Licences, Permits and Registerations

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The 2014 Business License Compliance HandbookFrequently asked questions from companies that struggle with the burden of business license compliance and management.

White Paper by Business Licenses, LLC

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Table of Contents

Introduction to the 2014 Business License Compliance Handbook Page 3

Chapter 1: The Basics of Business License Compliance Page 4

Chapter 2: The Trouble with Business License Research Page 9

Chapter 3: The Most Overlooked Liability of an M&A Page 11 About Business Licenses, LLC Page 13

The 2014 Business License Compliance Handbook, by Business Licenses, LLC

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The 2014 Business License Compliance HandbookAlmost every business operating in the United States of America is required to maintain multiple business licenses,

permits, and tax registrations with the government. That’s a tall order when you consider that there are 55 states and

territories, over 3,000 counties and parishes, approximately 36,000 municipalities, and over 35,000 special purpose

districts that overlay these governmental authorities. Every one of these entities has the authority to require a license,

permit, or registration. They often do. Consequently, a comprehensive business license portfolio often includes 4

separate authorizations for the most basic business activity and a multiple of that for highly regulated activities. This is

a substantial headache for any firm. The South Carolina Chamber of Commerce, for example, estimates that it takes

47 hours to fill out the state’s paperwork for a new business. But it gets even worse. 65% of license, permit, and tax

registration data change each year, ranging from minor modifications of forms or revisions of fee schedules to major

changes in the law.

No doubt this predicament is already provoking some pesky questions (and a little heartburn). Here at Business

Licenses, LLC, we do business license compliance all day long for high-tech, low-tech, and no-tech companies.

To help you cut through the red tape inherent in business license compliance, we’ve gathered together the most

frequently asked questions by tax, legal, and compliance departments.

You’ve got questions?

Bring ‘em on. We’ve got answers.

Keep in mind that this is a living document. If you don’t find what you’re looking for here, let us know. If you subscribe

to our mailing list at http://www.businesslicensesolutions.com/resources/faqs, then we can also keep you updated as

the questions and answers roll in.


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Chapter 1: The Basics of Business License Compliance

Why are so many business licenses, permits, and tax registrations required?Governments on the federal, state, and local level require these licenses in order to:

• Identify a business, make sure it’s accountable for its actions, and prevent fraud

• Protect the public by ensuring a business meets minimum health and safety requirements

• Track business activity for tax purposes

• Notify citizens of activities that impact them

What makes business license data such an immense burden?

Business license data is voluminous and includes license information, licensing authority contacts, statutes,

regulations, ordinances, interpretations, clarifications, procedures, forms, instructions, fee schedules, and the

unique requirements of every federal, state, and local authority. Many corporations opt for 3rd party assistance

just to keep track of their business license portfolio data and make sure that they always remain compliant.

Does it get worse when a company operates in more than one location?Most definitely. Compliance for businesses operating in multiple locations is a colossal hardship. For example,

one well-known retailer manages 180,000 separate licenses and permits per year. Another large retailer’s

annual compliance budget is $25 million. Opening or closing locations, moving locations, changing names,

changing ownership, or launching products multiplies the problem exponentially.

Are any industries exempt from this burden?We sometimes cross paths with companies that think they have unique flexibility due to their particular

business. Perhaps they sell commonly accepted goods, operate a conventional business model, or possess a

sterling ethical reputation. Why would any governmental authority pursue them? The answer is simple. They

generate revenue (and with great revenue comes great scrutiny).

Who issues business licenses, permits, and tax registrations?Business licenses, permits, and tax registrations are issued by federal, state, county, and local governmental

authorities to allow individuals or companies to conduct business within each authority’s jurisdiction. Local

governmental authorities include cities, municipalities, boroughs, townships, and a vast array of special purpose

districts for fire, police, water, economic development, etc. There are over 74,000 government bodies in The

United States, each of which has the authority to issue licenses, permits, and registrations.

These jurisdictions overlay and overlap, so a single business often requires multiple authorizations issued by

different levels of government. In addition, within each level of government there are often multiple agencies

with authorization authority, each with its own requirements, multiplying the compliance challenge by several

times. Table 1.1 shows a limited sampling of government agencies below the federal level that issue licenses,

permits, and tax registrations.

What is the difference between business licenses, permits, and tax registrations?A license typically covers a certain business activity in a specific location for a period of time and is intended to

be regularly renewed. A permit is usually more permanent, covering an activity in a specific location. However,


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Table 1.1: Sampling of Agencies that Issue Licenses, Permits, and Tax Registrations

permits are usually narrow in scope, so each time an activity takes place in a new location, a new permit

is required. Some permits also require inspections in order to remain in force. Tax registrations are usually

indefinite, although they need to be updated when facts about the business change.

