As long as it's done correctly, starting and running your own small business can be tremendously rewarding and exciting.
People who want to start home-based businesses are frequently so eager to get started that they fail to obtain all of the necessary licenses and permits.
The last thing you want is to start your business off well only to have it abruptly shut down due to a lack of the required licenses and permits. Forgetting to do this can lead to serious issues in the future.
Making sure you have your business licensing and permits sorted out from the beginning is worth the effort and money.
It's crucial to check with the Small Business Administration (SBA) to find out the precise licensing, permit, and zoning restrictions for your state because they differ depending on the location.
The fundamental license and permit requirements, however, are generally uniform among states. These are the five things you need to be aware of regarding the licenses and permits your home-based business must have.
Important to note
Check off every regulatory requirement to ensure that you can legally operate your home-based business.
Governmental organizations give licenses and permits; however, permits typically have more restrictions than licenses, which are more long-term in nature.
Whatever kind of business you run, you must have a business license.
If you provide specific services, such as advising services, or if you keep flammable items in your home, permits for professional services and for health and safety may be necessary.
If you want to advertise on your property, you must obtain a sign permit, and if it's not covered by your company license, you might also require a separate sales tax license.
Permit vs. License
You should probably familiarize yourself with the licensing and permitting procedures before you do anything. Although their meanings are frequently muddled and confused, licenses and permits are fundamentally two distinct concepts.
Governmental organizations grant licenses. They are a sort of legal contract that permits individuals who hold them to carry out activities that would otherwise be illegal for those without them, such as operating a vehicle or a business.
Running a small business and rendering expert services to clients are prohibited, as is operating a vehicle without a valid license.
The issuing government, typically at the state level, controls these activities. These licenses must be issued by the corresponding organizations.
On the other hand, a permit is a legal document that authorizes you to do something. If you have a license to operate a café, for instance, your state and/or municipality can require that you obtain a construction permit, which verifies that the structure you intend to occupy is appropriate for your business.
If you have a kitchen from which you plan to provide food to your customers, you'll also require a food service permit.
1License for General Business
Any business, even those operated from home, needs to get a city or county business license. This is a fundamental license that entitles the bearer to conduct business within the local area.
If your city or county doesn't have a dedicated department for business licensing, you can find out how to get a basic business license through your neighbourhood tax office.
In addition to acquiring a standard business license, be sure your company abides by any applicable zoning regulations.
Additionally, operating a home company is frequently subject to neighbourhood restrictions. This is frequently found in the form of homeowners' associations (HOAs). It is feasible to obtain an exemption or variance if your company does not adhere to the neighbourhood or municipal zoning regulations, but you must do it through the correct channels.
Important
A license could be referred to as a reseller's certificate, business tax certificate, or license.
2Professional Licensing
Some home-based enterprises necessitate state or federal professional certification or licensing. Businesses like day-care facilities, hair salons, law firms, or financial consulting services fall under this category.
Getting in touch with your state business office is the best approach to guaranteeing you receive the appropriate documentation. A list of all jobs or enterprises that need professional licensure can be found on the state's official website.
3Permits for Health and Safety
You might need to obtain an inspection and a permit from the neighbourhood fire department, depending on the kind of business you intend to run. If customers or clients really visit your home to do business, this is frequently necessary.
If your home-based business solely offers products or services online, it's usually not necessary—unless you keep an inventory of potentially flammable items at your house.
Environmental permits or permits from the health department are less frequently needed for home-based businesses. Businesses that sell food and drink items at retail or wholesale levels typically need to have this documentation.
In any case, it's simple to find out if your product is safe by contacting state environmental protection authorities or local health departments.
Lesson
In several states, running a business without the appropriate sales tax license is against the law.
4Permit to Sign
If you want to put up a sign to advertise your business where you live, make sure you are following any local ordinances. The size, kind, and location of business signs are regulated by particular sign rules that are in place in almost all cities and counties.
Furthermore, signs typically have only a modest amount of lighting. Many HOAs, condos, and apartment buildings have their own rules regarding commercial signs.
If you are a house owner, review your deed and, if there is one, speak with your HOA. If you rent an apartment, it's a good idea to ask your landlord's permission before posting any signs.
5Tax License for Sales
In some locations, a regular business license may also include a sales tax license. In some areas, a second sales tax license is necessary in addition to a regional business license.
Uncertain whether you require a separate tax license? If you need a separate sales tax license, the local agency where you obtained your business license can advise you where to get it at either the state or local level. Before you start your business, be sure this is handled.
Particular Considerations
While practically all home-based enterprises require the licenses and permits mentioned above, the following are some additional documents you might need: Whether these are necessary entirely depends on the kind of business you intend to operate.
VAT Tax License: A special license for the reporting and payment of value-added taxes may be necessary if you offer goods and services to customers abroad. You might also make use of a payment provider that handles tax collection for you.
Department of Health Permit: Anyone who operates a food-based business, such as a catering service, needs this particular license. It describes how to handle, prepare, and store food.
EIN, or Employer Identification Number: Federal law requires that this be done. If you aren't conducting business as a sole proprietorship, you'll need an EIN, which functions similarly to a Social Security number. This enables you to file your taxes using the name of your company. You can use this number for payroll if you have employees.
Keep in mind that this isn't a complete list. Make sure you verify that you have the necessary paperwork to operate your business with the state and municipal authorities. If you need further resources, you can also get in touch with the SBA.
Frequently Asked Questions
Should a Home-Based Business Be Registered?
Most home-based enterprises require registration with the local, state, and federal governments. Start by becoming registered at the state level, which requires giving the proper organization the essential information, such as the kind of business you intend to run.
Additionally, you must register it with the local government, which will issue you any necessary licenses so that you can start operations. For tax purposes, you must register with the IRS.
How Do I Obtain a Home Business License?
To obtain your business license and start operations, register your company with the relevant state office. To determine which permits, if any, you need to operate your home-based business, check with the local and county governments.
In order to file your business taxes with the iRS, you'll also need to obtain a taxpayer identification number (in some circumstances, you can use your Social Security number).
What Permits Are Necessary to Start a Home Business?
Almost all businesses, whether they operate from a physical location like an office or one like a home, need a general business license to function.
Professional licenses are required for several firms, including those that provide expert services like childcare, hairstyling, and financial counselling.
If your state doesn't include it with your business license, you can need a separate sales tax license. When you apply for your business license, be sure to ask if you need one.
