Many people who work from home begin with a little side hustle that they do not plan to grow into a business. Often, they make a little dollars selling their handcrafted items to friends and family, or they do some side job. They frequently fail to obtain a business licence since they do not plan to start a firm.
You want your home business to be legal in order for it to be profitable. Nobody wants the government to step in and pull the rug from under their feet. The good news is that obtaining a business licence for your home business is typically an easy process. In reality, most governments do not differentiate between home business and other types of enterprises.
However, whether your goal is to make a little more money on the side or to launch a home-based business, you may require a business licence. The issue with beginning a business without a licence is that if you are detected, you may face penalties and/or legal complications. Because of the possible danger, it’s worthwhile to research the legal requirements for operating a business in your city, county, and state early on. In most situations, you’ll fill out a form, pay a charge, and be on your way.
The majority of municipalities that govern business require a licence. It’s conceivable that you live in one of the few areas where business licences aren’t required (yet), but chances are your city or county does.
Why do business licences need to be obtained?
Many individuals are fed up with government regulation and control, which is essentially what obtaining a licence entails. However, as a customer, you’ll see that company licences are beneficial. A business licence is required for the following reasons:
- It notifies your local government about what you’re doing, making you accountable for your actions and ensuring you don’t hurt the public.
- It generates income for your city or county, assisting in the funding of schools, libraries, and other resources.
The Advantages of Having a Home Business License
Properly registering your business has several advantages. Aside from easing your mind by complying with the law, a licence provides validation and the documents required to apply for a business bank account and, if necessary, business financing.
How to Apply for a Home Business License
The good news is that obtaining a business licence is typically simple and inexpensive. You may learn more about registering your home company by going to your city or county’s website and searching for small business information. It’s possible that you’ll be able to register online. The Small Business Administration offers information for business licences in all 50 states.
- Check with your city or county to see if a specific permission is required for home enterprises. While most jurisdictions regard home companies the same as any other business, a handful, such as Bellevue, Washington, have specific permits for houses.
- If you haven’t already, come up with a business name. To obtain a business licence, your city or county will ask you to provide a legal name.
- If you are forming a corporation, limited liability company, or limited liability partnership, you must register it with your state. Unless your business name contains your own name, such as Johnson Cleaners or Jan’s Cafe, you will need to get a fake business name from your county if you choose to be a sole proprietorship or partnership. For state business formation, go to your state’s secretary of state’s website, and for fake business names, go to your county clerk, recorder, or registrar’s website.
- Download or get a business licence application from your city or county. Most towns make their applications available online, but if they do not, you must contact your city hall or country government.
- Fill out the application for a business licence. In jurisdictions that need a home business licence application, you may expect inquiries regarding the nature of your business and how it may influence the look of your house, traffic flow into your area, hassles for your neighbours, and the safety of your neighbourhood. As you reply to the questions, address these issues.
- Return the application along with the necessary fee to your city or county. Typically, you will have to wait several days to a few weeks before receiving your company licence. If your municipality is concerned, you may be summoned to appear before an official or your city council to answer more questions about your firm.
- You must have a business name and a business structure in place before applying for a business licence. Typically, the following stages are involved in obtaining your licence:
- To learn more about the procedure, go online or call the municipal or county office that handles company licencing.
- Fill out a form with your company’s details.
- Pay a charge, which ranges from $50 to several hundred dollars.
- You’re in business once you get your licence. You pay a charge depending on your earnings each year you do company.
Other Registrations or Permits You Might Require
A home business licence gets you started, but depending on the type of business you establish, you may need additional licences and permits. Here is a list of extra registrations that may be required:
- Occupational certification. Many states have laws that govern particular sorts of companies. You may require a permission to sell food, deal with people (daycare, counselling, etc.), or do financial work, for example. To discover information for your state, use your favourite search engine with the words “occupational licences” (for example, California Occupational Licenses).
- Allowance for sales tax. If you’re selling physical products (something you can hold in your hand) and your state collects sales tax, you’ll need to get a sales tax permit from the tax comptroller or tax office in your state. You may most likely apply for and submit sales tax collected from customers online.
- Permit or waiver for zoning. Zoning governs the sorts of businesses that can operate in specific regions of your city, town, or county. In most situations, residential zones do not permit the establishment of enterprises. However, if your company does not necessitate a sign, increases traffic, or involves dangerous products, you may be able to obtain a waiver. Contact your city or county’s zoning department to see what, if any, permits you require. Don’t skip this step. If you fail to obtain the necessary zoning approval, you may be fined or forced to close your business if your community learns about it.
- Employer Identification Number (FEIN) (EIN). An EIN is a business’s equivalent of a social security number. It is completely free and may be accessed online. Sole proprietorships are not required to have one, but it is advised so that you do not have to use your social security number for business purposes (for example, to fill out W-9 forms if you are a freelancer or perform contract work). An EIN is required for LLCs and other company formations, especially if you have workers.
- Permission from the Health Department. If you sell food you make at home or run a home-based catering business, you may need a health department permission and must follow certain guidelines, such as keeping ingredients for home and business separate.
- Doing Business Under (sometimes called “assumed name” or “fictitious name” statement). If the name of your business does not include your given name, your city or county may require you to file a doing-business-as declaration with the county clerk. This statement is also published in the local newspaper, informing the community of the business’s ownership.
- VAT is charged on overseas sales. If you sell items to customers outside the United States, you may be obliged to pay value-added tax, sometimes known as VAT. If you don’t want the trouble, utilise a payment source like Amazon or ClickBank that collects and pays it for you.