What Licenses do I need to start a business?

I have seen and read many times people asking how to start a business. It is a simple process but can be difficult to write in a small blog post because it depends on where you live, what type of business you want to start, and how much knowledge you already have.

What’s the easy answer? You just start. You start selling. You start doing. You start researching.

In most states and counties, you may be able to earn a certain amount of revenue before you need to officially make your business a business and some states and counties may require that you get licensed before making $1. What do you do then? Call or google your state and your county’s “business clerk office”, “business license requirements”, or “start a business in my county”. Start there and make a list of things you need to do. You can always call the office too.

For example, in Nashville, you need to fill out a business license and pay a $30 fee. You also need to contact the Tennessee Department of Revenue to set up an account to collect “Sales and Use Tax”. Basically, if you plan to sell retail merchandise, you need to collect the state tax money and then send it to them.

This is not all. Certain businesses and individual employees require specific licenses to operate, such as hair stylists, real estate agents, insurance agents, accountants, etc. You need to research the requirements in your area and state. Day care centers, even in-home day care centers, may require licenses before opening to the public.

If you live in a neighborhood with a Homeowners Association (HOA), there may be certain rules that govern types of businesses that can operate from your home. My HOA is strict. I can work from home but I cannot operate a business from my home. So, I can list my home address if I do online work but I cannot sell clothes from my living room with people stopping by. There is gray area for the person-to-person sales though. If you are successful selling Avon or Pampered Chef, then you may need to ensure the hosting parties are not violating the HOA rules.

Then you may need to purchase business insurance. That way, you can protect yourself, your home, business, and other assets in case something goes wrong. And you know what, something MAY truly go wrong. Contact an insurance provider, maybe the company that insures your car, home, or whatever.

Now, to put this all in perspective, if your kid sells lemonade and brownies at the street corner one Saturday morning, hopefully no one is complaining and the state tax folks aren’t asking for the tax money from your 9 year-old. You could probably sell some crafts and homemade goods to your neighbors and make a few bucks without all the hassle, even though it typically would be illegal. I am not sure it is worth the time for someone to come after you for $500 sales of wood signs. But if you want to grow your business because people are buying, then you need to create a real entity. You can also then enjoy the tax deductions too! (In this case, you need to contact an accountant to see what you can deduct, your savings plan, and other ‘real’ business stuff).

Here’s the checklist of stuff to research, although this may not be inclusive:

  • Your county or city business license through the clerk’s office
  • Your state ‘Department of Revenue’ to collect Sales and Use Tax
  • Specific individual or industry-specific licenses
  • Neighborhood HOA requirements
  • Business Insurance
  • Add anything specific to your industry or location

Don’t be discouraged with the items that seem like red tape. Each activity brings you closer to your entrepreneurship goal: to make money and bring your products to consumers!

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