Business License - Need or Want?
Updated: Feb 1, 2022
I'm self employed - I am a contractor - I just freelance - I am a real estate agent - I sell crafts on Etsy - Do I need a business license?
In my opinion ... Why not?!
There are plenty of benefits of registering your LLC with a business license. Here are just a few that make it a good choice:
1. It is super simple and relatively inexpensive to have one.
You have a one time charge for your license and then pay an annual renewal. Long term having this license establishes the date of formation as when your business began.
2. Having a business license also allows you to open a business bank account.
This enables you to separate your business income and expenses from your personal bank accounts. You do not want to get into the habit of commingling funds. - More information on commingling funds here: https://skillernlaw.com/2012/09/17/commingling-of-business/
3. Establishing your business also makes it easier to obtain and build business credit!
Depending on what your business is you may need credit for several things! Whether its materials, machinery etc! Careful not to overload your business with debt but a great resource to have!
More specifically in the real estate and mortgage world, there are other benefits!
A. In the mortgage world the small license fee actually prevents SO MUCH headache when buying a home.
While you may not want to buy a home for a few years, having the business established over a certain number of years actually helps you qualify for more home. In general you will need 2 years of tax returns to qualify, BUT if your business has been active over 5 years you only need one year of returns!
B. Having your license also removes the need for a CPA to verify your business
(IF you are a self employed and self filing taxes this is a big thing!) Not using a CPA for your returns means you would have to find one willing to review your current and past returns, then write a letter stating they are correct, when your business was established etc.. Not only is this difficult (puts the CPA at risk if you default on your mortgage) BUT also expensive!
If you are wondering if you should proceed with a business license it is always my recommendation to speak with an attorney or CPA for specific and specialized recommendations for your business.
I hope my experiences have shown you something new! If you have questions or even just some thoughts reach out and let's chat!