The types of licenses required for businesses depend on a number of factors, including location, industry,

products & services, sales territory, and number of employees. There are over 200 different types of business

licenses, permits, and tax registrations. Activities as basic as putting up a sign may require a unique license.

Table 1.2 is a (very) truncated list of license types that companies often need to procure.

It’s 2014. Doesn’t the internet make business license compliance easier?Not all local authorities post their forms and documents on the Internet. Even when they do, they are often

incomplete, out of date, or confusing. It is rare that such forms are embedded with fill-in fields, which means

they must be completed by hand or typewriter. Local governments are notoriously unresponsive or unhelpful

when trying to obtain information by telephone or email. Standing in line or waiting on hold to obtain a license or

ask a question is a costly waste of time. Panic can set in as deadlines loom, especially if a company’s licensing

staff is stretched to capacity, or as is more often the case, a company has no dedicated licensing staff at all. A

company can opt to retain a law firm or accounting firm to conduct the relevant research, but the costs can be

exorbitant. Accountants and attorneys tend to loathe this type of work as it is outside their core competencies

and yields little profit.

What fees are involved in business license compliance?It depends on the license and the governmental authority, but license applications typically entail governmental

fees. These internal check requests are expensive and a burden to process, especially if a company is dealing

with many locations. Check requests take time and the processing costs are often between $15 and $75, which

may be more expensive than the application fee itself.

How often do business licenses need to be renewed?Most business licenses have to be renewed once a year. This fact alone can be a nightmare when many

STATE COUNTY MUNICIPALITY

Board of Equalization

Board of Pharmacies

Bureau of Corporations

Agriculture Department

Health Department

Labor Department

Revenue Department

Transportation Department

Building Department

Bureau of Weights and Measures

Code Enforcement Department

County Clerk's Office

Environmental Resources Department

Health Department

Planning Department

Tax Department

City Clerk's Office

Public Works Department

Finance Department

Fire Department

Inspections Department

Parking Department

Police Department

Zoning Department


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Table 1.2: Sample License Types


SAMPLE BUSINESS LICENSE TYPES

Basic Business LicenseIssued by a municipality and/or county and required in most states for all businesses and in some states only for regulated businesses.

Federal Employer Identification Number Issued by the federal government and required for every business except sole proprietors with no employees.

State Tax Registration NumberIssued by the state government and required for every business except sole proprietors with no employees.

Fictitious Business Name RegistrationIssued by the state and/or county and required for almost all types of unincorporated businesses.

Health Department PermitIssued by the state and/or county and required for various regulated businesses, especially those involved in handling food.

Sales Tax License or Sellers Permit Issued by the state and required for any business selling items or services.

Fire Department PermitRequired for various businesses, especially those that attract crowds, such as nightclubs and bars.

Alarm PermitTypically issued by local police departments and required for businesses whose alarm is connected to a monitoring service.

Specialized Occupational Licenses

Required for businesses involved in regulated occupations such as automotive, insurance, legal, medical, real estate, tax advising, etc. This is in addition to professional licenses required for the individuals employed in these occupations.

Specialized Local Business License Required for regulated industries such as construction, entertainment venues, pawnbrokers, street peddlers, second-hand dealers, taxis, etc.

Home Occupation Permit Issued by the municipality and required in some cases for businesses that are home-based.

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locations are involved. Good calendars that track due-dates along with specific license details are rarely

maintained. Therefore, companies rely instead on inadequate and loosely organized spreadsheets created by

individuals who (let’s say this delicately) are not typically trained in the nuances of business license compliance.

Moreover, when they depart a company, they leave a void in the licensing process behind. Companies often

have to start over and develop a new workflow.

Who must comply?Nearly every business must obtain some licenses, permits, or tax registrations and keep them current. Even

activities that are not a formal business can trigger a license requirement. For example, in some jurisdictions the

occasional renting out of a vacation home requires a license.

If a company operates in multiple locations, it will need to comply with licenses, permits, and tax registrations in

every location in which it does business, even if the company does not have a physical business location in the

jurisdiction. This rule may apply, for example, to businesses that:

• Perform onsite services

• Operate trucks delivering goods

• Lease equipment

• Manage real estate

• Operate ATMs, vending machines, and kiosks

• Attend trade shows

• Employ field sales personnel

What are the dangers of noncompliance?A business can encounter a number of problems if it is noncompliant. These consequences can range from

annoying to devastating. For example, a business that is out of compliance may:

• Not receive permission to open a new location

• Not be able to release a new product or service

• Waste valuable time due to repeat inspections

• Lose revenue due to existing locations being padlocked, closed, and/or suspended

• Be charged with expensive fines, interest, and personal liens

• See its insurance coverage placed at risk and liability exposure increased

• Find that it cannot raise funds, sell shares, pass due diligence, or enter into other important contracts

• Discover that its customer contracts are voidable under the law

• Get suspended from a particular business or occupation

How proactive should a company be with business license compliance?Due to some of the constraints already mentioned in this paper, many companies find themselves taking a

passive role with business license compliance. They rely on renewal notices sent by government agencies and

pay whenever told. That sometimes works. But it often creates more problems than it solves. As a general rule,

pinning your hopes to the efficiency and reliability of government agencies is not a smart business practice.

