Even if a business license is not required to operate your business, having one may provide you with certain benefits and abilities unavailable if you just use your name for the business. Business licenses are relatively cheap and easy to file with your secretary of state. Many times, the secretary of state's office will provide you with a form to complete to obtain a business license.
Having a business license permits you to talk about your license. A licensed business, in whatever form you choose to incorporate the business, provides prestige and an aura of stability to your business that will be attractive to customers and investors. Approaching customers and potential investors and being able to share your licensing information shows that you are invested in and dedicated to the company's success.
A licensed business is an entity separate from yourself; this means that the company's taxes are filed separately from your personal taxes. While this requires you to complete and file a separate tax return, it also provides you with the opportunity to deduct business expenses that you might not be able to deduct on your personal taxes. Furthermore, separating your business and personal taxes will make it easier to report income and any business losses.
Record Keeping Guidelines
Your secretary of state's office may provide licensed businesses with guidelines and other assistance to help small businesses flourish. This advice could even be provided free of charge if your business meets certain standards, such as the number of employees or how much income it generates in a year. Free information on how to operate properly and legally can vastly increase a business' success.
While using your name as your business' name adds a personal element to your company, it does not protect you against liability for damages or injury caused by your company. Additionally, it puts your company's assets at risk should you be personally liable for damage or injury. Depending on how you form and license your company, a licensed business protects its owners against certain types of liability. If damage or injury were to occur as a result of the business' actions or doings, your personal finances would not be at stake in any settlement; similarly, if you are personally liable for injuring another person, the business' finances would not be accessible in a settlement for that injury. Note that the various types of licenses offer different levels of protection.
Access to Information
Operating as a licensed business may provide you with access to certain groups that you would be unable to join or participate in if you operate under your personal name. Companies such as the better business bureau , investment groups and other business oriented organizations may not permit you to join if your company is not licensed.
Not operating under your name also protects your personal information from the public. If a business is tied with your name, almost anyone can access a portion of your personal information, including your address, phone number and finances. Separating your business from yourself will maintain your privacy.