Does Your Service Business Have The Right Licenses?
Running a service business requires a lot of paperwork, and in some cities there is even more paperwork than you’d think. Most contractors and service businesses have their state-specific and trade-specific licenses, but in many areas there are city and county licenses as well.
This can create issues for businesses as they expand their service areas or hire new staff. In this article, we’ll show you the best resources for identifying what licenses you need.
Because there isn’t a universally accepted federal licensing program for trades workers, each state has their own (slightly different) process, typically handled by some kind of department of professional services. You can typically find the the forms you need to register or renew through Google, however plain-language descriptions of what you need to do can be hard to find.
If you’re a business owner, you probably have a good grasp on what licenses and qualifications your employees need within your own state. Things get complicated, however, when hiring out of state workers and people who need to be re-licensed in your area. In Michigan, for example, master electricians who take on journeymen have to be residents in order for the journeymanship to be valid, even if that master originally completed their certification in-state and later moved away.
Some states will accept out of state licenses, but that’s the exception instead of the rule. If you’re a master electrician (class A) moving from Iowa to Wisconsin you can skip the exam, for example, but in most cases you’ll need to provide proof of employment history and sit the test.
For general contractors, there’s a great state-by-state guide that covers the licensing process, and there are similar resources for HVAC professionals and electricians. When in doubt, talk to a lawyer.
Most counties follow state licensing standards, but every county does something a bit differently. Counties with higher populations tend to regulate service businesses more than smaller counties, however almost all counties will have some form of business license. In select cases, like Boward County (which contains Fort Lauderdale), the county will require a full exam, covering aspects of contracting, business operations, and business law.
Since most counties take a low-tech approach to making their ordinances available to the public, figuring out county licensing requirements can take a bit of legwork. You may need to contact the county clerk, circuit court, or the business licensing department in order to find out what you need to know and get the forms you need to fill out.
Counties are primarily concerned with business operations. They’re less concerned about duplicating the state licensing process, but they do monitor and regulate small businesses. As long as your business registration and tax information is in order, it’s a fairly simple process.
As it follows, city licensing is more sporadic (and more specific) than county licensing, and it’s primarily a concern for businesses operating in densely populated areas. If you operate in a rural area where you don’t pay city taxes, city licensing won’t be an issue. If you’re in a state where the cities and municipalities exercise fiscal home rule powers, you’ll need a city license.
In Boulder, Colorado, the city relies on a mixture of national/international licensing and state-specific licensing for contractors, tradesmen, and service businesses. They have an additional licensing exam, and insurance policy requirements for contractors operating within the city limits. In your area, there may be similar requirements.
Most cities provide limited online tools for applying for licenses online. You should be able to find .pdf’s of the relevant forms you need to fill out, but the full requirements are typically written in legalese. Given how complex taxation and licensing can be, especially in home rule states where there are multiple layers of municipal oversight, talking to a lawyer with local experience is a good idea.
It’s important to research what requirements you need to meet when hiring new staff or adjusting the areas you serve. Failing to license and register your business at all three levels can lead to fines and legal fees down the road, and if it isn’t handled properly it can limit your ability to expand your service areas. Similarly, learning which states have license agreements and what areas have low licensing fees can help you make intelligent decisions as your company grows. In either case, it pays to pay attention.