The word “license” comes up quite often in discussions of starting, owning, and running a small business, but it can be easy to get confused about what a business owner or entrepreneur must do to remain in compliance with the law. In a very general sense, “license” means the freedom to act. More specifically, it means official permission to engage in a particular activity, such as driving a car. In a business context, a license confers the right to engage in certain types of business or professional activities. A license may be held by an individual, as in the case of a professional or occupational license, or by a business organization. Operating without a required license can have serious consequences, ranging from substantial fines to criminal penalties. New Jersey and New York business owners should be aware of the various types of licenses in order to determine what they need for their own businesses.
Most licenses needed to do business in New Jersey are issued and managed by local or state agencies. State agencies typically handle occupational and professional licenses based on qualifications and criteria that apply statewide. Licenses and permits that pertain to a specific location, such as construction or use permits, are often the responsibility of officials at the city or county level, who might have greater knowledge and understanding of local circumstances and issues. Businesses in certain industries might need licenses from one or more federal agencies.
Professional and Occupational Licenses
Licenses are reportedly required for more than 200 occupations in New Jersey, which is slightly below the national average. About 20 percent of New Jersey’s workforce need a license for their job.
Individuals wishing to go into a “professional” field, such as doctors, nurses, attorneys, engineers, teachers, architects, and accountants, must obtain a license from the applicable governing body in their state. In most cases, an individual must meet certain educational requirements, pass a qualifying test like the medical boards or the bar exam, and maintain a certain level of continuing education.
People in a wide range of skilled trades must obtain occupational licenses, including plumbers, electricians, machinists, carpenters, cosmetologists, and medical and dental technicians. The Division of Consumer Affairs, part of the New Jersey Department of Law & Public Safety, regulates many of the state’s occupational and professional licenses.
In some cases, private oversight organizations share authority over occupations with public agencies. The Financial Industry Regulatory Authority (FINRA), for example, administers the tests required by the New Jersey Bureau of Securities for various financial industry licenses.
Business Licenses and Permits
Operating a business as a corporation, limited liability company (LLC), or other fictitious entity in New Jersey requires registration with the New Jersey Treasury Department’s Division of Revenue and Enterprise Services. This registration, which creates a new entity and authorizes it to do business in the state, is often known as a “business license.” The new entity must obtain a employer identification number (EIN)—the business equivalent of a Social Security number—from the Internal Revenue Service.
Businesses that provide goods or services directly to the public must obtain a sales tax license from the state government. They must also obtain licenses and permits from local authorities, which might include use and occupancy permits, construction permits, zoning approvals, and signage permits.
In certain industries, a business may be required to register with state or federal agencies, such as:
– Transportation or shipping (the Federal Motor Carrier Safety Administration and the New Jersey Department of Transportation);
– Financial services (the Securities and Exchange Commission); or
– Alcohol products (the Alcohol and Tobacco Tax and Trade Bureau, and the New Jersey Division of Alcoholic Beverage Control).
Environmental and Safety Licenses and Permits
Some business licenses are intended to protect the public from injury or protect the environment from harm. Food service establishments, for example, must obtain certification from the local health department. Businesses that produce or distribute certain food products must register with the U.S. Department of Agriculture, and pharmaceutical companies must register with the Food and Drug Administration. The Environmental Protection Agency and other state and federal agencies issue licenses and permits for activities that pose a substantial threat of pollution.
Business formation attorney Samuel C. Berger represents entrepreneurs, small business owners, and businesses in Northern New Jersey and New York City. Our fixed-fee legal-service packages address a wide variety of legal needs for our clients. Contact us online or at (212) 380-8117 today to schedule a confidential consultation with a member of our team.
NJ License & Certification Guide (PDF file), Business Action Center, January 25, 2011
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