An LLC license is a type of business license that many small businesses can obtain. What does an LLC mean?
An LLC stands for Limited Liability Company (LLC), and it protects business owners from being sued personally if their company goes bankrupt or has legal action taken against it.
The LLC license protects the owner of the company. It means that if an individual or another company files a lawsuit against you, they cannot take out any personal assets from your bank account.
This blog post will discuss all things related to LLC licenses and how they can benefit your business.
There are many different types of licenses for LLCs, so it's important to know which one you need before starting your application process.
Why Do Llcs Need Business Licenses?
LLCs that want to conduct business legally need to have a business license. This means that if an LLC wants to form in New York, it needs to have a company license from the state government. In addition, every other location requires local permits and licenses for businesses as well.
Many people don't realize this fact until they want to form their own LLCs.
A business license is essential if your LLC wants to provide clients with professional services, such as accounting or law.
If you form an LLC without a business license and provide services like these, it's likely that the local government will shut down the company and fine its owners if they find out about it later on.
Your business may be protected from liability thanks to an LLC status, but this protection does not apply outside your state.
Also, if you form an LLC in one state but provide services to customers in another, they will still require a business license from the second state even though the company has already been formed.
This is just one reason why it's important to seek legal advice so that an LLC lawyer can help clients form their companies correctly and include all of the required legal documents before moving forward with any plans.
What Types of LLC Licenses Are There?
Limited liability companies are business entities that shield LLC owners against personal liability thanks to an LLC status. Still, this protection is never complete unless you obtain licenses to conduct certain activities through your LLC.
LLC licenses types depend on what kind of business plan clients have. For example, there could be a single-member LLC or a multi-member LLC, which means different things regarding tax reporting requirements and who is responsible for business debts and other business expenses.
The most common business licenses are obtained on the different levels of government, state, or local agencies.
Federal Licenses
Licenses and permits to do business as an LLC vary depending on the type of business and what kind of products or services your company offers.
Despite liability protection, it is often necessary to obtain certain federal licenses to conduct some types of businesses; industries that govern nuclear technology, alcoholic beverages, telecommunications, and transportation are examples of industries requiring a federal license.
The most common types of Federal Licenses include those from the US Department of Transportation, the Nuclear Regulatory Commission, and the Alcohol & Tobacco Tax Trade Bureau.
In addition, there are specific industry-related certifications required for a professional LLC, such as ones required by healthcare providers, real estate brokerages, or auto dealerships.
LLC that plans to hire employees will also have to obtain the Federal Employer Identification Number, a form, or license, helping LLC pay taxes on their employees or reap other tax benefits.
However, there are situations where things can get complicated due to overwhelming amounts of paperwork and legal matters. Therefore good advice here would be to seek legal counsel (a law firm or accountant) about the federal licenses your LLC might need.
In case your LLC needs a federal license, it's best to contact the Small Business Administration's (SBA) and inquire about the details.
State Licenses
State business licenses are required for any business entity that operates or intends to operate in a given state as any of the following: private investigators, real estate or legal agencies, or physicians.
For businesses with employees, the need for obtaining an LLC license is usually straightforward as most states require all employers to apply for liability insurance which will be effective only after receiving proper licensing from State Insurance Commissioner.
Applicants must submit all necessary paperwork and fees to obtain an LLC license along with their state tax ID number (if they have one), which is usually applied after obtaining federal EIN (Employer Identification Number).
This process may take up to two weeks, but it can be done online in most cases.
Local Licenses
Location requires local permits and licenses for businesses as well. Many people don't realize this fact until they want to form their own LLCs. A business license is essential if your LLC wants to provide clients with professional services, such as accounting or law.
If you form your LLC without a business license and provide services like these, it's likely that you'll be fined or, even worse, risk losing your limited liability status.
To obtain business licenses, you need to start by finding out what kind of business license is required in your area and whether or not there are any special requirements for obtaining this business license.
You can always consult with local business authorities since they should be able to provide you with all the necessary information regarding business licenses depending on where your business is located.
LLC License Application
The filing fee and requirements for your LLC license will depend upon the state in which you're starting your limited liability company.
The application process itself generally includes filling out an application form, paying required LLC fees, and taking care of other formalities such as publishing plans or posting notices that will aid members' asset protection if they are ever sued.
In most cases, after submitting applications along with necessary documents and payments at the appropriate agency office, applicants will receive their licenses within a few days.
Depending on your chosen industry and business structure, you will have to obtain a license with a corresponding agency.
For example, to operate as an insurance agency, you will need to get a license from the state Insurance Department.
Although you must apply for corresponding licenses with the appropriate agencies, most states do not separately require them anymore. Each state has its own rules regarding what businesses are subject to licensing requirements.
Also, depending on where your company's offices are located (in particular, whether they're inside city limits), there may be additional local licensing procedures to follow after obtaining initial permission from the state.
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The Steps for LLC License Application
The fees and requirements for your LLC license will depend upon the state in which you're starting your LLC.
The application process itself generally includes filling out an application form, paying required fees, and taking care of other formalities such as publishing plans or posting notices that will help protect members' personal assets if they are ever sued. In most cases, after submitting applications along with necessary documents and payments at the appropriate agency office, applicants will receive their licenses within a few days.
