Requirements for a Business License
The requirements to obtain a business license can vary greatly from state to state. In some states, business license compliance is a function of the department of taxation but could be a completely different entity depending on the state in which you live. Business licensing is a requirement no matter what state you live in or the type of business you conduct. Depending on the type of business you're involved in, multiple licenses and permits may be required.
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Business Taxes
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An independent contractor who makes more than $400 a year from his business activities must report that income to the IRS. You will be required to pay estimated taxes every quarter when your business will make more than $3,000 to $4,000 per year.
If you have a regular job, you can ask your employer to withhold additional money to be sent directly to the IRS to cover any taxes that may be needed for your business activities. For more information on skipping quarterly filing, visit the IRS website at irs.gov.
Getting Started
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The steps you will need to take to get your business up and running are as follows:
1. A basic business license that is issued by the city where the business will operate. You may need a county license if the business is outside the city limits.
2. An EIN (Federal Employer ID Number) is a requirement for nearly all types of businesses.
3. A DBA (Doing Business As...) or Fictitious Business Name permit are interchangeable and are required if you plan to open a business banking account. A DBA makes your business and ownership public record.
4. Sales Tax Licenses are required for those businesses that will sell products and services.
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Licensing Entities
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All levels of government including federal, state and local issue licenses and permits related to business so you may have to obtain permits and/or licenses from several government agencies to operate legally.
Certain special licenses and permits may be required if your business involves construction, food handling, public transport or manufacturing.
Special Licenses
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A business that sells alcohol, lottery tickets or gasoline or offers services that may be regulated by the state like auto repair services, insurance and/or real estate sales or medical care requires special federal licenses. If you will be advising clients on investing---this license is through the Securities and Exchange Commission; transportation businesses are licensed and regulated by the U.S. Department of Transportation. For broadcasting, you will need a license from the Federal Communications Commission (FCC). If your business will involve the preparation and handling of meat products, a permit from the U.S. Food and Drug Administration (FDA) will be needed.
Home-Based Business Requirements
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Many people operate a business from their homes and don't have a license or don't even know if a license is required. Nearly every state requires some type of license or permit no matter where the business is operated. These permits can be obtained by the city or county in which the business will be conducted. Some home-based businesses will need to have special licenses, such as in-home child care or a business that requires food handling. Zoning can be an issue for home-based businesses. If your home is located in an area designated as residential only, you could be prohibited from conducting business of any kind at your home address so it is always a good idea to check with the business licensing division in your particular city.
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