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Business License Basics
Published October 11, 2007
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| Photo by: iStockphoto |
David Polatseck, president of Business Licenses LLC, explains the ABCs of business licensing for small business start-ups.
By: MATT ALDERTON
If entrepreneurs had their way, all they'd need to do to start their own business is come up with an idea, and then snap their fingers and blink their eyes in order to make it happen. Unfortunately, business ownership isn't that easy. In fact, it's oftentimes the opposite of easy, filled with complicated forms, papers and processes.
For start-ups, in particular, red tape is a frustrating challenge, as they must press "Pause" on their enthusiasm and energy in order to set up their business, when all they really want to do is run it.
While the small business set-up phase can't be skipped, it can certainly be survived—and shortened—with education and preparation. Take for instance one of the most fundamental of small business set-up tasks: business licensing.
Like most administrative tasks, business licensing is an item that's easily crossed off your list when you're armed with the right information, according to David Polatseck, president of Business Licenses LLC, an Airmont, N.Y.-based provider of business licensing services. The ProNet Small Business Resource Center recently interviewed him to find out how small business start-ups can best sail through the process of licensing their business in order to concentrate on building it.
Small Business Resource Center: Why do small businesses need licenses?
David Polatseck: The various permit and license requirements for businesses have three main purposes: To identify your business and make sure you're accountable for your actions, to protect the public health and safety, and to keep track of your finances for tax purposes.
SBRC: Who, exactly, needs a business license?
Polatseck: This depends on your location and activity. Some states and governments—like California—require business licenses from almost any business and some—like New York—only require licenses for regulated businesses, such as those selling food.
SBRC: Are business licenses governed locally, at the state level or federally?
Polatseck: They are governed at the federal, state, county and municipal levels, and by multiple agencies within those governmental levels, which is why it's so difficult to ascertain which licenses and permits a business needs.
SBRC: How many licenses and permits does the typical business need?
Polatseck: A typical retail business may need:
- A basic business operation license.
- A Federal Employer Identification Number (EIN).
- A state identification number.
- A fictitious business name registration.
- A tax registration from the state, for withholding employee taxes.
- A seller's permit, to collect sales tax.
- A license from an oversight department, such as the Department of Health, if you handle food, and numerous other agencies for different trades.
Editor's note: Other permits you might need include a home occupation permit, for home-based businesses; a zoning or land use permit, in order to do business, for instance, in a residential area; a fire permit, if your business will attract a large number of customers; and an occupational license, if you work in an industry such as medicine, cosmetology, financial services or real estate, among many others. Visit Business Licenses' Web site to find out what licenses and permits are required in your area.
SBRC: Are business licenses expensive?
Polatseck: They are a nuisance, but not a financial burden since they typically run less than $100.
SBRC: What's the cost of not getting licensed?
Polatseck: Penalties may be severe, including being padlocked.
SBRC: What are some tips that small business owners should keep top of mind in order to get through the licensing process smoothly, quickly and successfully?
Polatseck: We generally offer the following guidelines to make sure one receives their license:
- Fill out all forms correctly.
- Send along the correct [payment] amount, which may depend on different factors, including square footage, employees, gross revenue, etc.
- Send all required attachments, such as a copy of your driver's license, social security card, etc.
- Send your application to the right department.
SBRC: Finally, when does a business owner need to get licensed?
Polatseck: It may take a few weeks to receive all the licenses, and you are not allowed to operate without all of them, so it's wise to plan ahead.
To learn more about business licensing requirements, and about Business Licenses LLC, view Business Licenses' "All About Licensing" guide.
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