What Happens If You Don't Register Your Business

What Tin can Happen if You Operate a Business without a License

In order to operate a business organisation, there are many requirements, such as registering with the state, paying taxes and obtaining a business organisation license. In the case of business licenses, it can be a catchy process to manage because there is then much variability between industries and jurisdictions that at that place is not always a clear path forward.

Regardless, failing to obtain or renew a concern license can be a costly fault, resulting in pregnant penalties, such equally fines, lawsuits and in extreme cases, even arrest. As the consequences of running a business without a license can be far reaching and have a long lasting impact on your company, it is crucial that you understand the risks of not-compliance.

Fines & Penalties

If you operate your business organization without a valid license, at a minimum, y'all should wait to take to pay a fine or penalty. This is the virtually common scenario might occur when a business fails to comply with business license requirements.

As with most things relating to business concern licenses, the exact amount of the fine or punishment will depend on several factors, including the severity of the offense and what jurisdiction you're in. For example, missing a renewal deadline and beingness out compliance for a couple of months will often result in a bottom penalty than a business that willfully operates without a valid business organization license for years.

This is due to the fact that in many cases, jurisdictions volition issue you a penalisation based off of gross revenue that's generated during the menstruation of noncompliance. For instance, if you lot didn't have a business organisation license for six months, the city or state would enquire how much business was generated during that menstruation of time and access a fine that is based on a percentage of your gross acquirement.

In other cases, the fine or penalty for an expired business concern license might be a flat fee. Regardless of how the fine is calculated, it can be extremely costly to your business.

Lawsuits

Non having the proper business organization licensure opens your company up to lawsuits. There are several ways that this can occur. A disgruntled customer that is unhappy with the appurtenances or services y'all provided could take you to small claims court and cite your lack of business concern licensure as fraudulent action. Alternatively, if you lot're sued and y'all don't have the right licensure in place, the court could default to a judgment against your company, despite the other merits of the case. Either scenario could leave you on the hook for expensive damages and legal fees, in addition to whatsoever other fines or penalties.

Business Closure

Many people don't realize that business closures are a potential outcome of failing to obtain or renew a business license. Information technology seems farthermost that a license that may accept only cost $100, $200 or peradventure $i,000 could actually cost yous your business. Only unfortunately, it is a very real consequence that a visitor might face.

We've seen this happen to existent business owners. For example, i customer with multiple retail locations failed to renew a $75 license renewal for one particular store. The renewal notification went directly to the retail store, considering the jurisdiction sends it to the location on record, non headquarters or the company's legal department. Every bit a result, information technology was ignored by the shop manager. Later lx days, a second notice went out and when it was ignored again, the police department came and close downwardly the business.

A pocket-sized oversight ended up costing this store non only in fees but lost revenue, as they had to remain airtight while they sorted out their business license, hurting their bottom line.

Arrests

In an even more than extreme situation, yous could even be arrested for not having a business concern license. Operating a business organization without a license can be considered to be fraudulent activity, and so some jurisdictions might decide to abort the parties responsible. Additionally, if you're in a field like medicine or constabulary, practicing without a license is illegal and can result in arrest.

For example, in the previous scenario where the constabulary came to shut down the store, the store manager could have likewise been arrested equally a "person of responsibility" to be used every bit additional leverage to ensure the company fulfills their license requirement.

While unlikely, this tin can issue in a actually disastrous scenario where a business organization loses money due to a concern closure and is fined for non having a license, simply then has to pay legal fees to defend or expunge the record of the person who was arrested on acme of that.

Disability to Bid on Opportunities

Some other event of operating without a business license could exist the disability to bid on specific projects or opportunities. Sometimes, to win a bid, yous have to evidence proof that you're licensed. This is specially mutual inside the construction and contracting industries, where licenses are required to prove that you come across and follow safety and insurance standards. If you don't take the proper licensure, you can lose out on these opportunities, impacting the ability to grow your business.

Delays in Introducing New Products or Services

Delays in introducing new products or services are too something that tin arise when you don't take the proper licensure. For companies in the manufacturing industry, some jurisdictions require that you have a license to distribute specific blazon of products, such equally toys or other consumer products. It'due south something that tin exist easily disregarded, but if yous don't have the necessary business organization licenses, you're non going to be able to release that product to market until yous obtain them.

Loss of Reputation

One of the biggest consequences of not having a business organization license is likewise the most difficult to put a toll on- the loss of your business organization's reputation. If yous practice get fined or sued as a result of not having a business license and the word gets out, the resulting negative press can be more plush than any punishment, because your reputation is everything. When a customer hears that your business is not operating legally, it could telephone call into question the quality of your piece of work and the trustworthiness of your business, which can be devastating and difficult to rebuild. Sometimes, information technology could take years for the company'south image to recover afterwards negative press.

How to Stay Compliant with Business Licensure

All of these potential consequences of not having a business license underscore the importance of staying compliant. You tin can avoid these pitfalls past doing thorough inquiry when you open your business and obtain all of the necessary licenses for your industry- and by staying on acme of renewals, so that none of them lapse.

To help, you can outsource your business organization license management with a company like CSC. Our services tin can streamline the entire license, permit, and taxation registration procedure, as well as handle renewals to ensure that your business organization is e'er in compliance and that you never accept to face any of these consequences. Contact our team of business organization license experts to become started today!

Want to learn more about business licenses? View our upcoming webinar, "Take Control of Your Business Licensing Process" here. See all of our upcoming webinars hither.