Do you need a license to start a business at home?

investopedia.com - The 5 Licenses and Permits You Need for Your Home-Based Business

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Licenses vs. Permits: What's the Difference? Licenses Permits Expiration and Validity Longer-term or permanent Temporary and require frequent renewal Limitations and Restrictions Very few, if any More restrictive than licenses Style and Condition Often permanent and may come in card form Less permanent, such as a paper or sticker

1. General Business License

Any business, including home-based businesses, must obtain a local city or county business license. This is a basic license that allows the holder to engage in business activities within the local jurisdiction. If your city or county doesn't have a specific business licensing department, you can obtain information on obtaining a basic business license at your local tax office. In addition to obtaining a general business license, ensure that your business complies with local zoning ordinances. Sometimes this is certified when you apply for your license, but in other areas, you need to double-check with the city or county zoning department. Neighborhoods also tend to have restrictions on the operation of home businesses. You tend to find this in the form of homeowners associations (HOAs). If your business does not meet local zoning ordinances or neighborhood requirements, it is possible to obtain an exception or variance, but go through the proper channels to do so. A license may be designated as a business tax certificate, reseller's certificate, or license.

2. Professional License

Certain home-based businesses require state or federal professional licensing or certification. This includes ventures like daycare centers, hairstyling salons, legal services, or financial advisory services. The best way to ensure you get the proper documents is to contact your state business office. You can also visit the official state website to obtain a list of all occupations or businesses that require professional licensing.

3. Health and Safety Permits

Depending on the type of business you intend to operate, you may need to get an inspection and a permit from the local fire department. This is commonly required if customers or clients actually come to your home to conduct business. It's not usually necessary if your home-based business only provides goods or services online—unless you keep an inventory of potentially flammable products at your home. Environmental licenses or health department permits are less common for home-based businesses. These documents are most generally required for businesses that engage in the wholesale or retail sale of food and beverage products. In any event, it's easy enough to check with state environmental protection agencies or local health departments to find out if your business requires any type of environmental inspection or permit.

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Operating a business without a proper sales tax license is a criminal violation in some jurisdictions.

4. Sign Permit

If you plan on putting out a sign where you live to advertise your business, make certain that you are in compliance with all local ordinances. Nearly all cities or counties have specific sign ordinances in effect that govern the size, type, and location of business signs. The lighting of signs is also usually restricted. Many HOAs, condos, and apartment complexes have their own restrictions on commercial signs. If you own your home, look over your deed and check with your HOA if you have one. If you rent, it's always a good idea to get permission from your landlord before you put out any signage.

5. Sales Tax License

A sales tax license may be part of the general business license in some areas. But a separate sales tax license is required in other areas in addition to a local business license. Not sure if you need a separate tax license? The local department from which you obtain a business license can tell you if you must obtain a separate sales tax license and where to get it at either the state or local level. Make sure that you have this covered before you open your business.

Special Considerations

While the licenses and permits listed above are needed by almost all home-based businesses, the following are some of the other documents you may need. Whether these are required depends entirely on the type of business you intend to run. VAT Tax License: If you sell goods and services to foreign consumers, you may be required to get a special license for the reporting and payment of value-added taxes. You may also use a payment service that collects the tax for you. If you sell goods and services to foreign consumers, you may be required to get a special license for the reporting and payment of value-added taxes. You may also use a payment service that collects the tax for you. Health Department Permit: This special permit is for anyone who runs a food-based business, such as a catering service. It outlines food handling, preparation, and storage.

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This special permit is for anyone who runs a food-based business, such as a catering service. It outlines food handling, preparation, and storage. Employer Identification Number (EIN): This is required at the federal level. The EIN acts like a Social Security number, which you need if you aren't operating as a sole proprietorship. This allows you to file your taxes under your business name. If you have employees, you can use this number for payroll purposes. Remember, this isn't an exhaustive list. Be sure to check with your state and local agencies to ensure you have the proper documents to run your business. You can also contact the SBA for additional resources. Do You Need to Register a Home-Based Business? You need to register most home-based businesses at the local, state, and federal levels. Begin by registering at the state level, which entails providing the appropriate agency with the pertinent details like the kind of business you intend to operate. You'll also need to register it with the local government, which will provide you with any necessary permits needed so you can begin operations. You will have to register with the IRS for taxation purposes. How Do I Register My Home Business? Register your business with the appropriate state agency in order to get your business license so you can begin operations. Check with the local and county agencies to see which permits, if any, that you need to run your home-based business. You'll also have to get a taxpayer identification number (in some cases, you can use your Social Security number) so you can file your business taxes with the iRS.

investopedia.com - The 5 Licenses and Permits You Need for Your Home-Based Business

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