The following information pertains to people operating within the United States. If you are outside the U.S., please check with your local government officials or an accountant or other business professional to learn the requirements where you live.

Business licensing is something that varies, often widely, from state to state and county to county within the United States. Plus, cities and townships and other forms of government may have their own regulations and requirements.

Do you really need a business license?

Of course, the proper answer to that is almost always “yes.” But, if you’re not planning on selling anything, and perhaps working simply as an affiliate or making money through ads on your site, or if you just plan to run your “business” as a hobby to hopefully make extra income, then you might be able to get away with not having an actual business license. And, if the aforementioned is true for you, in some areas you might not even be required to have a business licenses for that type of “business.” But, of course, check with someone local to you, such as an accountant or government official, for the right answer as it pertains to where you live and what type of business you want to be in.

Don’t forget that, even if you don’t have a business license, you still will have to report any income on your taxes! The potential downside of not being considered an actual business is that you won’t be able to deduct any expenditures. Again, you want to talk to a tax professional or your accountant about these things.

Having a business license will be especially important if you do plan on selling any merchandise. Many wholesale merchants will not sell to you if you do not have a business license!

Some enterprising people will just start operating their business, whether locally or online, without any type of business license, to save money while they try to determine what type of business might be profitable for them. Then, once a business takes off, they’ll get a license to be official. While you may be able to get away with this, it is perhaps not advisable from a legal or tax point of view.

In most cases, a business license is fairly affordable, depending upon where you live and what you consider affordable. Also, it is usually straight-forward. You’ll probably just need to fill out a simple form, write a check and that’s it! It’s usually an easier thing to do than what you may expect. Again, the best thing to do is consult with someone locally who knows all the local requirements, as well as state and federal requirements and who can also advise you on tax issues, including sales tax requirements. It sounds like a lot, but it is probably going to be the easiest part of starting your own business, so don’t let the fear of paperwork stand in your way!

You’ll also want to give due consideration to your business name, but that will be a subject for another post.

This entry was posted on Tuesday, July 15th, 2008 at 12:01 am and is filed under Starting a Business. You can follow any responses to this entry through the RSS 2.0 feed.
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