Tuesday, January 26, 2021
Home Business Taxes Business Licenses: Which Type Do You Need?

Business Licenses: Which Type Do You Need?

If you are a professional and you plan to start a business, then you may need a professional license in addition to a business license, which you can apply for directly from the state or federal government.

DBA License

A DBA (Doing Business As) business license is filed at the state, municipal or county level of government. A DBA has to be filed if your business does not include your name. Also keep in mind that even if you use your last name and the business name includes a suffix such as “& Sons”, “& Co”, “& Associates”, or anything else that denotes an additional owner, then you need to file for a DBA license. If you merge into a corporate or LLC name, which is identical to your business name, then you don’t need to register for a DBA license. But if your incorporated name or LLC name is fictitious or different from your business name, then you have to file for a DBA license.

Sales Tax Identification Number

If you lease or sell any taxable product or services in any state, then you are required to obtain a sales tax identification number, also called a seller’s permit, retail license, resale permit or wholesale license. You need to acquire this sales tax number because as a retailer you will collect sales tax from your customers, which you have to pay later to the state. You will also need a sales tax ID to buy wholesale, and if you are a wholesaler, you will require it to sell wholesale. For instance, when you sell any product, you will be able to buy it wholesale without having to pay taxes for the product to the wholesaler. You will later charge your customers the taxes when you sell it to them.

State Employer Tax ID Number

If you hire people to work for you, you are required to obtain a state employer’s tax ID number and a federal employer tax ID number. Employment taxes have to be paid to both the state and federal government. The federal tax identification number also serves as your business number, just like a social security number is your personal identification number. It is always a good idea to obtain this number, even if you don’t need it immediately, as you can use it to open a business checking account.

Lastly, in order to avoid any civil or personal liability, it is important to either form a Limited Liability Company (LLC), or to incorporate your business. This is recommended because a corporation or LLC forms a completely separate entity and thus it separates you from the business. If you incorporate or form an LLC, then your debtors can only sue your business for your business assets, and not you or your personal assets such as your home, automobile or any of your personal belongings.

To reduce your stress and to obtain all the licenses you can hire an attorney. Try to find one that is not too expensive. After acquiring all the above licenses you can then open a business account and legally start your business.

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