Licenses & Permits
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You’ll probably need a license or permit— maybe several—for your business.
In some locations, every business needs a basic business license. But whether
or not that is required, your business may need one or more specialized
licenses. This is especially likely if you serve or sell food, liquor or
firearms, work with hazardous materials or discharge any materials into the air
or water.
There are licensing and permit requirements at all levels
of government—federal, state, regional, county and city. It’s not always easy
to discover exactly what licenses and permits you’ll need. But it’s very
important. You should thoroughly research this issue before you start a
business, complete the purchase of a business, change locations or remodel or
expand your operation. If you don’t, you may face expenses and hassles you
hadn’t anticipated. In a worst case situation, you could be prevented from
operating your planned business at a particular location but still be obligated
to pay rent or a mortgage. For example, what if you sign a five-year lease for
business space and then discover that the location isn’t zoned properly for
your business? What if you buy a restaurant and then find out that the liquor
license isn’t transferable? Or suppose you rent or buy business space thinking
that you can afford to remodel or expand it, without realizing that remodeling
means you must comply with all current ordinances? You might have to pay for
$15,000 worth of improvements to comply with the federal Americans With
Disabilities Act or $10,000 for a state-of-the-art waste disposal system.
Here are several examples that illustrate the types of
licenses and permits many businesses need:
• Millie plans to open a new restaurant. Before
doing so, she needs a permit from the department of building and safety for
remodeling work and a license from the health department approving the kitchen
equipment and ventilation system. She also needs a sign permit and approval of
her customer and employee parking facilities from the city planning department.
Finally, she has to get a sales tax license; even though in her state sit-down
meals are not taxed, she must collect and report sales tax for take-out orders
and miscellaneous items such as cookbooks.
• Leisure Time Enterprises, a partnership, buys
a liquor store that also sells state lottery tickets. In addition to obtaining
a basic business license issued by the city, the partners must have the
state-issued alcoholic beverage license transferred to them. They also have to
apply to the state lottery bureau for a transfer of the lottery license and to
the state treasury department for a sales tax license.
• Electronic Assembly Inc., a corporation that
assembles electronic components for manufacturers of stereo equipment, must
obtain a conditional use permit from the planning and zoning board in order to
conduct its “light manufacturing operation” in a commercial district. The
company also needs clearance from a tri-county environmental agency concerned
about possible air pollution and disposal of toxic chemicals. In addition, the
new elevator must be inspected and approved by the state department of labor.
• Peaches and Cream, a new disco, has to get
fire department clearance for its exit system and also must comply with the
city’s parking ordinance—which practically speaking means negotiating with the
planning department for the number of off-street parking spaces the disco will
provide for customers. The club also needs a liquor license from the state
liquor control commission, a cabaret license from the city council and a sales
tax license.
• Glenda needs an occupational license from the
state department of cosmetology before she can open up her beauty shop. Because
she carries a line of shampoos, conditioners and make-up, she needs a sales tax
permit as well. In addition, because she’s extending the front of her shop
three feet into the front setback area, she needs a variance from the zoning
board of appeals. Finally, because she’s in an “historic preservation area,”
her sign must be approved by the local planning board.
In short, license and permit requirements can affect where
you locate your business, how much you’ll have to spend for remodeling and
whether or not you’ll have to provide off-street parking. If zoning
requirements are too restrictive, you might even decide to avoid the hassle and
move somewhere you don’t have to fight City Hall for the right to do business.
Similarly, if building codes require extensive—and expensive—remodeling to
bring an older building up to current standards, you might want to look for newer
space that already complies with building and safety laws.
Each state has its own system of licensing as does each
unit of local government. Obviously, it’s impossible to provide a comprehensive
list of every permit and license in the United States. Fortunately, I can give
you some general principles and a positive approach to help you learn about and
comply with the licensing requirements that affect your business.
Double check license
and permit rules. When you investigate the type of licenses and permits you need for
your business, check directly with the appropriate governmental agencies. Never
rely on the fact that an existing business similar to yours didn’t need a
license or had to meet only minimal building code requirements. Laws and ordinances
are amended frequently—generally to impose more stringent requirements. Often
an existing business is allowed to continue under the old rules, but new
businesses must meet the higher standards. Similarly, for obvious reasons,
don’t rely on the advice of real estate agents, business brokers, the seller of
a business or anyone else with a financial interest in having a deal go
through.
The Purposes of Licenses and Permits
Governments require licenses and permits for two basic reasons.
One is to raise money; the whole point behind some licenses or permits is to
levy a tax on doing business. In a way, these are the easiest to comply
with—you pay your money and get your license.
The other basic purpose behind licenses and
permits is to protect public health and safety and, increasingly, aesthetics. A
sign ordinance that dictates the size and placement of a business sign or an
environmental regulation that prohibits you from releasing sulphur dioxide into
the atmosphere are two of many possible examples. Complying with regulatory
ordinances can often be far more difficult than those designed simply to raise
money.
Copyright
© 1999-2001 Nolo.com All Rights Reserved
Excerpted from the “Legal Guide for Starting and Running a Small Business”, by Fred S. Steingold