“You need a license for this business” isn’t something any entrepreneur wants to hear. But with a little homework and a few trips to the local county or state offices you can save yourself a lot of headaches — and expenses.
Some businesses in some states do not require a license. In many cases you can operate a consulting business, or a retail store, for example, without one. But you need to do some homework to find out what's required in your state or locale. Among the business licenses and forms to be aware of:
DBA (Doing Business As)
If you want to call the business something other than your own name, go to your local county or state office and file for a "Doing Business As" or DBA name. This is helpful even for sole proprietorships, which needn’t actually incorporate. Rules vary by state and even by county, so check with yours to see what they are. A good place to start is at the Small Business Administration's web site.
Even if you don’t incorporate, filing for a DBA helps when it comes to filing taxes and the like, as it helps in keeping things organized separately form your personal returns.
Beyond the name of the business, one set of rules to be wary of are zoning laws, and those can vary quite a bit even between towns in the same state. As a general rule, big cities will have more complicated zoning rules than small towns, though small towns can actually be more restrictive. That is, in some smaller communities operating any business out of your home can violate residential-only zoning, whereas a big city like New York might have multi-use zoning for a given building.
Many small businesses such as doctors, lawyers and dentists get around this by applying for variances or waivers. Any of these can be obtained from the city or county zoning authorities. But the best thing to do is to go to the local city or county clerk’s office and ask.
Once you understand your locality’s rules, the next thing to figure out is whether you need a license for your business.
Odds are if you are planning to be a doctor, lawyer, or therapist you need one from your state. Some states even require licenses for barbers and cosmetologists. And most places require a license for contracting work of any kind, either electrical or carpentry. In New York State, for example, an electrician requires a license and the requirements can vary depending on what county you are in. New Mexico has statewide licensing.
Licenses are often necessary for international businesses. If you plan on shipping anything overseas, you need to check to see if what you are sending out is legal and what country you can send it to. Even shipping a small computer to certain countries can require export duties to be paid, and then there’s the issue of technology restrictions – most people don’t realize that there are specific rules for shipping even personal computers to some countries, depending on what type they are.
The rules vary a bit depending on the country you want to send something to. For example, Cuba, Iran, North Korea, Sudan and Syria are pretty much off-limits. But Honduras or China might have a different set of rules depending on what it is you want to send. Many shipping companies won’t take your item unless it has an Export Control Classification Number (ECCN), which the BIS can provide.
Another department that watches this is the Office of Foreign Assets Control.
Many of the OFAC rules apply to people in the financial industry, though there are also specific regulations for transactions more than a few thousand dollars, which most banks have to report. And no matter what you are selling, it is never a bad idea to check the name of the person you ship to against the names on the OFAC lists.
The key thing to remember, as always: Get good advice from a qualified legal professional. A few hundred dollars spends up-front will be well worth it.