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What Sole Proprietors Need to Know About Business Licenses

By
Derek Walter
,
business.com writer
|
Sep 14, 2018
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> Business Basics
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If you conduct business, even as a sole proprietor, you have some municipal rules.

Freelance work can be liberating. You have the freedom to set up shop anywhere you’d like and conduct business from the kitchen, home office, a coffee shop or at 35,000 feet. It has dramatically reshaped the way we think about work and empowered individuals to pursue a living without the constraints of the traditional 9-to-5.

However, just because your business blurs the traditional lines of the working world doesn't mean that some of the standing laws and regulations about a business license and other matters don't apply. In fact, there's a decent chance that if you conduct business, even as a sole proprietor, you have some municipal rules to follow.

Know what the law says

First, let's understand the terminology involved. According to the IRS, a sole proprietorship is "someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation."

There are various reasons why one may go the sole proprietorship route for creating an LLC. For many solo operations, a proprietorship makes the most sense with minimal costs. However, it can lull you into the sense that you're in a regulation-free fantasyland.

In particular, don't assume just because you're a one-person operation or that your work is conducted entirely online that you're exempt from business license restrictions.

Consider the following language from the Alameda County website: "All individuals, partnerships, corporations, and sole proprietors conducting business in the City of Alameda are required to have a business license.”

In many cases, such a license is not cost-prohibitive. But again, this varies based on where you live. The best way to tackle this issue is to research your city, county, township or other local municipal organization and find out what the rules are.

Where to apply

For a business license, location matters. If you live in the unincorporated area of a county, you will likely need to apply for the license through the county instead of from a city. By that same token, you'll need to check the city's website to see if it requires that business conducted requires a permit.

It may be tempting to think just because you're working away from the back patio that you're not going to be noticed by the team from the county office. Here's the problem – it may be unpopular to say so, but tax revenue is critical for your community. And if altruism doesn't work, consider that you could be subject to penalties for the time you were operating without a license.

Arguments about the proper role of regulation aside, part of running a business means taking care to follow the right laws and codes so you stay on the good side of the law. The freedom of solo freelancing is great, but it's worth remembering that you're still part of the business world and it has some rules for you to follow.

Derek Walter
Derek Walter
Derek Walter is the founder of Walter Media, which offers writing and content strategy services. He is also the author of Learning MIT App Inventor: A Hands-On Guide to Building Your Own Android Apps.
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