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Most state and local governments require that any person or company operating commercially
must have a valid and current business license, usually at the local or county level. If you live within the boundaries
of a city or town, check your local government website for specific requirements. If you live in an
unincorporated area outside of a city or town, then check with your county government. If you plan to
start a corporation, visit your state government website that directs you to the Secretary of State's office
which is usually the entity that handles these types of business registrations.
Depending on the form of business, the industry, the type of activity involved and the location,
the process for obtaining a business license can be very simple for small businesses or very
complex for large companies. In many places, especially small towns, the process can be a registration
and fee for a sole proprietor or it can be a stack of paperwork for a company with multiple divisions.
In some places a business license may not be required at all to work as an independent contractor.
Some people may confuse business licenses with professional certifications. A business license gives
you permission to run a business for profit whereas a professional certification is one of many
steps required to advance in a specialized field, but it doesn't grant you authority to run a business.
If you are doing business as your own legal first and last name, you do not necessarily need
DBA ("doing business as") registration. But if you choose a different name for your business, you
will likely have to register that DBA at your County Records office in addition to getting a business
license. And of couse failing to obtain proper business licensing and DBA registration can lead to fines
and other penalties implemented by various government agencies.
One of the most important considerations when starting a new business is choosing the type of entity you want or need to operate as
for tax purposes and to protect your personal assets from liability in the event of an unfortunate event (think lawsuit).
The best advise we can offer is to talk to a Certified Public Accountant (CPA) to discuss these options at the front end of your start-up.
As a business owner I can attest to the fact that a good CPA can be your very best friend! Tax laws at the numerous levels of American
bureaucracy that dip into the money pie you make are wildy varying and extremely confusing to most people who are not trained professionals in the
field of Accounting and Tax Return Preparation. The second piece of advice we can offer in this area is to ask your business owning friends for referrals as CPAs
come in various specialty fields and with varying credentials and expertise.
As cumbersome as it seems, it is far more productive to address all of you tax related issues with a professional, often the first visit will be free and advisory, in order
to make certain that you have the right fit. Be honest about your intentions and keep good records of income and expenses as this wil make your life and the life of your accountant much better around tax time.
So, what does all of this have to do with business licenses? Everything! The type of entity you set up may or may not allow you to take certain deductions for certain types of expenses.
One example we can share is the difference between a Sole Proprietorship and a Corporation in California (most states operate in this same manner as does the Federal Government).
Sole Proprietors are often lible for what is called the "Self Employment Tax" which is a minimum flat rate of 15% of net (after deductible or qualifying expenses) revenue.
That percentage can mean a huge payment at the end of the year that most small businesses have difficulty absorbing if not saved for and planned for through the entire year.
If you are operating as a corporation there are all types of different selections available (sub S corp) being just one that allows for a small business to operate the same way
as the "big boys" do while offering some protection from personal liability and certain tax benefits. Again, we strongly urge you to contact a CPA or other licensed tax professional
before you start operating your business. You may find out you would be best served by operating as an LLC, LLP, LP, Partnership or Professional Corporation or perhaps even a non-profit
of some sort.
We can help point you in the right direction for starting your small business and all you need to do is complete this form and one of
our professional consultants will be in touch soon!