Consider that many renewal notices sent by government agencies don’t reach their intended destinations at all.

Since current license certificates often have to be displayed in a public place at every location, this can cause

enormous headaches when inspectors make surprise appearances.


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To minimize risk, it’s never a good idea for corporate headquarters to depend on either the reliability of the

government or the due diligence of its local employees. They should maintain copies of updated license

certificates in a central repository so that they can be quickly produced in the event that an inspector asks for

them or if they engage in an important strategic transaction.

Is there a big takeaway to all this?Naturally. Business license compliance can be a nearly impossible challenge since every little change that a

company undergoes can trigger an unexpected compliance crisis. Even those few companies with dedicated

licensing departments often find themselves understaffed, especially during crunch times. However, there is

good news. Partnerships, processes, workflows, and automated solutions exist that can keep a company out of

trouble during good times and bad.

That’s where our experts and consultants often enter the picture. We are always happy to discuss a company’s

challenges and help them find solutions that address its most pressing needs, meanwhile working hand-in-hand

to formulate strategies that will forever relieve the onerous burden of business license compliance.


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Chapter 2: The Trouble with Business License Research

Are there general guidelines for conducting business license research effectively?Yes, there is an excellent framework for conducting research on business licenses. We know it’s a good one

because we created it and our research teams use it daily. We can briefly touch upon each of the 6 major steps

of the framework, but in order to truly jump into the process, we recommend reading our detailed white paper on

the subject. It can be downloaded for free at http://www.businesslicensesolutions.com.

How do you define a business in the context of business license research?It’s not easy because even simple definitions can have large ramifications for a licensing authority. For instance,

you may view your business as a chain of grocery stores, but that seemingly straightforward definition may

encompass many types of goods and services. If you also process money orders or cash checks, then these

activities may require additional local, state, and federal licenses. If you sell heavily regulated products like

tobacco or liquor, then you probably need even more licenses. That’s why it’s necessary to thoroughly examine

every activity that your business conducts, from your core products to your service offerings, while keeping in

mind that how you obtain and distribute your products can trigger a licensing event too.

What are hidden and nonexistent locations?They are each variations of the same challenge. You may have locations that you don’t know about. That

sounds absurd... and it is absurd. However, many corporations forget to consider home occupancy licenses


Define Your Business

Core Products

Map YourLocations

Ancillary Products

Primary Locations

Find ProperAuthorities

Supply Chain

Hidden Locations

RelevantMunicipalities

ContactOfficials

Distribution Chain

NonexistentLocations

3rd Party Providers

AgencyConsolidation

Create LicensePortfolio

Service Offerings

MisalignedLocations

LocalOrdinances

HumanNature

DataAnalysis

StartOver

I II III IV V VI

http://www.businesslicensesolutions.com

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when their employees work from home or keep business-related property in their personal residences. They

also forget to consider the intricacies of “store within a store” situations in which their products are displayed by

retailers in subletted spaces within larger stores.

Nonexistent locations pose a similar challenge. It may be unintuitive, but not having a location can also be

relevant to the business license research process. Consider employees and/or contractors that perform services

in localities where they have no intention of formally declaring a physical presence. They often forget to consider

how municipalities regulate local contracting services.

Why is it hard to find the proper authorities?It’s not always easy to determine which municipal authorities have jurisdiction over your locations. Sometimes

business locations fall into unincorporated areas and there is no telling in advance whether or not you will need

to navigate the complex requirements of both county and city laws, not to mention the Rube Goldberg-like

network of townships, fire districts, school districts, and other special districts.

Wouldn’t it make more sense to contact officials near the beginning of the research process?In our experience, agency officials are hard-working and eager to help. That’s the good news. The not-so-

good news is that they are not always well-versed in the subtleties of business license requirements. It is not

reasonable to expect them to perform the research for your business or act as your department’s personal

consultants. This is why we recommend directly contacting officials at the end of the research process. Our

modus operandi is to use officials to verify the information that our research framework has already uncovered.

Are there recommended tools for creating a license portfolio?The Business License Management System (BLMS) is an excellent place to start. It is specifically engineered

for the purpose of tracking business licenses, permits, and tax registrations in a dynamic structure. Keep

in mind that the data that you need to manage is too complex and the variables are too unwieldy for any

application with a linear layout. Licenses are imposed at the local level and the intricacies of their rules fluctuate

tremendously. This will cause needless frustration when you try to track the essential variables with a 100+

column spreadsheet that continues to grow in leaps and bounds.

