Operating a business often requires having some kind of license, even if it’s just a standard business license issued by the state. If you’re running a certain type of business, you and your employees might also need a professional license. In this article, we discuss the importance of acquiring all of the proper business licenses, before launching your venture.
For example, you need a medical license to practice dentistry, acupuncture, or chiropractic care. In food service, most states require at least one person to be food safety certified, but some states require everyone handling food to obtain a basic level of certification. And if you’re going to sell restricted items, you will probably need a special license issued by the state.
If you skip getting the proper licenses to run your business, you risk facing serious consequences that can force you to close your business and you might even end up facing legal consequences.
So, if you’re thinking about skipping required licensing, or running a business illegally, here are all the reasons to reconsider.
- You will get evicted if caught
Getting caught running an illegal business will most likely end in an eviction. If your landlord finds out you aren’t licensed, especially if you’re intentionally doing something illegal, they will have no choice but to evict you from the property. As long as you’re there, you are a liability to them, and there’s no other option.
Being evicted from a commercial space isn’t something you want to deal with because it will make it extremely difficult, if not impossible, for you to rent a new place in the future. An eviction will fall off of your credit report eventually, but not for many years.
- You can’t get a business bank account without a business license
Operating without a business license is usually illegal, but the worst part is you can’t get a business bank account without one. If you’re trying to run a legitimate business but have sidestepped the licensing requirements, you’ll have to combine your business and personal finances, which will make it harder to track expenses. It’s not impossible, but it will require tedious accounting practices to stay on top of everything. When you have a separate business bank account, you could technically wait until the last minute to account for your expenses prior to filing your tax return.
- There could be legal consequences
If you get caught operating a business without the required licenses, there’s a good chance you’ll end up in legal trouble. If you don’t have a state business license, but you meet all the requirements, you could be ordered to stop doing business immediately. Depending on what you’re doing, you could also be hit with some fines, and if you’re actually committing a crime, you can expect to be sued.
For example, if you’re caught running your business for six months without a state-issued business license, you might get fined a percentage of your gross income during that time. This can get pretty expensive the longer you operated your business unlicensed.
If you’re wondering how you might get caught if nobody can prove you’re doing something wrong, consider that it can happen in a number of ways. For instance, your landlord might discover your activities accidentally, or a customer might take you to small claims court over an issue and your lack of licensure will be revealed. It’s just not worth the risk.
- People will sue you to protect their intellectual property
If you try to make money off of someone else’s intellectual property (IP) without permission, you will likely get sued. For example, say there’s a life coaching company that will train and license individuals to coach other people according to their protocols and standards. Although you don’t need a professional license to be a coach, you can’t make money by teaching their information and systems unless the company certifies you to teach on their behalf.
If, after working with one of their coaches, you decide to teach their programs to other people as a business, they will probably sue you when they find out what you’re doing. Worse, because you won’t be properly trained, vetted, and authorized, you’ll probably end up being exposed as a scammer.
Don’t skip getting all required business licenses
Trying to get around paying for professional licenses, or attempting to circumvent necessary training is not only deceptive, but once caught, people will spread the word about your business being a scam, and you’ll have a hard time doing any kind of business in the future. It can be tedious and time-consuming to go through the motions to get your licenses, but running a business without having all the required licenses is just not worth the risk.
