Small businesses don’t have to worry about federal permits and licenses, but all businesses must know about federal tax registrations.
On the federal level, there are two tax registrations that you should know about. The first is the application for an Employer Identification Number (EIN), which every business should file. It's fairly simple and straightforward. You fill out and submit Form SS-4, which is available online at the IRS website (www.irs.gov). You can submit the form by mail, or you can use the IRS phone system to file by phone in which case you'll get your number the same day. There is no cost for getting an EIN number. If you’re a sole proprietor, you may use your own Social Security number rather than apply for a separate Employer Identification Number. However, it's usually a good idea even for sole proprietors to obtain an EIN—especially if they plan to hire employees or retain independent contractors. It also helps keep your business and personal affairs separate.
The second federal registration requirement applies if your business is a corporation and you want to elect status as an S corporation. In that case, you need to file Form 2553 (Election by a Small Business Corporation; also available at www.irs.gov).
The federal government doesn’t require permits from most small businesses, but it does get into the act when certain business activities or products are involved. Below is a list of the business operations most likely to need a federal license or permit, along with the name of the federal agency to contact.
|Business||Agency to Contact|
|Investments advisers||Securities and Exchange Commission|
|Ground transportation business such as a trucking company operating as a common carrier||Federal Motor Carrier Safety Administration|
|Preparation of meat products||Food and Drug Administration|
|Production of drugs||Food and Drug Administration|
|Making tobacco products or alcohol, or making or dealing in firearms||Bureau of Alcohol, Tobacco, and Firearms of the U.S. Treasury Department|
Increasingly, some environmental concerns are being addressed by regional (multicounty) agencies rather than by an arm of the state or local government. If so, you may need a permit or license from that regional body.
In many areas, control of air pollution is now handled by a regional (multicounty or state) agency that issues permits and monitors compliance. For example, in northern California, the Bay Area Air Quality Control District covers at least seven counties. A regional body with environmental responsibilities may also have jurisdiction over wastewater discharge or the storage or disposal of hazardous materials.
Questions affecting the use of water by a small business are usually dealt with at the local (city or county) level, but some issues may fall within the jurisdiction of a regional authority. For example, if your business is in a semirural area and plans to draw its water from a well rather than the public water supply, a regional health authority may test the purity of the water before you’re allowed to use it. In scarce-water areas, a regional water management body may have authority to decide whether or not you may install a well or use an existing one.
Similarly, though regulation of septic systems typically is left to local health departments, in some areas permits may be under the control of a regional body.
Excerpted from Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).