Starting a New Business

How to Navigate the Rules and Regulations That Affect Your Business

Rules and regulations certainly aren’t the most exciting part of your new small business, but not having your paperwork in order isn’t a mistake you want to make. From business licenses and permits to zoning laws and insurance, make sure your business is compliant from the very beginning.

Business Licenses

City business licenses

Apply for a business license with your city’s business licensing department. You absolutely need a city business license to operate. Then, depending on the nature of your business, you may also need a state or federal business license, or both. You need the same licenses and permits for an online business as you would a brick-and-mortar location.

State business licenses

States typically require licenses for businesses where customers’ physical safety or financial well-being depend on the business owner’s knowledge — like building contractors, electricians, plumbers, real estate brokers and insurance agents.

State licenses are also typically required for business owners delivering personal services that can affect a person’s health— like doctors, nurses, barbers and cosmetologists.

Federal business licenses

Federal licenses do not affect as many businesses, but are required for certain industries that affect the public welfare — such as meatpacking, investment advisory services and operating radio and TV stations.

The Small Business Administration’s website provides additional information on state and federal licensing requirements.

Business Permits

Depending on your location and type of business, you may also need a business permit or permits to operate. Many of the same types of permits required by cities are also required by counties if you live outside the jurisdiction of a town or city. County requirements are usually less strict.

Fire department permits

If you handle flammable materials or run a building that will be open to the public, you may need to either obtain a permit from the local fire department or schedule periodic inspections.
If you don’t meet fire safety regulations, you may receive a citation.

Local government agencies are particularly vigilant about enforcing fire permit regulations against businesses where large groups of people gather, such as restaurants, day-care centers and retirement homes.

You may also need a permit from your city’s air and water control department if you burn materials, use products that produce gas or dump any materials into waterways or sewers. For instance, if you use spray paint that emits gas, you may need a permit.

Land use permits

Some cities have restrictions on signs limiting where you can place them, how large they can be and what type of lighting you can use. To see if you need a permit, check with your city’s planning and zoning or development and permit department. If you rent, you should also get written permission for the land use from your landlord.

Sales tax permits

You may need a sales tax permit (also called a seller’s permit, certificate of resale or certificate of authority). Home-based businesses selling taxable goods and services generally need a sales tax permit, as do retailers and wholesalers.

Health department

If you plan to sell or handle food, you’ll need a permit from the county health department. The health department will conduct an inspection before issuing a permit.

Alcohol permits

If you own a bar or serve alcohol of any kind at your business, you’ll need to register and obtain certain permits from the Alcohol and Tobacco Tax and Trade Bureau.

In some cases, businesses will need a large number of permits. For instance, if you operate at multiple locations, you may need permits for each location. Some business owners find this easier to manage if they hire compliance experts to help them research what permits and licenses are needed.

Rules - Body

Zoning Laws

Zoning laws are intended to preserve the character of the neighborhood for your neighbors. They tend to restrict things like:

  • Excessive traffic and parking from visiting customers
  • Receiving customers in a residential neighborhood at odd hours
  • Loud noise
  • Eyesores such as large signs
  • Safety hazards
  • Types of animals allowed on a property

You probably cannot run a retail business out of your home due to the amount of traffic it would create. Depending on your city, you may or may not be allowed to run your accounting firm or your dog grooming business from your home. You could have noise ordinances in place for specific hours each day. If the neighborhood isn’t zoned to accommodate alpacas in your yard, you’ll be in violation if you do.

When you apply for your business license, your city zoning department or planning department with check to see whether your location is zoned for the type of business you intend to run. This will also determine whether there are enough parking spaces to support the type of business you want to operate.

If your area is not zoned for your type of business, you will need to apply for a variance or conditional-use permit by presenting your case to your city’s planning commission. You can usually get a variance granted as long as you can demonstrate that your business won’t disrupt the neighborhood you want to open in.

If you’re running your business out of your home, strict zoning regulations prohibiting business use of homes may apply to you, so you should research this carefully. Check if your local homeowner’s association imposes any restrictions as well.

Insurance

Depending on where you’re located, you may be required to carry professional liability, product liability, general liability or commercial property insurance. Additionally, your homeowners insurance may not cover business losses, so if you’re operating out of your house, in-home business insurance is advisable.

Use Local Programs and Regulations to Your Advantage

City and county government

Local city and county governments often support local businesses through financing programs. These can cover direct grants, subsidized loan programs, direct equity investment, and tax credits and deductions. Market research and free advertising programs may also be available. Consult your local chamber of commerce for details.

Your city’s business center is your best resource for keeping track of local regulations. Unless you keep up-to-date, you won’t know when certain laws change and how they vary from place to place. Overlooking them can get a business in trouble, or could mean you’re overpaying on taxes. For example:

  • Chicago recently changed its ordinances on tobacco sales to prohibit sales to those under 21, with citations to be issued to violators.
  • Real estate title insurance companies in New York City and Miami are subject to reporting obligations for all-cash sales.
  • San Francisco has a gross receipts tax ordinance which has certain exemptions based on items federal and state law prohibits the city from taxing.

Local banks and credit unions

Local community banks and credit unions may have programs geared toward supporting local small businesses. Small financial institutions provide more than half of small business lending, compared to less than one-fifth provided by the 20 largest banks.
Unlike national banks, they have a vested interest in developing the local community. Local financial institutions may be able to point you toward networking connections that can be useful to your business.

Start on the city level with licenses and permits and work your way out from there.

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