How often is it recommended to repeat the research framework?Business license portfolios quickly get stale. No government is in the habit of proactively contacting businesses

to let them know about upcoming changes to their regulations. Fairly or not, they expect you to know. That is

a frightening proposition if you can’t stay on top of the constantly changing rules. But it doesn’t have to be that

way. If your staff follows the framework that we have outlined here and repeats the process on an annual basis,

then your business will always remain one step ahead.


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Chapter 3: The Most Overlooked Liability of an M&A

Why are business licenses relevant to a merger & acquisition?You can acquire a company and possess their assets. You can merge with their staff and take advantage of

their experience. You can purchase their patents and own their business model. But you can’t automatically

absorb their business licenses or their regulatory licenses or even their building permits. That’s the inconvenient

reality that frustrates many buyers during the M&A process. The more due diligence you and your legal

department muster, the more obvious it will be that business and regulatory licenses — such as financial,

security, food, alcohol, contractor, and environmental licenses — are serious problems that simmer beneath

the surface. If you are counting on operating your acquired locations on day one, selling your new products on

day two, and keeping your distribution and supply chain functional on day three and beyond, then you better be

confident that the business licenses owned and maintained by your acquired entity are up-to-date and that a

strategy is in place to transfer them to your possession.

What should a company know before entering into a merger & acquistion?We have a detailed worksheet that assesses a company’s risk of noncompliance during an M&A. We can

preview part of it in table 3.1, but in order to see the entire worksheet, we recommend downloading it for free

from http://www.businesslicensesolutions.com.

Table 3.1: Noncompliance Risk Worksheet

Do some business licenses face greater scrutiny than others during a merger & acquisition?Not all business licenses are the same. Some can be updated and allowed to continue with little disruption.

Others must be forced to expire so that replacements can be issued. Still others require waiting periods and/or

inspections before ownership is reassigned. Of all the licenses that may exist in a company’s portfolio, we find

that by far the most difficult to transfer are health and food licenses.


ABOUT THE ACQUIRED ENTITY

1 Does the acquired entity conduct many diverse activities? Yes No ?

2 Does the acquired entity conduct affairs in at least 2 different states and/or territories? Yes No ?

3 To operate lawfully, does the acquired entity require at least 100 licenses across all locations? Yes No ?

4 Has the acquired entity declined to produce an extensive business license portfolio? Yes No ?

5 Does the acquired entity have any past liabilities and/or previous noncompliance records? Yes No ?

6 Has the acquired entity neglected to update their secretary of state office records? Yes No ?

7 Does the acquired entity have business licenses that require Qualifying Agents? Yes No ?

8 Has the acquired entity been managing their business licenses in a decentralized manner? Yes No ?

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What steps can a company take to mitigate the risk of noncompliance during a merger & acquisition?There are numerous concrete actions that we recommend a company take to protect themselves both prior to

closing and after the closing of an M&A. They include:

• Pinpointing all the locations in which the merged entity will operate and geocoding them for accuracy

• Ensuring that company listings with secretary of state offices are consistent and up-to-date

• Confirming that physical license certificates are furnished prior to closing

• Applying for all the regulatory licenses that require grace periods

• Having a 3rd party audit the new portfolio to confirm that all licenses have been transferred correctly

Finally, it’s a good idea to get detailed advice from a business license compliance expert. It’s one thing to be

cognizant of the different types of business licenses and the unique challenges inherent in each, but you also

need to be able to quickly identify and pigeonhole each of your intertwined business activities. If you don’t have

a compliance specialist already on staff or at least have their contact information circled in your address book,

then let this be your wake-up call; it’s better to get moving now than wait until you’re knee deep in the muddy

waters of a merger & acquisition gone awry.


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About Business Licenses, LLC Business Licenses, LLC has spent the past decade serving over 11,000 clients, including many of the Fortune

500, with software, services, and outsourcing. This unparalleled background makes us the leading end-to-end

governmental business license compliance provider in the U.S. to companies of all sizes.

Our accomplished staff includes attorneys and paralegals who are expertly familiar with domestic and Canadian

licensing requirements. Our staff excels in state and local government compliance, research, and licensing laws/

regulations as well as software development, systems, web development, and customer service.

Contact InformationBusiness Licenses, LLCRobert Pitt Professional Plaza

21 Robert Pitt Drive

Monsey, NY 10952

Main Tel: 888-609-6008

Fax: 845-356-8397

[email protected]

Sales, Affiliates, and PartnershipsTel: 800-679-3611

[email protected]


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Licences, Permits and Registerations