What Kind of Licenses and Permits Do You Need to Open a Business?
Starting a small business can be a challenging and rewarding experience, but many small business owners get into trouble with state and federal authorities by failing to obtain the licenses that they need in order to operate. Some licenses and permits are required for all types of businesses, while other permits and licenses are specific to particular industries.
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Local Business Licenses
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Most cities or municipalities require you to obtain a local business license in order to operate your company. A city business license is renewable each year, so once you've obtained your initial business license, your city will send you a renewal form at the beginning of each calendar year. A city business license usually requires you to fill out a simple form with contact information and the type of business you intend to operate. You'll be required to pay a fee when you submit the form, and then you must file and pay a business license revenue tax quarterly or annually.
State Business Licenses
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A state business license legally entitles you to transact business in the state where your company will be operating. A state business license usually includes a simple application and a one-time fee, which registers your business name with your state, and lists you with employment agencies such as your state's unemployment insurance division, and industrial insurance department. It also entitles you to purchase wholesale items for your company without paying sales tax.
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Federal Licenses
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If your business will be hiring employees, you must call the IRS and register as an employer. This process only involves a simple phone call. You aren't required to pay a fee or fill out any paperwork, but the IRS will send you paperwork issuing an employer identification number which you must include on all federal employment tax forms. Once you've registered your business with the IRS, you'll receive quarterly and annual employment tax forms, which you must complete and return by their due dates.
Industry Specific Licenses
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Many specific businesses are required to obtain city, state or federal licenses or permits in order to operate, especially if they engage in activities that involve public health. Food businesses must obtain health department licenses and permits either from their municipalities, or state regulatory agencies, depending on whether they are selling products at a wholesale or retail level. Lawyers and physicians must also obtain licenses from state agencies and renew these licenses periodically. Contractors such as plumbers, electricians and refrigeration technicians must also obtain industry specific licenses. Check with your state and city business license agencies to find out if you need any additional permits or licenses for the type of business you plan to operate.
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References
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