A Simple Breakdown of Business Licensing

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A Simple Breakdown of Business Licensing
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• Business licensing in and of itself is not
  difficult. The most important thing to understand
  is that business licensing allows government
  agencies to develop a regulatory relationship
  with the business. Depending on where your
  business is located, each jurisdiction will have
  its own specific requirements to meet. An
  important concept in understanding business
  licensing is that, in the US, the federal
  government has very little jurisdiction in
  licensing businesses.

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Business structure 
The initial step of business licensing in the US
will take place in the structure of the business.
There are currently four main types of business
structures in the US. These structures are sole
proprietorships partnerships corporations and
the LLC or Limited Liability Company. Depending
on your own set of circumstances, you will
develop a business structure based on one of
these four protocols. Additionally, it is
important to realize that business structures are
solely regulated by each individual state. Thus,
there are some differences between the structures
in each individual state. However, that
difference is usually small and regulated more
towards the type of business.
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Regulatory authority 

• In the US, each state has developed its own
  regulatory structure for business licensing. In
  some states, the process is very easy and handled
  through the Secretary of States office or a
  business affairs office of the state. Other
  states are more complicated and have multiple
  levels of business agencies, each of which
  assigns licenses to businesses. Therefore, as a
  business owner, your first step should be to
  examine what agencies you must qualify with in
  order to license your business. Most states
  websites and business agencies will inform you as
  to which businesses need to be licensed by a
  specific government agency.

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Local jurisdiction

• In some locales or areas, a business must also be
  licensed by its local jurisdiction. This varies
  from county to county as well as city to city in
  some states. Therefore, not only should you
  investigate what state licenses you will require
  for your business, but you must also ask your
  local business licensing agency what requirements
  must be met.

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The IRS 

• While the federal government does not normally
  license businesses, it must be understood that
  the Internal Revenue Service does have certain
  requirements that must be met. If you are a
  corporation, you have the opportunity to declare
  yourself an S-corporation, so long as you meet
  the IRS criteria. Standard qualification is
  usually based on the number of investors in the
  business as well as certain financial parameters
  of the business. Additionally, if your business
  will have employees, then you will be required to
  have an employer identification number or EIN.
  Only the IRS is capable of issuing an EIN to a
  business.

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Understanding why a business needs a license 

• The primary reason why the state or local
  jurisdiction may require a business license is to
  ensure general public safety. In most states,
  though not all states, a business is licensed so
  that, when the public goes to the business and
  something goes wrong, the public has an ability
  to seek restitution. Thus, depending on your
  business structure and abilities, you may not
  need a full business license for every business
  opportunity. The usual exception is that a
  business does not have the public entering its
  primary location, such as a consulting firm or
  freelancer. However, this is not true in every
  situation, and therefore, you should investigate
  to be sure your business is fully licensed as
  required by the state.

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Questions? Comments?

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