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10 Common Myths About Business Licensing Laws Debunked

Business Licensing Myths
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I once thought that only large corporations needed business licenses. Boy, was I wrong! Let me share my experience and help you avoid the same pitfalls. Well, it was not just a pitfall, but a pool of penalties. 

Becoming a business owner isn’t tough these days. All you need is clients who pay you well for your service or product. But, hey! What about legal considerations? Talking to a friend for licensing advice won’t work at all. Unless he is a professionally licensed advisor in your country. 

Additionally, people have a lot of confusion about business licensing. Some say it’s a one-time process, while others call it recurring. But what is the real fact? Hold on! This blog will challenge you to find the top ten myths!

Myth 1: Only Big Companies Need Licenses

One of the very false impressions is that licenses are only required for large organizations. Yes! That’s true; big companies need licenses but the government can’t simply ignore the small companies. If you are running a business that focuses on selling products or services, you are to file licenses. There are no in-betweens. Having a company, regardless of size, needs to fulfill licensing requirements and obtain it. If we talk about a particular state, NYS, having a business license is mandatory.

Myth 2: Licensing Requirements Are Same for All-State

If you are a regular taxpayer, you know there are different state taxes that a resident has to pay. How can you expect the same license requirements? Well, state governments actually don’t work on the same set of state laws. There are even different state requirements varying from city to city. However, the basics remain the same for all state licensing policies.

So, before applying for a business license, make sure to check the requirements for your state. Additionally, check if they have any requirements for the proof of financial stability or business insurance. Acquiring this information before hand will help you wind up the license process quicker.

Myth 3: Licenses are Required Only for Physical Storefront

Actually, that’s not true! Licenses are unavoidable if you fall in the business category. There is no rule that only physical storefronts need a license. You must have a license to sell your service. Even if you don’t have a physical storefront.

In fact, business licenses are imposed to hold businesses accountable for their actions. Additionally, it will help in maintaining public safety. So regardless of online or onsite business, business licenses are obligatory.

Myth 4: You can Ignore the License If You Are Testing an Idea

Another myth with no basis at all. Even if you are testing a business idea, you are selling services or products, which drag you into the business category. Even in the trial phase, you need a license as you are directly working with the public. 

So, it’s illegal to even test a business idea without a license. Especially one that involves customer interaction and buying and selling. If you experiment on a business idea without a license, it will lead to fines and legal issues.

Myth 5: Only Profit-Making Businesses Need Licenses

Non-profit businesses also need business licenses to operate. These organizations work differently than for-profit businesses, but they need a license to verify their expertise. In some states, you might not require a license for these organizations. However, if you are operating in California or NYC, you need a license. 

It is suggested that you check the requirements for your state if you are planning to operate a non-profit organization. Along the way, you might find certain tax exemptions for these organizations, which is a plus!

Myth 6: Business Licenses are One-Time Expense

Let’s face it! No, business licenses come with a lifetime validity except in nursing (a profession, not business). License experts who guarantee one-time expenses are a big no-no. There is always an expiration date on your license. Be it a food-selling business, cosmetics, electronics, or construction. 

Additionally, there is a cost associated with a license. When you submit a license application, you need to pay the fee with the form. On top of that, some licenses also come with additional costs for renewals, amendments, or inspections. You need to budget these expenses as a part of your business expense plan.

Furthermore, keep in mind the expiration date and renew it as soon as possible. Late renewals come with additional fee tags. Moreover, your license can be cancelled if not renewed on time. Ultimately, you need to apply for a new license, which will cost a lot.

Myth 7: One License is Enough to Work in Multiple States

Every state has a different government and a distinct set of rules. So, one license can’t be used for multiple states. If you want to expand your business to multiple states, you need a license for each one. Additionally, if you are planning to do online business in multiple states, you still need registration for it.

Look! Every single business that actively involves subscriptions and product and service selling needs a proper license. Nothing below a license is acceptable to do business in different states. So, be sure to check the criteria of each state before expanding your business.

Myth 8: You Only Need a License If You Have Employees

This is the major misunderstanding that solo proprietorship businesses don’t need a structure or registration. Actually, they need proper registration to work effectively. Otherwise, you might get fines and unwanted tax penalties. If you are a freelancer or someone operating a single-person business, you should apply for a sole proprietorship license.

Myth 9: Licenses aren’t Necessary for Online Business

Not at all! Business always involves the public so a license is a mandatory thing. Even if you are freelancing your services. It’s a common misconception that if you don’t have a storefront, licensing rules aren’t applied to you. Well, not true! 

For instance, you are from California and selling insurance services to New Yorkers. That means you have an online presence in a city and a physical presence in another city. You need a license for both. Online businesses are no exception. The same business rules apply to both online businesses and onsite businesses.

Myth 10: Business Licensing is Easy to Understand

It can be true! You say, “Hey! You just said it’s a myth.” Well, if you are someone with a legal background, a license is easy to understand and apply for. However, if you don’t have legal knowledge, count it a myth. Licensing is a complex process and can be a headache to handle.  You can consider hiring a professional licensing service for your business. Whether you want to do business in one state or multiple states of America, licensing aid will be beneficial.

The Bottom Line:

Business involves a lot of work, and having a professional business license is a must-have. Not only to save you from fines but also to show your authority and expertise in business. So, before starting your business, get yourself up to speed with applicable license policies. Additionally, don’t wait too long after license expiration. It will help you avoid stress and excessive late fees.

FAQ (Frequently Ask Question)

1- Do corporations require identical licenses?

  • Not at all! License requirements vary from business to business. For instance, what kind of business it is, location, and other measures. In short, every industry has its own set of rules.

2- Is my commercial business license legitimate all the time as soon as I attain it?

  • Licenses expires! It is renewable but duration varies from state to state. For example, you might need to renew your license annually or every two years. Additionally, not renewing your license is subject to penalties and legal action.

3- Are licenses required for home-based companies?

  • Of course, you need a license for home-based companies, even if you are the only employee in the company. Your business must follow the legal guidelines and regulations. Additionally, you might need a home occupancy permit to run your company inside your house.

4- Do I still need a different permit if I already have a business license?

  • Depends on the nature of your business. There can be multiple permits that you need to search for and attain in order to run a business smoothly. For instance, food and fitness licenses might also require some permits.

5- Do commercial business licenses only function as a method of profit for the government?

  • Although corporation licenses have costs. Their essential reason is to guarantee that agencies abide by the legal guidelines, though. Additionally, it helps protect the welfare, health, and safety of the general public.

6- Do all states have identical licensing requirements?

  • No, there are huge variations in licensing requirements and rules among states. Additionally, licensing requirements may vary from city to city (within a state). So, the good rule of thumb is to check the specific standard for your state.

7- Do internet businesses require licenses?

  • Yes, all businesses, regardless of their location and online presence, need a business license. The rules and regulations applied to brick-and-mortar businesses also apply to Internet businesses. There can be an additional need for a particular license. You can count on home profession licenses and sales tax licenses.

8- Does getting a business license simply need to be performed once?

  • Well, you need to attain a license only once for a business, but it needs to be renewed every year or every two years. In other words, having a license comes with renewal responsibilities. It ensures that you stay compliant with state policies.

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