Why would a business license be revoked or suspended?
A business license can be revoked or suspended for several reasons, including:
- Failure to renew
- Lapsed requirement (i.e., a failure to obtain a required surety bond or insurance certificate)
- Violation of local codes or ordinances
- Violation of state law
- Business misconduct
- Failure to pay fees, taxes, or judgments
In several states, a business or professional license can also be revoked for failure to pay child support.
Heavily regulated industries have more rigorous licensing requirements. For example, states may require contractors and construction companies to report certain events or information (such as changes in business structure, personnel, bonds, and insurance) or face an automatic license suspension. A license could also be suspended if a qualifying individual for the business (if required by the state for that industry) leaves and is not replaced within a designated time frame. In some cases, the license may be revoked for one to five years, and the business can incur fines amounting to a percentage of the total contract value.
Marijuana businesses are also closely regulated. These businesses must meet numerous state and local requirements to maintain a marijuana license once that license has been approved, including original eligibility requirements, product testing, compliance reporting, and ensuring the business is operational by a certain time. In South Lake Tahoe, California, a marijuana dispensary’s cannabis and business licenses were revoked for failing to open on time! In Missouri, state cannabis regulators revoked a number of cannabis business licenses for failure to meet social-equity eligibility criteria.
Consequences of having a revoked or suspended business license
If you operate without the required business licenses, you can face several penalties, including:
- Financial penalties
- Interruptions in business operations
- Criminal sanctions (such as imprisonment)
- Negative publicity
A revoked business license can also impact client relationships and future business opportunities. For example, contractors with a revoked or suspended license may fall into breach of contract. Contracts with general contractors often stipulate that the contractor maintain compliance with all laws. If a license is suspended it can create challenges with clients as well as with the state contractors’ board.