The Blog

October 26, 2021

Why You (Might) Not Need Business Licenses

You Don't Need A Business License, Woman In Sweater Smiling At Laptop

Starting your business is a big deal. Then you get to the legal crap and, if you’re like most folks, it scares you a bit. You start doing your research and you stumble across the business license information. But you’re just starting your business and you’re not even sure if it’s even worth spending the money or time to get a business license. 

We feel you. But you might not even need one yet… here’s why. 

What’s a business license? 

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. 

You will receive a business license when you  register your business in your local area, usually at the city and/or township level. Business licenses are an outdated concept, but important nevertheless. These local licenses are really just another way for your local government to get a few extra bucks out of you. In theory, your business license is supposed to pay for your small share of infrastructure (roads, police to help in emergencies on said roads, etc.) that you use to commute to your small business… but we all know how that goes in this post-2020 world. 

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. One upside is that a business license can make your business more trustworthy to your customers and to any other business you may be looking to work with. Some local areas also do a good job at connecting you with other licensed businesses in your area, but this is not the norm. 

Do you need a business license for your business? How to Tell

It’s always important to run a legally legit business. However, to do so, you don’t always need a business license. 

If your business is still fresh and you’re not even sure if it’s going to hit the ground running, 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 areas 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.

Some businesses, however, do require that you have a business license. Restaurants, coffee shops, salons and other local staples almost always need a business license to operate.. 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.

The government always wants its money, which is why despite anything else going on with your business filings, licenses, etc., it’s always important to stay on top of paying your taxes (both personally and as a business). If you want to learn more about how to pay taxes as a small business,  click here  and dive into the content we’ve created all about that!

What happens if I run my business without a business license? Should I be freaked out?!

Let me tell you a little story. I had a coworking space in a small town outside Atlanta so that I always knew I could find a peaceful spot to work, because my home could be loud or crowded at that time. 

One day, the Business Police (not a real thing btw-- it was just like someone’s aunt and her friend for moral support) came in and raided the coworking space. They pointed a stern finger and spoke firmly at anyone and everyone who would listen about the seriousness of working in this coworking space without a business license. 

Totally freaked, we all ran out and got the application for our license. But then, most of us just… forgot to fill it out. Getting an LLC was a ten minute process, but this license was an 86 page application (no, that is not an exaggeration-- eighty six pages of who knows what). We had the best of intentions and ended up fine, even without a business license. 

This story is anecdotal, so of course it might be different where you are, but in our experience 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. In this case, they likely would have pointed it out several times and then given us a fine for operating without a business license. 

And the kicker? This fine is oftentimes less than what you would have paid for all those years of a perfectly licensed business. 

At the end of the day, the decision to get a business license is yours. But, you want to look at the whole picture before you go off spending all that money and taking the time to fill out the application. 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. After all, once you’re making money you can have people and they can do these errands for you *cackles in a monocle*

Are you ready to find out what you actually need to start a business legally? Check out  this video and drop your questions in the comments!

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