Why all businesses need a permit or license

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Technology has made starting and running a business much easier, as some tasks only require a keystroke or mouse click. While there are many businesses that don’t require a college degree or brick-and-mortar building, it doesn’t mean that legal paperwork like permits and licenses should be bypassed. Anyone considering this type of gamble should look at these facts before moving forward.

Does every business need a permit?

This goes for the sole proprietor running a modest operation at home or a growing mobile business. According to the Small Business Administration (SBA), most businesses require federal or state government licensing. Depending on the location, as well the business nature, documents may also be required by the county. Unless operating a non-profit, all businesses that earn a profit must pay taxes to all relevant government agencies.

What is needed, and by whom?

For instance, entities that are regulated by the federal government, like alcoholic beverages, livestock and transportation, require permits from the Department of Agriculture or the Food and Drug Administration (FDA). On the state level, the amount of paperwork can vary by the county as well as the business itself. Usually, a basic business permit, business tax certificate and seller’s permit are sufficient, but it may be necessary to complete a Fictitious Name application, get a Burglar Alarm permit or see if a home operation qualifies for a zoning permit.

Where to get the facts

Local SBA offices, small business development centers and the city hall can provide information to anyone free of charge. State websites also have resources as well as information about business licenses and permits. If a person is selling a product or service periodically, they need to consult with a tax professional or the Internal Revenue Service (IRS).

Investment vs. gamble

Often, new business owner may feel compelled to bypass this necessary step because they want to test the waters first or wait until they have made a profit. While many successful companies may have started as barebones operations, procrastinating on the necessary paperwork is risky.

Companies that operate without legal paperwork will find it costly in more ways than one. While one piece of paper may cost anywhere from $75 – 200, fines are likely to be at least twice that amount. When it comes to unpaid taxes, interest and penalties will most likely increase as long as there is an outstanding balance.

It can also mean that a business must close its doors for good.

Legitimacy means more opportunities

Banks and other financial institutions will only lend money to legitimate businesses with current documents. The same goes for business partnerships that may be for the sole purpose of cross-selling or increasing brand awareness. Consumers tend to look down on businesses that operate illegitimately. Although it is possible for almost any company to bounce back from a bad reputation, it costs less to do thing things right from Day 1.

Take care of business, then make the money

The initial process can be time-consuming, but it also helps to get educated about what is needed. It may be tempting to move forward, but being compliant with the law saves money in the long run. This is especially true when more than one document is required to satisfy different levels of government.

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