Do You Really Need a Business License

If you are about to start a company, you have probably wondered, “Do I need a business license?”

You would need to obtain and retain a business license regardless of the form of business you own if it is located in a physical storefront or it’s an online business, and whether it is a small or large corporation (possibly you’ll need more than one license).

This article aims to answer some of the most frequently asked questions by business owners about why you should obtain a business license.

What is a business license?

A business license is government-issued mandatory permission or permit that allows a company to operate in a particular jurisdiction. This license is often required in addition to the state-level registration of a company.

Whether a business requires a specific license depends on factors such as the nature of the business, the types of products it sells and the local government regulations where the business is located.

What is the point of a business license?

Business licenses keep companies responsible for their activities while also protecting the public’s health and safety.

• Professional licenses reflect the level of competence held by a specific professional.
• Tax licenses are required to sell taxable products.
• Licenses are used by the government to track revenue for tax purposes.

Who needs a business license?

Almost any business, whether it’s an online business or not, that generates revenue will need to obtain a business license, permit, or registration in order to operate lawfully and in accordance with government regulations.

Do I need a local business license?

You’ll almost certainly need at least one simple local business license or permit, such as a sales tax permit, if you want to operate a business out of your home. If you are starting a small company, such as a restaurant or a daycare, you’ll need even more licenses to ensure that you are following industry regulations.

What can happen if you don’t have a business license?

Operating a company without a license may be called illegal activity, and certain jurisdictions may choose to prosecute those involved. Additionally, practicing without a license in a profession like medicine or law is illegal and can lead to arrest.

Major fines and/or penalties may be levied against your company

It is illegal to conduct a business without a license, but the seriousness of the offense is dictated by the market, venue, and depth of licensing requirements. In contrast to an over-the-road trucking company without a license, a bookkeeper who operates from home without the correct license or permit is a minor offense. Local fines, penalties, and possible back taxes could be imposed on the bookkeeper.

For example, if you desire to start a business in Arkansas, you should obtain an Arkansas business license.

Local, state, and federal ordinances will not protect you or your company

If you do business without a license and a customer is dissatisfied with the product or service you offered, he will sue you in small claims court, alleging fraud as one of the reasons for the complaint. Doing business without a license is, in reality, a form of fraud.

When a plaintiff wins the case and the defendant is held liable, the company is liable for the amount the plaintiff paid for the product or service, as well as any damages related to the fraudulent conduct.

Your company may be shut down, either temporarily or permanently

If a company is found working without a license, it will be forced to shut down. In certain cases, the company is free to reopen until the licenses are obtained. However, a business may be required to serve a mandatory probationary period or, in the worst-case scenario, or you may be refused a business license.

Company’s name will be tarnished

When a company is found operating without a license, this can call into question the company’s ability to conduct business ethically and competently. Customers will conclude that if the company did not follow procedures to operate legally, it is unlikely that it would follow customer instructions as well.

Obtaining a business license can be a lengthy process, particularly if the industry requires several licenses or permits. However, the time and effort required to obtain the licenses is well worth it in the end. The consequences of running a company far outweigh the hassle of obtaining a license.