Entrepreneur Insight

Licensed to Sell: Small Business Licensing and Permitting

Advice from business owners on getting the necessary licenses and permits for a smooth opening.

Getting licenses and permits to open a small business seems like it should be pretty straightforward, but any business owner will share that there are seemingly endless hurdles they had to jump through first. From making sure they are qualified to apply for a business license, to knowing what information and documents are needed to get the necessary licenses and permits, the process for opening a brick-and-mortar business can sometimes take years. Regulations for permits and licenses also vary from city to city, not just on a state or federal level, which business owners need to keep in mind if they are opening in multiple locations. Nevertheless, below are some best practices for applying for business licenses and permits, from business owners who have been through it all.

First, register your business and business name

Prior to obtaining a business license, you must register and claim your business name, which is known as both a DBA (“Doing Business As”) and a fictitious business name (the terms are interchangeable). Registering a DBA is necessary if you are a sole proprietorship doing business under a different name from your own, and also if you want to open a business banking account. The purpose of a DBA is to protect business owners by giving them the right to a name and to protect consumers by letting them know who they are doing business with. However, in most states a DBA does not guarantee “exclusive use” of that name unless your business is registered as an official business structure, like a limited liability company (LLC) or a corporation.

You first need to search your county database to see if the name is taken, or whether there are similar names in use; if not, then you can register that name. Hailey Kwon, owner of Dots Cupcakes and Dots Café in Pasadena, California, suggests that you can hire a newspaper to handle the business name registration for you.

“If you’re opening a business, you have to print your business name in a publication for four weeks,” says Kwon. She says any publication will do, and most publications offer these services.

Kwon adds, “They go and handle all of it. You pay whatever fee for the printing part, and they handle the registration part. They charge a small fee, too, but it might be worth it so you don’t have to go down to whatever office.”

Kwon says that you can also claim your business name by filing for an LLC, which is what bar owner and restaurateur Lupe Martinez did when she was looking into buying a business.

“If you’re going to register your business as an LLC, that’s the first thing you have to get from your lawyer, and that’s going to cost about $1,000,” shares Martinez. “You have to do that before you open escrow.”

Getting a business license and seller’s permit

Once you have a DBA, you can obtain a business license from the city in which you are operating. In Los Angeles County, not all businesses need a license in order to operate, but it is important to check with your county and city officials to see what the requirements are.

Most states also require businesses to have a seller’s permit (also referred to as a resell permit, sales tax permit, sales tax license, etc.). Just like the name suggests, a seller’s permit allows you to sell products and services in your state and to collect sales tax on those sales. Some states, like Oregon, Alaska and Montana, don’t have a statewide sales tax, but Alaska and Montana do allow localities to charge sales tax, so it’s best to check with those states to see whether you need to collect sales tax.

In order to get a seller’s permit, you need to have an employer identification number (EIN) even if you don’t have employees, and you need to know the NAICS code (how the U.S. government classifies businesses) of the products you are selling. You can either mail in an application or submit it in person. In California, says Kwon, you can apply online for a seller’s permit through the California Department of Tax and Fee Administration.

Of course, these are not the only licenses and permits a business will need. Depending on what type of business you run, there could be a myriad more you will need to apply for.

Because Martinez’s establishments often involve entertainment and dancing, she had to apply for a lot of different licenses and permits. “Let’s say you have a pool hall, karaoke, live entertainment—all of that has to be licensed,” says Martinez. “Even if you have a pool table—that’s considered coin-operated equipment and you have to be licensed for that, as well.”

Kwon, who opened up her second Dots Cupcakes location in historic Old Town Pasadena, had to abide by city regulations regarding the size of her store sign. “In Old Town, you can’t change the façade of your building,” says Kwon. “There’s a lot of places that have historical preservation that you need to abide by. [You have to get] signage permits. You think you can just put up a sign, but you can’t—it’s actually measured, and you have to submit those plans.”

Research city plans and regulations beforehand

One thing that Kwon wishes she did before she opened Dots Cupcakes was more research into city regulations before she signed the lease.

When Kwon was opening her second Dots Cupcakes location on Fair Oaks Avenue in Pasadena, she had no idea there could be a potential parking issue. “They had a parking structure across the street,” she says. “We’re part of an outdoor mall. Basically, there’s a certain amount of parking allowed for each store.” The city of Pasadena requires stores to have a certain amount of parking spaces available based off of the seating and linear space. Kwon didn’t realize that one of the other tenants, a movie theater, took up so much of the parking that there wasn’t enough space left for her store—and without parking, Kwon couldn’t submit her building permits and open Dots Cupcakes.

Luckily, the movie theater moved out and freed up the necessary parking spaces for Dots Cupcakes. “The lesson here is, you have to find out how much parking is allowed for what you’re trying to open,” Kwon advises. “If you’re renting a place, most of the time your landlord will give you an abatement of two or three months where you don’t have to pay rent. But in circumstances where there’s parking issues, you’re going to have to start paying rent and you haven’t even submitted your permit yet. It can cost a lot of money, for rent and time.”

Martinez has also run into problems with city regulations. When Martinez purchased the bar in Huntington Park, Calif., that would become Novacane Bar and Grill, she thought that it would be simple to get all the licenses and permits transferred to her name.

“We thought, ok, this place was permitted, we didn’t see an issue—why couldn’t we get those permits, too?” she says.

But when Martinez went to the city to get everything transferred, she found out that they didn’t want “another bar there.” The area was known for a certain kind of bar, Martinez explains, and city officials thought she was going to continue the trend.

“I’m there telling them, I’m not like that, this is different, I’m going to do this, do that,” she says. “But they were like, ‘Nope, we don’t want it.’ I had to beg and cry, and just keep going there every day and say, ‘I need to speak to your boss, I need to speak to somebody else, please come and look at the place.’”

(Photo credit): Gettyimages.com/10'000 Hours

"The best resource is talking to somebody and asking what the actual steps are. Actually meeting with somebody at the county and saying, ‘This is what I want to do, give me four different scenarios that I could face—if I face one hurdle, what’s option number two?’”

-Hailey Kwon

Go to city hall in person

Both Martinez and Kwon found that the best—and only—way to get things done was to go visit each city department in person.

“The best resource is talking to somebody and asking what the actual steps are,” advises Kwon. “Actually meeting with somebody at the county and saying, ‘This is what I want to do, give me four different scenarios that I could face—if I face one hurdle, what’s option number two?’”

It takes a certain doggedness to get your business off the ground, believes Martinez. “I’ve never done it through phone or email,” states Martinez. “You can leave them thousands of messages, and they’re not going to respond to you. I always make it a point to be there at 7 o’clock in the morning and keep going until I get someone assigned to me. Once you get someone assigned, then you deal with that person. On the phone, no one is going to be attentive or helpful to you.”

When you’re there and ready to talk with city representatives, Martinez recommends making multiple copies of all the documents you will need and to make “stacks” for each department you’ll need a permit or license from—she says around seven or eight stacks should do.

“You have to have a copy of your business license, a copy of your lease, a copy of your ID, a copy of your bank account, a copy of your fictitious name, a copy of your LLC,” she lists. “Don’t expect them to make copies for you, or to look it up. No, you have to give them, like, a package for them.”

Although the process can be confusing and time-consuming, Kwon believes the difficulty is ultimately beneficial to the small businesses that push through. “I always say, they’re really weeding you out into opening up your business, which is actually a good thing,” Kwon says. “Opening a business costs a lot of money and a lot of resources. If you aren’t able to get through the opening—that’s the easy part. Once you open, you have to actually start making money and pay back all these permits that you got.”

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