Depending on your chosen industry, you will have to obtain a license with a corresponding agency. For example, to operate as an insurance agency, you will need to get a license from the state Insurance Department.
Although you must apply for corresponding licenses with the appropriate agencies, most states do not separately require them anymore. Each state has its own rules regarding what businesses are subject to licensing requirements.
Also, depending on where your company's offices are located (in particular, whether they're inside city limits), there may be additional local licensing procedures to follow after obtaining initial permission from the state.
In most cases, you will have to follow the next steps in order to obtain your LLC license.
Step 1: Compile the LLC Documents
Once you've established what kind of licenses your LLC needs, you need to prove that your new LLC business entity is authorized to do business in your state.
For this, you will need the articles of organization—a document that establishes your LLC's name and purpose, as well as its registered agent (the person or company responsible for receiving legal documents regarding the LLC and acting on your LLC's behalf).
Also important are the LLC operating agreement and any resolutions made by the LLC members. Articles of Organization and LLC Operating Agreement work together to establish how your LLC will be governed and who has the authority to make decisions about it.
Once you have compiled all of the LLC formation documents, they need to be filed with the Secretary of State, where you plan on setting up.
Step 2: File Your Application
When you've determined what business license to apply for and which business papers are required, the next step is to fill out and submit an application.
Each application is unique, so adhere to the directions carefully.
Application procedures vary from state to state, so some states accept filings made online or by mail, while others may even allow in-person or fax submissions.
In some instances, when LLC has more than one owner, all owners must sign these papers or have them notarized.
Wait for the License Approval
Seeing as some LLC licenses can be obtained online, you will either receive immediate approval or be notified when the licensing authority has evaluated your application.
The waiting period varies from agency to agency. It's essential that you fill out your application properly and submit the remaining documents because your application could get rejected, unnecessarily perpetuating the process.
Seeing as some LLC licenses can be obtained online, you will either receive immediate approval or be notified when the licensing authority has evaluated your application. The waiting period varies from agency to agency.
Although it may appear to be a straightforward procedure, obtaining a license is never a sure thing. Because several industries restrict the number of licenses that can be issued within a particular city or state, your LLC license could easily be put on hold until further notice.
Planning this step is extremely important, so make sure to research this matter well in advance.
Stay Compliant
You will obtain legal authorization to operate your business once you are qualified and receive your LLC license.
However, many commercial LLC licenses must be renewed on an annual basis, so keep track of any renewal demands to ensure that your license does not expire inadvertently and your LLC remains in good standing with the state.
FAQs
How Much Does an LLC License Cost?
The cost of an LLC license generally varies depending on the city or state in which you live. In most cases, it can be as little as $50 to a few hundred dollars.
Make sure to find out how much an LLC license costs where you reside before applying for a business permit because each locality has different fee rates and state laws that need to be followed.
The amount of money required for this application process also depends on whether your company will have only one owner or multiple owners.
When there are many co-owners of a company, you might have to obtain a license for each member, especially if you have a professional LLC.
What Comes First, LLC or Business License?
The state and local authorities need to see that your LLC is set up correctly before you can even apply for a license. The initial steps to forming an LLC come before you apply for a business license, which involves filing your Articles of Organization and Operating Agreement.
How Often Do I Have to Renew My LLC License?
Each state requires different renewal procedures, while some LLC licenses won't have to be renewed at all. The frequency of renewal will depend on the state in which you live, but it is typically every year or every two/three years. It would be best if you also kept in mind that you might have to pay the renewal fee.
Regulatory agencies will usually send a notice well in advance before the license expires, and this notice should arrive at your LLC's address. For this reason, having a registered agent helps a lot because they will keep track of these matters.
What Is a DBA License for LLC?
A DBA license for LLC is very similar to a fictitious business name. You can also choose a fictitious business name or simply put it as the designation you are using at that time. Not every state requires a DBA license. DBAs are generally recommended if you want to operate as a sole proprietor because it protects your privacy.
A DBA license protects both the owners of an LLC and their users because it provides consumer protection (license lets the authorities know everyone will be able to find your name in case of a lawsuit), while owners are protected through limited liability.
A DBA license is also particularly useful for businesses that are limited to a certain geographical area because once you have applied for the business registration, it will show your exact location.
On the other hand, if you choose LLC license instead of DBAs, people outside this specific location might not find out where exactly you run your business from, even though they can still contact and conduct their transactions with an LLC owner.
Thus, choosing a fictitious name would give them more protection than using an LLC designation - however, only in the state which requires it.
Do All LLC Members Need to Be Licensed?
Not all members of an LLC need to have a license, but if you are running a professional LLC, some states require that all owners (members) are licensed.
Does a Foreign LLC Need a Business License?
Like any domestic limited liability company, a foreign LLC needs the same LLC licenses the designated state, county, or city requires them.
Is Renewing an LLC License the Same as Filing an Annual Report?
No. LLCs need to renew their license (if required) and still file an annual report. Again, the dynamics of the license renewal and the need to file an annual report will vary by state.
Conclusion
The bottom line is that you need to make sure you have all necessary licenses to start your LLC in their respective states and any other state where they may do business across state lines.
LLCs and other business entities need to make sure they get all necessary licenses and permits before opening their doors.
In conclusion, liability protection should not be a reason for an LLC owner or member to think that it can operate without having proper licensing, so check with your local municipalities on what you need.
