Why Should Someone Get a Business License?

Some people are so eager to become entrepreneurs that they overlook the importance of obtaining a business license. A business license is advantageous for many reasons; often it's absolutely necessary.

Legality

Some industries require that owners obtain a license for the business to operate legitimately. Examples of this include food businesses, salons, construction businesses and retail stores. You will be fined each time you are found to be operating a business illegally. You may be forced to close your business if you are breaking the law by operating without a business license.

Liability

One of the main reasons people get business licenses is to release them from personal liability. This is not the case when you form a sole proprietorship, but it is the basis behind forming a limited liability corporation (LLC) or limited liability partnership (LLP). The fact is, we live in a litigious society, and you can end up getting sued for the pettiest of things, whether you're in the wrong or not.

A lawsuit against your business can cost you great amounts of money, and if you don't have a business license, it could hurt your case. What's worse, if you don't have a separate business entity and the person suing you wins their lawsuit, they may be able to take your personal possessions, such as your car, home, and money in your personal accounts.

Leasing

In some cases, in order to lease retail business space, you need to provide the landlord or leasing manger with proof of a business license. This is especially true when it comes to leasing space in a shopping mall or center. Although not all commercial buildings require that tenants have a business license, some of the most coveted locations do. By not having a business license you could be missing out on a prime location for your business.

Wholesale Accounts

For those who own a retail sales business, being able to establish wholesale buying accounts allows buying merchandise at the lowest possible prices. In most cases, you need a business license to establish a wholesale buying account. Whether you want to sell perfume, candles or clothing, the wholesale supplier will request a copy of your business license as proof that you plan to resell what you're buying.

If you're able to buy merchandise without providing proof of a business license, you may not be not getting the lowest possible price for your wholesale merchandise.

Finances

One of the most important rules of owning a business is to keep your personal finances separate from your business finances. To separate your personal from your business finances, you need to establish a business bank account. In most cases, you cannot open a business bank account without having first legally established your business entity by getting a business license. The bank will want to see proof of it.

References

• Information About Business Licenses