What Are the Advantages of Having a Business License?
Many cities and states require new businesses to obtain proper licenses before commencing any sort of transaction. This is for the protection of all concerned and typically costs no more than a few hundred dollars. Governments recognize the benefits of being perceived as business-friendly, so their actions and requirements are designed to be as painless as possible. Licenses also convey responsibility and a stamp of approval, key aids for any new enterprise.
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Legitimacy
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New businesses don't have the advantage of hanging out a sign that reads "Established in 1956" and must do all they can to establish a reason for people to shop or contract with them. With Internet business taking off, even the personal contact that may have drawn customers is often relegated to a few clicks. The properly obtained license from a recognized government authority can go a long way in mitigating customer concerns or hesitancy. Business-to-business (B2B) contracts often require proof of licensure as well.
Taxes
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Cities and states rely on business licenses as a central record of all dealings and taxes owed. Sales taxes are a prime source of governmental revenue, and licenses help to facilitate the entire process from collection to submission. They also help business owners keep track of various permits and other taxes, which keeps them operating and in good standing. Productive relationships with all governmental authorities can be quite helpful when dealing with a problem or trying to cut through bureaucracy.
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Loans and Funding
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Cities have made a concerted push to attract new businesses, which directly help their tax base, employment rate and level of commercial activity. To sweeten the pot and compete effectively with other suitors, many cities provide resources, loans, grants and other funding to give new and existing businesses their best shot at success. All of these processes require a valid business license before eligibility.
Legal Compliance
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Business licenses are not merely a source of governmental revenue in return for a rubber stamp. Given the vast array of possible businesses within a city's borders, city leaders must ensure that all building codes, regulations and practices are followed to the letter. This is a matter of public safety relating to both commerce and health. The business license also represents a stamp of approval in the event of questions about its practices.
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