The Basics of Business Licenses

by DMA Staff | Apr 04, 2017

What is a business license and who is required to maintain one?

Business licenses are permits that are issued by governmental agencies and allow individuals or companies to conduct business within the specific government's geographical jurisdiction. The license is authorization to conduct business and is typically issued by the local government. Business licenses vary among states, and local county/city municipalities. A single jurisdiction may require multiple licenses and those licenses can be issued by a variety of governmental departments and agencies. There are often many licenses, registrations and certifications required to conduct business in a single location.

The business activity and physical location (address) typically determine most license requirements. There are also some that are based on sales into a jurisdiction. Governmental agencies can fine and/or close a business if it is operating without the required licenses.

There are over 120,000 possible licenses that each have their own rules and regulations on what will be required to operate a business. For example, some jurisdictions charge no fee or a $100 fee yearly and require very little information to register and renew your business license annually. Whereas others, may require the square footage of the business, employee headcount, annual gross receipts, officer information, alarm company information and many other random types of information. Some jurisdictions require that an officer sign the business license form and the fee can be calculated based on a combination of the employee headcount, gross receipts or any other required information requested. Business Licenses responsibilities may be grouped in various departments of an organization as most of the time companies do not have a dedicated business license team. The taxes remitted for the most part are low and considered an administrative nuisance by most companies. 

Who do you speak with at the corporation regarding their business licenses and what are some questions you can ask?

We have found that Business Licenses are handled in various parts of the company rather than having their own dedicated group. DMA has found that business licenses are frequently grouped with one of the following departments; accounting, legal, risk management, real estate, property tax, sales tax, handled by each local office (the decentralized approach) or they may outsource to a provider. Some questions that you can ask to assist in knowing if this would be a good opportunity to partner with DMA are the following.

  1. How many licenses are currently being filed?
  2. How many licenses are gross receipt based?
  3. What types of licenses do they file?
  4. Are annual reports part of their responsibilities?
  5. Is new registration research being performed on an annual basis?
  6. Do they feel they are compliant in all locations or do they feel that they may have some exposure based on their location listing, gross receipt reports or payroll reports?

Click here and download our case study to see how DMA assisted our client with their business licenses during acquisition of a new company who was behind on payment.   

Please do not hesitate to contact your local DMA office should you have specific questions or requests.