6 Vital Licenses & Permits For Setting Up A Home-Based Business

There are 30 million+ small businesses in the U.S. Roughly 15 million, or half of these businesses, are home-based. Given this stat, it’s safe to say that home-based businesses are a popular option for people who are looking to take the leap into self-employment.

Beginning a home-based business is far less expensive than starting a business in a rented space. In fact, home-based business operators save a lot of money by cutting back on administrative fees, transportation costs, etc.

Why Is Setting Up A Home-Based Business Good For Your Finances?

Most business owners utilize this money to repay debts taken to start the business, contribute to retirement savings accounts, build an emergency fund, and so on.

A popular choice among home-based business owners to pay off their loans is debt consolidation. The procedure of debt consolidation is to combine multiple debts into one. Instead of making separate monthly payments to several credit card companies or lenders, you combine them into a single payment from a single lender, usually at a cheaper interest rate. A qualified attorney is the best person to complete the debt consolidation procedure.

Starting a home-based business takes a lot, and one has to invest a great deal of effort and time to see their business bloom. Conducting proper research before diving in is also essential, but many people skip this vital step. As a result, they face consequences, such as a penalty and even getting shut down.

One integral part of your research before starting your business should be finding out the licenses and permits that you need according to your state to make your business legal.

Below you will find the necessary licenses and permits for home-based businesses.

Essential licenses and permits to set up a home-based business

1.   General Business License

Regardless of the kind of home-based business, most jurisdictions require new businesses to obtain a general business license. This license allows your home-based business to sell products and services both online and in person, as well as collect sales tax on any taxable goods.

How to apply?

You have three options for obtaining a business license:

• File on your own.
• Hire a third-party filing agency to assist you in preparing your licensing applications.
• Consult an attorney who can help you in obtaining your business license.

If you plan to file on your own, follow these general guidelines:

• Determine which business licenses you will require.
• If your city or county lacks a business licensing agency, you can find information on acquiring a basic business license from your local tax office.
• Gather the necessary business documentation for your application.
• Apply for a business license.
• Make sure you renew your license in a timely manner.

2.   Sales Tax License

Most states need business owners to collect sales tax when selling taxable items or providing taxable services. To collect sales tax on taxable transactions, a business must obtain a sales tax license, also known as a sales tax certificate of authority 

Remember, executing a taxable transaction without a certificate of authority might lead to huge fines (the fine depends on the particular situation).

How to apply?

Follow these steps to register with your state to collect sales tax:

• Gather important information such as your employer identification number (EIN) and other business identifying information.
• Go to your state’s Department of Revenue website.
• Search for or click on the “Sales and Use Tax” section.
• Click the link and follow the information given on the website to register your business.

3.   Professional License

Professional licenses allow individuals who have satisfied specific education, work experience, and exam requirements to use their skills as their profession. The license demonstrates that you are qualified to execute a given profession. It includes ventures like attorneys, daycare centers, tattoo artists, hairstyling salons, architects, financial advisory services, etc. Each state has its list of licensed occupations.

How to apply?

• Conduct research and learn about the licensure process for your profession.
• Contact the appropriate state licensing board to obtain complete guidelines and visit their website. The U.S. Department of Education also created a resource that mentions over 50 regulated professions in the U.S. that need to be licensed.
• You will certainly be requested to demonstrate that you meet the licensing body’s academic standards. You should apply for a credential evaluation in this scenario.

4.   Sign Permit

A sign in front of your house can be an excellent way to promote and advertise your home-based business. However, you will need to obtain a sign permit to do so. Almost every city has specific sign ordinances limiting the sign’s location, type, size, and lighting that you can use for your business.

Be sure to learn about the regulations you must adhere to and apply for a permit. If you place a sign without a permit, you will face penalties, and the proper authority will remove your sign.

How to apply?

Each city has its own set of sign permit regulations, which may include any or all of the following:

• A paper sign application is usually required.
• Complete elevations, a site plan, and fabrication plans for the sign are necessary for the application process.
• Proof of property ownership or written approval from the building owner is needed.
• You will need materials lists, structural calculations, and other engineering specifications for your one-of-a-kind design.
• The final fees are determined, and the city will complete the paperwork to approve the permit.
• After approval, the sign is ready to be constructed and installed.

5.   Home Occupation Permit

A home occupation permit is essential if you’re planning to operate your business from home. The permit shows that you will operate your business according to Homeowner Association (HOA) laws and that your property owner is aware of your business. These permits protect your neighbors’ rights and ensure your business will not create any trouble for them.

How to apply?

As with everything else, each state or city’s application process will be slightly different. However, the fundamental aspects will be the same:

• Review any restrictions that may apply in your residential zone.
• Contact your local authorities.
• Check with your local Sales Tax Division to see if you will also require a Sales Tax License.
• Fill out an application for a Home Occupation Permit in your area. As previously stated, you must find an application for your city, as each is unique.
• Pay an application fee.
• Contact your local government officials or homeowner association if you have further inquiries.

6.   Health & Safety Permits

This permit is commonly required if your clients or customers come to your home for business purposes. You may also need an inspection and a permit from the local fire department, but it is usually unnecessary if your home-based business provides service or goods online.

However, if you need to keep an inventory of potentially flammable products at your home for your online business, you will have to get a permit. If you are selling food and beverage, you will also need a permit from your health department.

How to apply?

• Visit the directory of local health departments from the National Association of City and County Health Officials (NACCHO).
• Contact your local county health department for details on the requirements for a health permit.

What are the risks of not getting licenses and permits for your home-based business?

There are numerous requirements for starting a home-based business, and one crucial requirement is obtaining the necessary licenses and permits.

Failing to get or renew a business license can be a costly mistake, and you can face significant penalties such as fines, lawsuits, and, in extreme cases, the business will get shut down. Because the consequences of operating a home-based business without a license can be far-reaching and have a long-term impact on you and your business, you must understand the risks of non-compliance.

Many home-based businesses begin by using loans. When people face situations like this, they end up drowning in debt, falling behind on payments, and eventually ruining their credit. If you are one of them, seeking assistance from a credit repair company is the best option for you, and it will assist you in regaining control of your finances while also repairing your credit.

Conclusion

There are numerous examples of many blooming home-based businesses facing massive fines due to failure to obtain appropriate permits and licenses.

Getting necessary permits can be time-consuming and complicated, but making this effort can save your business from facing the difficulties mentioned above. As a result, registering and obtaining the necessary permits and licenses should be one of the first steps to starting your home-based business.

_{The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything. The information provided in this post is not intended to constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.}