When you're embroiled in the excitement of starting a new business, it's easy to ignore the need for licenses and permits. Sure, getting licenses and permits is about as fun as visiting the dentist. But failing to do so-and doing it right from the beginning-is one of the most common mistakes new entrepreneurs make.
Following are some of the most common licenses and permits homebased small-business owners may need and where to go for more information.
Business License
Contact your city's business license department to find out about
getting a business license, which essentially grants you the right
(after you pay a fee, of course) to operate a business in that
city. When you file your license application, the city planning or
zoning department will check to make sure your area is zoned for
the purpose you want to use it for and that there are enough
parking spaces to meet the codes. You can't operate in an area that
is not zoned for your type of business unless you first get a
variance or conditional-use permit. To get a variance, you'll need
to present your case before your city's planning commission. In
many cases, variances are quite easy to get, as long as you can
show that your business won't disrupt the character of the
neighborhood where you plan to locate. Because you're planning to
start a business in your home, you should investigate zoning
ordinances especially carefully. Residential neighborhoods tend to
have strict zoning regulations preventing business use of the home.
Even so, it's possible to get a variance or conditional-use permit;
and in many areas, attitudes toward homebased businesses are
becoming more supportive, making it easier to obtain a variance.
Visit the Zoning section of this article for more information.
Fire Department Permit
You may need to get a permit from your fire department if your
business uses any flammable materials or if your premises will be
open to the public. In some cities, you have to get this permit
before you open for business. Other areas don't require permits but
simply schedule periodic inspections of your business to see if you
meet fire safety regulations. If you don't, they'll issue a
citation. Businesses such as restaurants, retirement homes,
day-care centers and anywhere else that lots of people congregate
are subject to especially close and frequent scrutiny by the fire
department.
Air and Water Pollution Control Permit
Many cities now have departments that work to control air and water
pollution. If you burn any materials, discharge anything into the
sewers or waterways, or use products that produce gas (such as
paint sprayers), you may have to get a special permit from this
department in your city or county. Environmental protection
regulations may also require you to get approval before doing any
construction or beginning operation. Check with your state
environmental protection agency regarding federal or state
regulations that may apply to your business.
Sign Permit
Some cities and suburbs have sign ordinances that restrict the
size, location and sometimes the lighting and type of sign you can
use outside your business. To avoid costly mistakes, check
regulations and secure the written approval of your landlord (if
you rent a house or apartment) before you go to the expense of
having a sign designed and installed.
County Permits
County governments often require essentially the same types of
permits and licenses as cities. If your business is outside any
city or town's jurisdiction, these permits apply to you. The good
news: County regulations are usually not as strict as those of
adjoining cities.
State Licenses
In many states, people in certain occupations must have licenses or
occupational permits. Often, they have to pass state examinations
before they can get these permits and conduct business. States
usually require licensing for auto mechanics, plumbers,
electricians, building contractors, collection agents, insurance
agents, real estate brokers, repossessors, and anyone who provides
personal services (i.e., barbers, cosmetologists, doctors and
nurses). Contact your state government offices to get a complete
list of occupations that require licensing.
Federal Licenses
In most cases, you won't have to worry about this. However, a few
types of businesses do require federal licensing, including meat
processors, radio and TV stations, and investment advisory
services. The Federal Trade Commission can tell you if your
business requires a federal license.
Sales Tax License
There are two reasons you need a certificate of resale (in other
states, this may be called a "seller's permit" or a "certificate of
authority"). First, any homebased business selling taxable goods
and services must pay sales taxes on what it sells. The definition
of a taxable service varies from state to state. Depending on
individual state rulings, both the parts and labor portions of your
bill may be taxable. Sales taxes vary by state and are imposed at
the retail level. It's important to know the rules in the states
and localities where you operate your business because if you're a
retailer, you must collect state sales tax on each sale you make.
Before you open your doors, be sure to register to collect sales
tax by applying for each separate place of business you have in the
state. A license or permit is important because in some states it's
a criminal offense to undertake sales without one.
Health Department Permits
If you plan to sell food, either directly to customers as in a
restaurant or as a wholesaler to other retailers, you'll need a
county health department permit. This costs about $25 and varies
depending on the size of the business and the amount and type of
equipment you have. The health department will want to inspect your
facilities before issuing the permit.
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