All Those Little Government Things
Most of the mail I receive from readers deal with the big things of business -- marketing, employees, leadership. But many readers also need help with those little, aggravating details of getting the right licenses or permits just to do business in the first place.
So let's clean out the Inbox. As I do, keep in mind:
- Each level of government has its own specific laws; contact your city, county, and state authorities to understand all the regulations for your type of business.
- It's always a good idea to consult a business lawyer. You may also want to make an appointment at your local Small Business Development Center. Locate the SBDC network in your state at www.sba.gov/sbdc.
The bureaucratic things you'll have to deal with fall into three general categories:
- Identification numbers -- to keep track of your business with government authorities, for instance, federal identification numbers for income tax purposes.
- Licenses (or certifications) -- required to engage in certain types of businesses and professions, for instance, contractor's license, license to sell alcoholic beverages, optometrist certificate.
- Permits -- required for particular, often more limited, actions, for instance, building and construction permits, special event permits. Sometimes, these terms are used interchangeably, such as permit instead of license or vice versa.
Here are questions I get most frequently:
What's a federal tax identification number and where do I get one?
A Federal Employer Identification Number (FEIN or FIN) or Employer Identification Number (EIN) is the same thing. If your business has employees, or is a corporation, LLC, or partnership, you'll need an EIN. Even if you're a sole proprietor, you may want an EIN because you'll be asked for a tax ID number by companies you do business with, and an EIN seems more professional than a personal social security number.
It's very easy to get an EIN. Go to www.irs.gov and download Form SS-4 or call 1-800-TAX-Form to get the form by mail. Be prepared to answer the questions on that form, then call 1-866-816-2065 (toll-free), and the IRS can assign you an EIN over the phone.
Do I need a state identification number?
States may assign you an identification or account number for various reasons. The usual numbers are corporation number for incorporated businesses, employer account number for employer businesses, certificate numbers for specific licenses.
Here's an easy way to find your state requirements and resources on the Internet -- just type in www.(your state's abbreviation).gov. In other words, Arizona would be www.az.gov and Iowa would be www.ia.gov. Look for links to help businesses get started in that state.
Do I need a business license?
Typically, you will need a business license. Licenses are regulated by each county and city. You probably won't need a license for a home-based business. Check with your local and county governments.
What's a resale license and where do I get one?
A resale license enables a company to purchase goods or materials for manufacture without paying sales tax because the tax will be charged to the ultimate consumer.
In other words, if I own a sporting goods store, I can buy golf clubs from the manufacturer without paying sales tax because I will charge customers the tax. If I'm going to use the clubs myself, I'm supposed to pay the sales tax since the exemption is only on goods for resale.
Once again, each state has its own requirements and terminology. Some states don't require a license -- just a signed statement of intent to resale goods.
What's a DBA or fictitious business statement
If you use any name other than your own personal name for doing business, you'll need to file a "doing business as" (DBA) or fictitious business statement, usually with your county government. You'll likely have to also publish this information in a local newspaper. This enables the public to know who's actually operating a company.
In other words, if I own a flower shop called Blooming Nuts, I have to file a DBA, so people can find out that I'm the nut behind Blooming Nuts.
Securing all these licenses, numbers, and permits can be a hassle. Don't let it intimidate you. After all, it's a whole lot better than getting into trouble later.
Copyright Rhonda Abrams, 2003
Rhonda Abrams writes the nation's most widely-read small business column and is the author of The Successful Business Plan and The Successful Business Organizer . Register to receive Rhonda's free business tips newsletter at www.RhondaOnline.com.