8 Different Types of Business Licenses
To do business anywhere in the world, you need a business license. The type of license you will require depends on the nature of your business and where you are operating from. In some cases, you will need multiple licenses and permit from different levels of government to be allowed to transact business.
The first step to getting a business license is to identify which one(s) applies to your business. An online search can easily give you this information, but you should also consider checking with your municipal government what the requirements are for a new business. This is critical since your business may be required to meet other obligations and follow regulations that don’t involve licenses and permits.
Below are eight types of business licenses you will come across.
1. General Business Licenses
A general business license is required for businesses with a physical location operating within a city. Such a license could take about 45 days to be approved and needs to be renewed after every two years. It cannot be transferred to another business or person. It attracts a fee of $110 for every renewal term. Should it be located outside the city, the relevant authorities where it’s located handle the licensing matters.
2. Special Business Licenses
Somewhat sensitive businesses attract intense scrutiny from the licensing authorities. This is done to avoid licensing businesses that could engage in illegal and criminal activities or businesses whose activities could imperil consumers or customers. Besides the general business license, such sensitive businesses must get another license before they can legally operate; the special business license.
To be granted this license, a business has to undergo intense scrutiny from the regional Police Department where fingerprints of the owners are taken besides other routine investigations. The special license costs $125 and is valid for one year. It also attracts a separate fingerprint fee of $44. These types of business licenses usually take up to three months to process.
Among businesses that are required to procure a special business license are friendship clubs and dating services, tobacco retailers, antique dealers, carpet cleaning services, car dismantlers, and many others.
3. Doing Business As (DBA) Licences
Businesses operating under a different name from that of the sole proprietor are required by law to get a DBA license. Work at home businesses is also required to procure this business license. A DBA license comes in handy when filing tax returns besides adhering to other regulatory business requirements.
A DBA allows your company to transact business in the company name and to operate company bank accounts. You can file for a DBA license online or at your regional licensing offices.
4. Direct Sales Licences
Any direct sale worth at least $25 is required by applicable regulations and the Consumer Protection Act to include certain information. A direct sale is negotiated and/ or concluded away from a seller’s place of business. For instance, this could be at a customer’s home or office. It includes direct door-to-door sales.
A business license for a direct-selling business will involve additional contract requirements available at your regional business licensing offices. Operating without a direct sales license could affect your business in many ways. For instance, a consumer is within legal rights to cancel their contract with you within one year if your business is not properly licensed.
5. Municipal and Provincial Licenses
It is illegal to operate a business in any province without the required types of business licenses. Counties and cities do not discriminate on people doing business in the same region. There are, however, different rules and regulations for various businesses within the same province or municipality. There are also different rules for merchants with a fixed business location and those who do not.
6. Professional / Occupational Licenses
To practice in any occupation or profession, you will need the necessary license. For instance, you will need a professional or occupational license to transact in cosmetology, real estate, medical care, legal representation, auto repair, provide tax services, etc.
To be licensed, you, your business and the individuals working with you will need to show proof of their ability to provide such professional services. These professional licenses can be tricky to obtain, so it’s best to consult a business lawyer for their expertise and guidance.
7. Federal Business License
You must first meet certain requirements to get a federal license to practice in a particular trade. The requirements vary depending on your region and the nature of business you are proposing to start. In most cases, only businesses operating across states and regions require a federal business license.
For instance, you will need to meet FDA (Food and Drug Administration) requirements if you plan to trade in drugs or process meat. To be granted a federal business license, you must first establish your business as a sole proprietorship, partnership, or LLC.
8. Sales Tax License
If you operate in a region that charges sales tax and your business trades in services and goods, you need a sales tax license. To establish if your services or products fall under this category, check with your local provincial or state revenue agent. Sales tax could apply to both products and services.
There are as many types of business licenses as there are businesses. However, those listed here are more generic and can apply to all manner of businesses. The critical consideration in getting a business license is to understand the nature of your business and where you will be operating from. You will also be required to fulfill other obligations and obtain relevant permits, whether or not you have a business license.