Local Government Requirements for Starting a Business

Before you open your doors for business, you'll have to look into state, federal, regional, and local requirements that apply to your type of business. On the local level, begin by asking city and county officials about license and permit requirements for your new business. Some cities may have a centralized office that provides this information.

The local city and county officials most likely to be of help are as follows:

  • city or county clerk
  • building and safety department
  • health department
  • planning (zoning) department
  • tax offices (for example, tax assessor or treasurer)
  • fire department
  • police department, and
  • public works department.

Nonofficial but often extremely helpful resources include local chambers of commerce, trade associations, contractors who have experience in building or remodeling commercial space, and people who have businesses like yours. You can also consult a lawyer who's familiar with small businesses similar to yours.

Local Property Taxes

Your city may impose a property tax on the furniture, fixtures, and equipment that your business owns. If so, you may be required by law to file a list of that property with city tax officials, along with cost and depreciation information. You may have to update this information annually. Sometimes there's also a tax on inventory—which leads many retail businesses to run a stock reduction sale a few weeks before the inventory-taking date mandated by the tax law.

Other Local Taxes

Some cities, especially larger ones, tax gross receipts and income. Check with the city treasurer for registration and filing requirements.

Health and Environmental Permits

If your business involves food preparation or sales, you'll need a license or permit from the local health department. The health ordinances may require regular inspections as well. Whether you run a sit-down or a fast-food restaurant or a catering establishment, you can expect the health department to take a keen interest in the type of cooking equipment you use, the adequacy of the refrigeration system, and many other features of the business that can affect your customers' health.

You may also run into health department regulations if you receive water from a well rather than a public water supply. In small towns or semirural areas, health departments routinely test well water for purity.

Also, where septic systems are used for sanitary sewer disposal, the health department supervises the installation of new septic systems to make sure that there's no health hazard. In some areas these matters are handled by regional rather than local authorities.

Increasingly, local health departments are getting involved in environmental duties, including such things as radon tests and asbestos removal. Many other environmental problems, however, such as air and water quality, are still dealt with mainly at the state and regional level.

Crowd Control

If your business deals with large numbers of customers, you may need licenses or permits from the fire or police departments. These agencies are concerned about overcrowding and the ability of people to leave the premises in case there's an emergency.

The role of the fire department may overlap with that of the building and safety department in prescribing the number of exit doors, the hardware on those doors, the lighting to be used, and the maintenance of clear paths to the exits. The fire department will also be concerned about combustible materials used or stored on your business premises.

Building Codes

For anything but the most minor renovation (such as putting in track lighting or installing shelves), you're likely to need a permit—maybe several—from the building and safety department that enforces building ordinances and codes. Often, separate permits are issued for separate parts of a construction or remodeling project, including permits for electrical, plumbing, and mechanical (heating and ventilating) work. If you don't have experience in these areas, you may need a licensed contractor to help you discover the requirements for your construction or remodeling project.

Building codes are amended frequently, and each revision seems to put new restrictions and requirements on the building owner. You may look at space in an older building and figure that you'll have no problems in doing business there because the current business owner or the one who just vacated the premises didn't. But the prior occupant may have had the benefit of grandfathering language that didn't require him or her to bring the space up to the level of the current codes. A change in occupancy or ownership may end the benefits of grandfathering, and a new occupant or owner may be required to make extensive improvements.

An experienced contractor can help you determine the building and safety requirements that apply to a particular space—for example, a code section mandating that railings on outside stairs be 36 inches high. For any building or remodeling project, it's essential that you learn the applicable rules. If your city uses all or part of the Uniform Building Code, get aâ��copyâ��of it.

Other municipal ordinances may be administered by the building and safety department or by another unit of local government. There's no uniformity in how cities or counties assign the responsibility for administering these other ordinances. A large municipality or county might have several separate departments to act as the enforcing agency. A smaller city or county would probably leave everything to the building and safety department.

Zoning Ordinances

Before you sign a lease, you absolutely need to know that the space is properly zoned for your usage. If it's not, it's best to make the lease contingent on your getting the property rezoned or getting a variance or conditional use permit—whatever it takes under the ordinance to make it possible for you to do business there without being hassled by the city or county.

In some communities, you must get a zoning compliance permit before you start your business at a given location. Other communities simply wait for someone to complain before looking at zoning compliance. Keep in mind that by applying for a construction permit for remodeling or by filing tax information with the municipality, you may trigger an investigation of zoning compliance.

Zoning laws may also regulate off-street parking, water and air quality, and waste disposal, and the size, construction, and placement of signs. In some communities, historic district restrictions may keep you from modifying the exterior of a building or even changing the paint color without permission from a board of administrators.

Excerpted from Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).

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