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What Is a Business License? What Are Business Licensing Requirements?

A business license is a specific government document, which certifies that a business is safe for the public. There are many different types of licenses that may be required depending on the specific type of business, as well as what each state requires of its businesses. Some businesses do not require any sort of formal licensure, while others need multiple or extensive licensing in order to operate in accordance with local laws.

Business licensing requirements refer to the various license and certification needs that a business must fulfill in order to operate in a particular area. License laws can vary from city to city, and even in different places within the same city. This is due to the fact that license requirements may vary depending on issues such as geography, zoning, and environmental factors. An example of this would be how there could be different requirements for businesses operating in a business area as opposed to a home-based business.

What Do Business License Laws Regulate?

As previously mentioned, businesses must comply with local, state, and federal license laws. These laws often require businesses to obtain licenses in order to conduct certain activities. Most of the laws which govern business licensing are intended to protect the public regarding health, safety, and a higher quality of services.

Business license laws apply to the following aspects of business operations:

  • Opening and closing times for the business;
  • Limitations on the maximum number of patrons that may be in the building at any one time;
  • Limitations on activities and substances that may cause harm to the environment;
  • Serving and selling food and drinks, especially alcoholic beverages;
  • Restrictions associated with city ordinances, such as permissible noise levels; and
  • Permissible activities within city zoning laws.

Many of these regulations are directly connected with the business' operating license. An example of this would be how certain small business licenses may only be used in designated areas of a city or town.

What Are Some Examples of the Most Commonly Required Business Licenses?

It is common for one, singular business to need several licenses in order to conduct all of their business activities. Some examples of the most commonly required business licenses, permits, and documents include:

Basic Business Operating License: This license is what governs the basics of business operation, and may be obtained from the city in which the business will be operating. For businesses with multiple locations, they may need to obtain a separate license in each city and/or state in which the business branch is located;

Fictitious Business Name License: These licenses are required for all businesses operating under a fictitious name, such as a “doing business as” license. “Doing Business As” is a legal term which implies that the trade name which a business is operating under is not the legal name of the actual person who owns the business. The actual person or organization responsible for the business files under a different or “fictitious” name. This is usually because the public will recognize the business easier with the fictitious name. “Doing business as” is commonly referred to as DBA or d/b/a/. The biggest advantage to filing under DBA laws is that the business owner can create a new business operation without having to undergo all of the filing associated with starting an entirely new business. DBA is ideal for sole proprietorships who are seeking to expand their operations;

Sales Tax License: A sales tax license is required for nearly all products and services sold by a business. A sales tax is a tax on the sale of personal property or taxable services, and is generally applied to the sale when it is purchased by the consumer. The requirements in terms of sales tax licenses will vary according to state tax laws;

Land Usage and Zoning Permits: Zoning ordinances regulate land use within cities and counties by categorizing and separating different land uses into districts within a city and county. Land use laws and regulations control the way that land can be used in any given area. Such laws are generally maintained by local governments as well as municipal codes. Land usage and zoning permits are especially necessary for home-based businesses, as well as those businesses that are involved in manufacturing operations;

Health Department and Fire Department Permits: It is common for local municipalities to require that businesses obtain special safety licenses if they will be attracting unusually large crowds. An example of a business that would likely be required to obtain such permits would be a live music venue;

State-Issued Licenses: State issued business licenses may be required if the business involves the sale of certain products regulated by state laws. This most commonly applies but is not limited to alcoholic drinks, lottery tickets, firearms, and gasoline;

Professional and Occupational Licenses: Professionals will need to obtain a license in order to practice their skills. These may include but are not limited to medical professionals, legal professionals, auto repair specialists, cosmetologists, real estate agents, and tax accountants; and

Federal Licenses: A business owner may need to contact a federal agency if their business will involve:

    1. The manufacture of drugs;
    2. Preparation of meat products;
    3. Broadcasting, such as radio or television;
    4. Trucking or ground transportation;
    5. Investment activities, such as stock trading and securities acquisitions; and
    6. The manufacture, sale, or distribution of alcohol, tobacco, or firearms.

What If a Business Violates Licensing Laws? What If My Business License is Revoked or Suspended?

Failing to obtain a proper license when required, or failing to maintain a currently valid license, can result in a variety of legal consequences. These can include but may not be limited to:

  • Statutorily Determined Fines;
  • Suspension of business rights;
  • Overall loss of operating privileges; and/or
  • In especially serious cases, criminal consequences can result. This could include criminal fines as well as
  • potential jail sentences, and is common more common for violations related to pollution and dumping.

A common mistake involves a business moving forward, assuming that their license is current and valid when it has actually expired. It is important to ensure that all licenses are valid, and that all local, state, and federal laws are being followed.

Most business licenses can be revoked by the agency that issued the license, if the licensing regulations have been violated. This is especially true if the license was issued directly by a government entity.

If your business license or permit has been revoked, it may be possible to appeal your case. Generally speaking, instructions for appealing your claim are included in the letter which notified you of a violation.

However, it is also possible to file a legal claim if you feel that your license privileges were wrongfully revoked. An example of this would be how it is possible that the law was wrongfully interpreted in your case. Legal investigations sometimes require the participation of other government agencies, such as the Equal Employment Opportunity Commission (“EEOC”).

Finally, it is important to note that any laws regulating business licenses cannot be discriminatory against any groups. Additionally, they cannot infringe upon a person's constitutional rights.

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