Retailers are regulated by a wide range of business licensing requirements. These vary depending on the type of facility, operations, type of business and jurisdiction where you do business.
In this article, we explore business licensing for retail businesses, including general obligations, license compliance pitfalls, and how to maintain compliance.
Determination of retail licensing requirements
Determining the type of licenses your retail business will need to operate legally is a complex undertaking. Licenses are issued by several authorities, including federal, state, and local governments. Licenses may also vary between states and local municipalities. Even if you operate in one location, you may need several different licenses, registrations, and certifications.
Generally, business activity and physical location will determine which licenses you need. However, you also need to consider the vertical of your industry and the products and services offered.
For example, if you sell regulated items like alcohol or tobacco, you will need to regularly review your specific product license types while meeting other requirements. Similarly, regulated retailers of sensitive products (such as pharmacies) are required to obtain special licenses and certifications.
Typically, a retail operation will need licenses in the following four categories:
- General Licenses and Deposits. Including sales tax permits, workers compensation deposits and payroll forms.
- Regulatory permits. If you operate in certain industries, such as construction, transportation, and food, you may need to obtain various regulatory permits.
- Local licenses and repositories. Local jurisdictions, such as cities and counties, typically require retailers to complete DBA registration and obtain business lien licenses, as well as signage and zoning permits.
- Professional licenses. A trade or professional license demonstrates the level of skill or knowledge needed for a specific job. Licenses are issued by a state, local, or federal government agency and confer the legal right to work in a profession.
For more information, see Commercial Licenses by Industry and Retail and Consumer Commercial Licenses.
Penalties for non-compliance with licenses
Business licenses are in place to regulate your retail store and protect the public. Any violation risks attracting negative media attention and public perception.
Non-compliance can be costly. Many jurisdictions are tightening licensing regulations. If you are found to be non-compliant, the owners and/or the company could be subject to fines and penalties. Some offenses even carry criminal penalties or may result in the seizure of business assets or the closure of the business.
Non-compliance can also impact strategic business plans, such as postponing mergers and acquisitions, your ability to open new locations or offer new product lines.
The Pitfalls of Retail Business License Compliance
Non-compliance is easy to fall for, primarily due to the complexity of business licensing requirements. In fact, many companies are unaware that they are no longer compliant. For example, food retailers often overlook local environmental department permits such as Food, Oil and Grease (FOG) registrations; sewage discharge; and other food and health records.
Commercial License Triggers
To ensure you stay compliant, here are some triggers that may require you to obtain new licenses or update existing ones.
- Change of company name, moving of the head office, addition of a new product or service. Each of these items could require you to update your business licenses.
- Doing Business in a New Jurisdiction requires new licenses.
- get out of a state will ask you to cancel or update your business licenses.
- Establishment of the link with the sales tax. E-commerce can trigger new requirements. This applies even if your business does not have a physical presence within the borders of a state in which you sell online. In states with sales tax, you may need to collect and remit taxes on goods and services sold if your business meets the law’s nexus requirements.
- Change of ownership. If your business ownership changes, some authorities require updated license applications, while most require specific “change of ownership” filings. These can include background checks of the new owner, fees, and a new commitment to the rules that govern the license.
- Change in regulations. As laws and regulations change, the types and number of licenses, permits, and registrations your business may need also change. Up to 65% of license registration requirements change every year.
For more information, see Commercial Changes That May Impact Commercial License Compliance.
Maintain license compliance for your retail business
To help you stay compliant and avoid fees and penalties, follow these steps:
- Gather all relevant commercial licensing data in one portfolio.
- Establish a process for reviewing license requirements on a regular basis (quarterly, semi-annually or annually).
- Keep up to date with business licensing requirements in your industry.
- Use technology to track timelines and documentation for filing, managing, and renewing business licenses.
- Identify triggers for new commercial license compliance actions.
For more help, see these tips for creating a commercial license compliance plan.
Business license assessment is essential
Since business licensing regulations and requirements are constantly changing, it makes sense to hire a business license assessment service.
This service will assess the legal footprint of your business based on where you operate and identify gaps in compliance with business licenses and tax registration. This information will then be centralized.
The service will also collect additional information, such as forms, fees, and filing instructions for licenses you don’t have but legally need. If any licenses are identified as expired, the service will reconfirm renewal dates, account numbers, and present you with a full audit of what is needed to maintain compliance.
Regardless of the size of your retail business, license compliance is complex. Your retail business will be well prepared for success (and avoid unnecessary fines and penalties) if you understand your licensing obligations and implement the appropriate compliance strategies.
CT Corporation can help you determine your licensing requirements. Our complete business in three steps license verification service includes the following:
- License ID: We generate a custom report of all required commercial licenses.
- Gap analysis: The search results are matched against your current license list.
- License verification: We check the status of all licenses deemed necessary (including license numbers, renewal dates and account numbers of all licenses you have provided to CT)
CT also provides license evaluation services to identify compliance gaps, including licenses you do not have but should have and licenses you have that may not be in good standing.
To learn more about how CT can help you manage your commercial licensing needs, contact a CT service representative or call (844) 878-1800.