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Compliance一月 08, 2024

Research: The first step in business license compliance

By: John Randazzo

The essential first step to managing business license compliance is to conduct proper and thorough research regarding business license requirements specific to a company’s business activities in all locations where you have nexus.

Right from the start and as your business grows, staying compliant with business licenses is important. Typical business events — including business formations, launching new products and services, changing a business name, adding a new location, and more — often trigger new business license requirements.

Maintaining compliance is no easy feat. Not adhering to these requirements can hit a business hard, leading to financial penalties or, in severe cases, even site closures. It's vital for any business, no matter its size, to keep up with these regulations.  

Business license research: Fundamental and complex

Business license research can be a challenging step. Here are some reasons why.

  • Across the U.S., there are thousands of local, state, and federal jurisdictions or licensing authorities, each with their own requirements.
  • There are thousands of different license types.
  • Information such as the correct licensing authority and how to contact them, their requirements and license types is often not easy to find. Thorough research requires extensive time either in online searches or talking directly with multiple government agencies.
  • Regulatory bodies frequently alter their license requirements.
  • Each licensing authority sets varying frequencies for filing requirements across different licenses. Comprehending the criteria for one business license filing might not be applicable to other mandatory filings.
  • Certain straightforward business events may cause new unforeseen licensing requirements. For example, in some states, changing a business name or office location can require an entirely new license.
  • Certain industries and types of business activities have special requirements for business licenses. For example, the requirements related to providing construction services can vary significantly by state.

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Clearly, with all these variables, business license research is a crucial yet complex initial step in compliance. It’s also where a multitude of structural problems can occur. Some businesses don’t have the resources to dedicate the needed amount of time to business license research; they may underestimate its complexity or the time required to do it right. Other businesses may rely on too few staff members or fail to provide adequate cross-training, leaving them vulnerable to when key employees leave the organization. Even businesses with adequate internal controls and dedicated resources can miss requirements in this ever-changing landscape.

Non-compliance is costly

Incomplete research logically results in incomplete compliance. Failure to acquire and manage all required business licenses can be costly. Each year, businesses are faced with fines, penalties, and even forced to stop doing business due to missing business licenses.

For example, the city of Independence, MO, was owed tens of thousands of dollars in unpaid license fees by many of the city’s 9,000 businesses. City business license compliance officers went door-to-door to collect that revenue. The plan is for these sweeps to continue monthly.

The Department of Financial Services for New York ordered an insurance company to pay a $3 million penalty for soliciting and engaging in insurance business in New York without a license.

In California, the Contractors State License Board (CSLB) regularly conducts sting operations to catch unlicensed contractors. The penalty for a first-time offense can include up to six months jail time in addition to a fine.

As these examples illustrate, non-compliance can lead to:

  • Stopping business operations until violations have been cleared.
  • Criminal penalties and the possibility for company officials to be summoned to appear in court on the company’s behalf.
  • Forced delays in new product and service launches, or the opening of new locations.

The value of engaging a business license compliance expert

Relying on compliance experts to conduct your business license research saves you and your staff from enormous research time, gives you answers quickly on an ongoing basis, and reduces the risk of missed renewals.

The best compliance partner will be responsive to your needs, have deep expertise in determining business license requirements for all industries across the country, and provide a full range of services to guide your organization through the research phase and beyond as your needs evolve.

Look for a research service that provides:

  • A comprehensive report detailing all your business license requirements unique to your business
  • Detailed up-to-date information on all necessary licensing fees and forms
  • Current points of contact at the licensing jurisdictions
  • Alerts about any specialized requirements, such insurance and bond requirements, background checks and pre-requisites to obtaining a license
  • Supporting information to help you understand when the requirements apply to your unique business (e.g. revenue thresholds)

Trusting qualified experts with your business license research needs is the first step toward peace of mind. An accurate and complete report of your requirements leads to full compliance and reduced risk for your business.

Learn more

To learn more about how CT Corporation can help you manage your business license needs, contact a CT Corporation business license specialist.

John Randazzo, Business Consultant
John Randazzo
Business Consultant
John has been consulting with corporations and law firms on corporate legal transactions and business entity compliance since joining CT Corporation in 1994.
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