October 26, 2021
If you’re like most folks, the legal side of starting a business probably scares you a little bit. Or a lot. With good reason, because launching your own business is a big deal!
Imagine you’ve already taken those first few crucial steps to starting a business and then you stumble across some random article about needing a business license first. Which you haven’t done. Do you really need one before your biz goes live?
You might not need one yet. Here’s why.
Most people think of business licenses for a coffee shop, liquor store, or nail salon. But you might need a business license for your small business as well. The purpose of a business license is so that the state or city knows what you’re up to and so they can protect the public from scammers.
How do you get a business license? You’ll receive one when you register your business in your local area, usually at the city and/or township level.
Then, your business license will help pay for your small share of infrastructure in the area you live in — roads, police to help in emergencies on said roads, and so on. Pessimists might say that local business licenses are really just another way for your local government to get a few extra bucks out of you. (Are they wrong, though?)
It’s always important to run a legally legit business. One upside of getting a business license is that it can make your business more trustworthy to your customers and to any other business you may be looking to work with.
However, you don’t always need a business license to do so. Don’t let the official and scary-sounding “license” throw you off!
Some businesses do require that you have a business license to operate. Restaurants, coffee shops, salons and other local staples almost always need a business license first.
A great place to start if you’re not sure whether you need a business license is to search “Your Town” + “chamber of commerce” to direct yourself to the site or person who can help answer this question for you.
If your business is still fresh and you’re not even sure of its future yet, you don’t want to waste your money or time on this resource-intensive endeavor. It’s more important to get out there and make sales to get some capital (and start paying yourself!) than it is to make sure all your “i’s” are dotted and “t’s” are crossed.
Most cities have a grace period because they know as a new business, you have bigger fish to fry than dealing with a business license right out of the gate. Even after you’re up and running, your offers might disqualify you from the need to get a business license, or you might operate outside of city limits where one is required.
We’ve talked about how easy it is to file an LLC on the blog before. It takes, like 10 minutes to do! But in our experience, filing for a business license was much, much more complicated. We’re talking about filling out an 86-page application here. (Not an exaggeration.)
Your mileage may vary, but typically, if you miss something in the course of setting up your business, someone (who wants your money) will point this out to you and you can take care of it later. No biggie.
They may even point it out to you several times and then fine you for operating without a business license, but guess what? This fine is oftentimes less than what you would have paid for all those years of a perfectly licensed business.
Business licenses may be legally required before your business starts operating, but that doesn’t mean you should wait around for them, or get so put off by the licensing process that you give up before you even get out there.
If you’re small, or in the early stages of your business, you likely want to take a hard pass on a business license until you’re a little bit more established. But if you know you’ll be operating for a while or you’re ready to scale, a business license can make you look more legit, and it can connect you to other biz owners in the area.
At the end of the day, the decision to get a business license is yours. But look at the whole picture before you go off spending all that money and taking the time to fill out the application. Plus, there are other more important tasks you need to check off your list to start your business legally. Just sayin’.
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