Do You Need A Business License?

This seems like a fairly straightfoward question that would receive a straightforward unequivocal answer, however, that’s not the case.

With the economy in recession, trying to claw it’s way out, local governments are looking for ways to raise revenue. One of the best ways is to enforce taxes and fees in areas that have been overlooked or lightly monitored. Another way is to institute new laws, fees and regulations. No matter the route, a letter may wind up in your mail box that states that it has been noted that a business is being run on said premises and you do not have a business license. It will probably give you about 2 weeks to comply.

Those of you with space in a commercial area may already have a business license. Your lease, mortgage, or insurance may have required you to obtain one and keep it updated.

If you run your business out of your home you may have assumed or understood that if you didn’t see customers or clients in your home that you didn’t need license. This may indeed be the case. The best thing is do your research to know where you stand.

The first things is- Don’t Panic. It’s a very simple process. Just the matter of some time, a little paperwork annoyance and, oh yes,  fees and perhaps penalties.

I am in no way dispensing any legal advice or direction. You must do your own research and, if needed, consult your own attorney or accountant.

Here are a few things you should know and/or research.

Business licenses are granted by the County in which your business resides.

A business license is also called a Occupation Tax Certificate.

There is a regular business license and one that pertains to selling alcohol.

County’s rules, regulations, codes and rates will and do vary even within the same state. Remember, this is governed by the county.

Research your county’s website for business registration and regulations. It may be very vague. There is often a number you can call to get more help.

Before you call for help, you should know your parcel number/code. This is the number given to your lot and relates back to the zone in which your lot is in. You may already know that you are zoned residential, commercial, etc. But you will probably still have to have this in order for the government clerk to give you further information on regulations pertaining to your zone. You get your parcel number/code from your county’s tax assessor’s office. This is usually a different office from business registration.

On your county’s website there should forms for you to download. There will be different ones depending on your business status; sole-proprietor, S-Corp, LLC, etc.

My county required a corporation certificate from the state and 3 years of income history.

How much is  a license? That’s the hard part. There’s not a set fee. From my research, I have found that there’s an average fee of $50 for the registration with a minimum of an $85 charge for the license, up to a cap of about $300 or $400. Confusing? Yes. The rest of the fee is based on the income for the business. It sounds like a tax right? It is. Remember, a business license is also called Occupation Tax Certificate.

The penalties and/or interest you may have to pay will be based on how long you have been without a business license within that 3 years, what the fee for the license would have been for EACH year plus interest for each month/year it is past due and perhaps an assessed penalty for late payment.

There is not a chart for you to look at to figure out the tax yourself.  Each county will have it’s own process. Usually you fill out the form, fax it in or appear in person at the business registration office. Either way,  they evaluate your tax and penalties based on  the SIC (Standard Industrial Classification) for your business – which they figure out. If you appear in person, you may be able to take care of all of this at the same time.

If you fax in your application, you will have to call back to get your code and then send in the application.

Lastly, there may be an Affidavit that requires you to state your status as a US citizen, legal resident, qualified alien, etc. This must be notarized and sent in with the application. If you apply in person, the county clerks should be notaries and you can take care if it all right there.

Again, this is now way serves any type of legal advice. You must do your own research and confer with your own attorneys if needed.

Hope this is enlightening!