public safety, and promoting certain types of
industries. As a result, the licensing laws are likely to change over time. This means that you need to be vigilant
in order to comply with the current version of the laws.

Best Practices to Remain in Compliance

These two best practices will help you remain in good standing with the licensing agencies:
 Keep a master list of all renewal dates. In addition, set up a reminder system that delivers a reminder
or series of reminders for any pending renewals well in advance of deadlines.
 Add "update business licenses" to your to-do list when you make any change regarding your business or
your business operations. For example, if you change your business name or incorporate your sole
proprietorship, you will need to update your licenses accordingly. You may even need to update your
information if you change the hours or days of operation.

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Failing to Have Necessary Licenses Can Have Severe Consequences

Failing to have your business licenses up to date can result in hefty fines and penalties. (A few violations even
carry criminal penalties.) What’s more, some fines and penalties can be imposed on the owners of a business,
not just on the business itself. Government agencies may also have the right to shut down your business (or
even seize your assets) for failure to comply.

Example: Recently the Oklahoma Alcoholic Beverage Laws Enforcement Commission seized all the
equipment and supplies that a Tulsa restaurant used to create its signature craft beers because the
restaurant had failed to obtain the necessary licenses.

A shutdown will cost you—not only in lost revenue for the days you are shuttered, but also in lost goodwill of
your customers and in damage to the reputation of your business.

Conclusion

As tedious as the process is, take time to make sure you have obtained all the necessary permits before you
open your business. (And, keep records of the costs so you can claim a tax deduction for these expenses.) Once
you have your required permits, put procedures in place ensure that they are all still current and the
information submitted is still accurate. Keeping your licenses up-to-date helps to maintain your good reputation
given today’s increased focus on compliance and transparency.

One way to simplify this process, avoid numerous phone calls and online searches, and ensure you are on top of
law changes is to partner with a business compliance service, such as BizFilings. BizFilings’ business license
application service will determine what permits, licenses and registrations are needed and obtain the necessary
forms and applications, leaving you free to tackle other tasks.

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