Does Your Home-Based Business Need a License?

Whenever you’re starting a business, whether you’ll be working from home or setting up a store on Main Street, there are a number of legal considerations to explore. The specific licensing requirements vary state by state, as well as by business type. For example, a tattoo artist, daycare center, or restaurant will be more tightly regulated than a copywriter or business consultant.

Does Your Home-Based Business Need a License?

Here we’ll break down some of the general guidelines for home-based permits and legal needs to answer that question:

1. Register the business

The first step to legally getting your ducks in a row is to register the new business with the state. This can be done in two ways: 1) when you incorporate/form an LLC for the business or 2) when you file a DBA (Doing Business As) for your sole proprietorship.Not sure what any of that means? Here are the basics. Filing a DBA is the easiest way to register a business – in essence, you’re registering the name of the business. For example, Jennie wants to start a business called Design by Jennie. She can file a DBA for “Design by Jennie” and this gives her the legal rights to conduct business with that name (and also prevents anyone else from opening a business called “Design by Jennie” in the same state).However, just having a trade name (or legal rights to a name via a DBA) doesn’t protect you from personal liability. If your business runs into financial trouble or is sued, then as a sole proprietor/DBA, any of your personal assets may be on the hook. But, that’s not the case with the LLC or corporation. If you’re interested in learning more, check out this Business Structure Wizard to figure out what form is best for you.

2. Professional licensing

Generally speaking, if you’re a writer, graphic designer, app developer, consultant, or sell jewelry, soap, etc., you won’t need any professional license. However, some activities –such as a plumber or lawyer- will need to be licensed to show a degree of proficiency in their profession.

3.  General business licenses

Depending on where you live, you probably will need to get a general business license. Your city or county government website should be able to point you in the right direction. Basically, it’s an annual license (with a small fee) that allows you to legally operate a business in the area.

4. Zoning

When you’re working from home, you’ll need to make sure that your home or apartment is “zoned” for it. If you rent an apartment, are there any prohibitions on a home-based business? If you own a condo, are there any association restrictions? Typically speaking, if you’re just working behind a computer at a desk, you’re going to have far fewer restrictions than if you’re inviting customers into your home.

5. Sales tax license

Any business that sells taxable goods or services (whether online or offline) in a state that charges sales tax will need a sales tax license or permit. You can apply for a tax permit with your state revenue agent (i.e. franchise tax board).

6. Other local permits

Other local permits include:

• Building permit (from your city/county planning department). You’ll most likely need this type of permit if you’ll be building or modifying a location for your business.
• Health permit (from your city or county health department). Businesses that usually need a health permit include: restaurants, street vendors, catering trucks, beauty salons, tattoo parlors, nail salons, etc.
• Home occupational permit (from your city/county planning department). In some jurisdictions, you’ll need a permit for a home-based business.
• Signage permit (from your city/county zoning department). Some places require a permit (and compliance with zoning laws) before you can erect a sign for your business.
• Fire permit (city/county fire department). You’ll most likely need to get a permit from the fire department if your premises will be open to the public or if you’re going to be using any flammable materials.

Take some time to research your local licensing requirements and get the required paperwork in before you open your doors (or, as quickly as possible if your business is already in existence).To help you navigate the process, the SBA.gov website offers a useful tool called “Permit Me” where you can enter your zip code to view a list of the licenses and permits you’ll need. Consider this website a first step; you should also check with the websites of your local state, county, and city.Here’s the bottom line: getting your permits in order is a relatively easy task, and the fees are far less painful than having to fork over penalties or deal with more severe consequences if you’re operating illegally.

Have registration or licensing considerations held you back from starting or growing your business?  Do you have licensing tips to share?  Tell us about it in the comments.