Business License Pros & Cons
Starting a new business is the dream of many entrepreneurs, but the process itself can be lengthy and complicated. In order to do business in a state, you'll need to apply for and receive the appropriate business license. While business licenses may be an inconvenience for owners, they also help keep businesses within the guidelines of government regulation.
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Taxation
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One of the primary advantages of business licenses is the fact that they allow state, federal and local governments to enforce their tax codes. There is no way of ensuring that unlicensed businesses pay the taxes they owe or follow the appropriate procedures for withholding taxes from their employees' paychecks. Licensing, which involves issuing unique tax code numbers to businesses, keeps every business paying its fair share.
State Specificity
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Many business licenses are administered on the state level. This means that if you found a business in one state but later make plans to move it or expand into another state, you'll need to apply for a new set of licenses. States use business licensing and tax laws to encourage new businesses to open there or to take advantage of businesses that are already established in the state. But for business owners, the specificity of business licensing prohibits relocation and mobility.
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Multiple Licenses
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Some businesses will need to hold multiple licenses before they can sell certain products or services. For example, a restaurant may need to file for a license to do business as well as a liquor license to sell alcoholic drinks and a state health department license to serve food. Other specialty licenses that businesses need in addition to their basic licensure include licenses to sell tobacco and lottery tickets and offer cars for hire, including limousines. Each license has its own application process and fees associated with it and needs renewal on a regular basis.
Regulation
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Business licenses have the advantage of allowing state and federal agencies to regulate business activities. For example, by requiring restaurants to file for a license from the health department, the state can send inspectors to ensure that the restaurant is a safe place for consumers to eat. Businesses with a tobacco license can expect inspections and tests to make sure that they don't sell cigarettes to underage minors. All of this oversight combines to increase the level of consumer protection.
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