Are Licenses and Permits Essential for a Business?

Registering a business with the state or local government is not necessarily required to complete business transactions, but it is a smart choice for a new entrepreneur for a variety of reasons:
(Specially applicable for running offline businesses)

1. A business bank account is important especially for small businesses to separate the personal activities from the business activities. To open a business bank account, they are required to provide proofs that the business is properly registered with the state.

2. It is more professional to give the clients a business name for payment instead of the owner’s name.

3. To apply for a loan and get it approved the company have to prove that it is actually an authorized business.

4. Potential customers and clients, especially who have never worked with before, need assurance about the legitimacy of the business and makes put the clients at ease when making a decision about whether to spend money with your company.

5. A registered business can receive supplier discounts that they wouldn’t normally receive as an unregistered operation.

6. Business owners having legal paperwork from the state get discounted wholesale rates from the suppliers. Also, if you plan to try to get government contracts for your company, a business registration is one of the first requirements.

7. A business registration allows you to hire full-time employees and pay them in accordance to state laws. When you register your business with the state you’ll receive a state identification number that allows you to route state taxes on the employee’s behalf. So if you plan to hire on employees to your business, it’s best to take care of registering workers.

8. In many cases permit or license are needed to avoid paying sales tax in order to purchase products from manufacturers and also allows to sell to retailers without collecting sales tax.

Necessary Licences and Permits

The laws and regulations vary from place to place and from industry to industry but still some common rules are maintained, like:

Employer Identification Number

Having an EIN is necessary, as it allows obtaining various kinds of licenses for the business. The application process for an EIN takes up to two weeks. It costs nothing to apply for an EIN, it can be registered online.

Wholesale licence

Obtaining a wholesale license is essential as it allows wholesalers to purchase goods in bulk from manufacturers without paying tax and also for reselling the wholesale items. Once the wholesale license is obtained, this certificate is used to buy goods from the manufacturer without paying tax, specially in case of bulk purchase the wholesalers do not need to pay taxes at every buy. As a result of which the wholesalers do not raise the product prices to be charged on the customers. This license is the tool for the government to track the tax-exempt products purchased by the wholesalers and these in turn are taxable to the clients.

Sales Tax License and ID

Department of Revenue provides the sales tax license. Along with this, all must apply for a State Tax ID number, which allows charging taxes to the retail buyers, paying the state taxes and to the employees. Depending on the state rules, fees are to be paid for obtaining a wholesale license. Generally, no payment is required to obtain this license, but in case the business terminates, security deposits will be necessary. The board determines this deposit at the time of application.

Here are some of the common retail licenses and permits to keep your business operating legally:

Business Name Registration or DBA Certificate

The business needs to have the appropriate paperwork to use any other name apart from the owner’s personal name for your retail business. There are two types of certificates common under business licenses, some include a business name registration and others require a separate registration or a DBA (doing business as) certificate.

Resale Certificate

The business will need a resale license or certificate for purchasing products and resale them without paying sales tax. This type of business license will allow the store to buy goods from manufacturers or distributors without any tax payment. The sales tax is then collected from the customers and paid it back to the state. Vendors generally prefer to get a copy of the resale certificate before doing business with the company.

Professional Licenses

State or local occupational licenses are required for some industry-specific retailers such as auctioneers, hair dressers, pharmacists, optometrists and other professionals.

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