Government Regulations for Starting a Business
Starting your own business is a way to take control of your financial future and put your skills to good use. But starting a business is a complicated process that state, federal and local governments impose regulations on. If you start selling merchandise or services without the proper authorization, you may be subject to fines or find it difficult to start a legitimate business in the future.
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Permits
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Each state has its own regulations for issuing business licenses and permits. A license allows you to do business in a particular location, such as a city or county. Other permits pertain to general business activities. For example, if you plan to purchase property and build a physical location for your business, you'll need commercial building permits. If you start your business in an existing building, you'll need a certificate of occupancy before you can begin operating there.
Naming Your Business
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Every business needs a name, both to identify itself to customers and to avoid confusion for regulatory agencies. When you start a business, you'll need to register an official name that becomes the legal identifier for the business. In the case of a sole proprietorship that you own yourself, the business name can be the same as your own name. Businesses with multiple owners may need fictitious names under state law, and other states that don't require fictitious names still allow owners to register them to prevent others from using them.
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Identification Numbers
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Every business needs an employer identification number, or EIN. This is the number that federal, state and local governments use to track a business's taxes. To receive a federal EIN, a business owner must fill out Form SS-4. An EIN applies to all of the business's tax activities, including withholding tax from employees' paychecks, paying sales and use taxes and paying mandatory taxes for unemployment insurance.
Special Regulations
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Certain types of businesses need to acquire special permits before they can perform activities that fall under a state or local government's control. For example, each state requires establishments that sell alcohol to apply for a liquor license; violation of state alcohol codes, such as selling alcohol to minors, can result in a revoked license, making it illegal to sell alcohol to anyone until the license is reinstated. Health permits are a requirement for businesses that sell prepared food. Other types of business activities that require special permissions include selling firearms, selling medical marijuana and performing automobile inspections.
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