Unfortunately, there is no standard answer to provide you with all the information you need to know to properly license every business. Regulations vary from city to city, county to county and state to state. In addition, many requirements vary depending on the legal structure you choose, the type of business, the estimated revenues, the number of employees and the physical location of the business. The best approach to take is to proceed step by step and research the requirements for your particular business at each level of government:
Do not rely on another business owner for your information. While they may be in total compliance, the rules may be different for your business. In addition, home-based business owners should investigate any limitations included in their homeowners' association covenants, if applicable. Homeowners' association covenants are often more restrictive than city, county or state regulations.
City Hall is the first place to call to learn the requirements of the city where you plan to operate your business. Offices within City Hall issue zoning clearances, occupational licenses, home-based business permits, home-based business guidelines and information on tax obligations.
Each town or city has its own guidelines. Some locations require a home occupation permit, some require an occupational license, some require both, some don't require either. However, those that don't require either usually have a list of guidelines home-based business must abide by. It is important to note that additional clearances may also be required. For example, food-serving establishments require health department clearances in most cities. Some businesses may need an inspection by the fire department. Ask your City Hall contact if you need any additional permits or clearances for your type of business.
Most licenses are issued on a calendar year basis. The cost of a license may vary by type of business. There may be a flat fee for first registration or prorated based on the number of months remaining in the year. Fees may be based on gross sales, square footage of the business or home-based status.
Your next call should be to your county courthouse. Ask for the department that deals with registering small businesses — it is often the assessor or the finance department. As with the city, county requirements vary. You may find that your county requirements include all, some or none of the following:
Missouri has a CD-ROM on the "nuts and bolts" of operating a business in the state. This can be ordered online by visiting www.missouribusiness.net/smallbiz.
Missouri SourceLink is a clearinghouse for answering questions and helping provide assistance about the state's registration and tax requirements. Contact:
As a Missouri business, you may be required to register your business in other states. For home-based businesses, the need to register your business and/or obtain a sales tax identification number in another state often occurs when you are located near a state line and you will be conducting business in the other state at trade shows, fairs, etc. However, be aware that there may be other circumstances in which you are required to register your business in another state. You can obtain licensing information for the states bordering Missouri at the websites listed below:
For other states, conduct a web search for a contact.
Typical issues you may deal with at the state level include:
When making your call to the clearinghouse phone line, be prepared to tell them the form of business organization you plan to use so they can send you the appropriate forms. There are four basic forms of business organization: sole proprietorship, general partnership, limited liability company and corporation (S and C). There are many modifications and variations within these forms, but the key to selection usually revolves around the concept of liability and taxation. In choosing your business structure, consult with both a qualified accountant and attorney who are familiar with your resources and objectives. You can find specific information on each type of business organization at www.missouribusiness.net/sbtdc/doingbusiness/taxes.pdf.
Incorporated businesses from other states planning to do business in Missouri must register as a Foreign Corporation.
Anyone who regularly transacts business for profit in Missouri under a "fictitious name" is required by law to register that business name with the Secretary of State's office. For a sole proprietorship or partnership, a business name is generally considered "fictitious" unless it contains the full name (first and last) of the owner or all of the general partners and does not suggest the existence of additional owners. Use of a name which includes words like company, associates, brothers or sons suggests additional owners and will make it necessary for the business to file and publish the fictitious business name on company letterhead, business cards, in advertising or on its product.
Registering a fictitious name does not offer protection for that name. If someone already has filed the name you are filing as a fictitious name, no notice is given to either party. There could literally be hundreds of companies with the same name. In the case of a corporation, the business name must be distinguishable from other corporate names already on file in the records of the Secretary of State's office. If the name has not been previously registered, then you can reserve your corporate name for 60 days for a $25 filing fee while the articles of incorporation are being prepared to be filed.
This does not prevent a national company operating in states other than Missouri from a suit if you infringe on their national name, logo or trademark. You may want to do a national name search or trademark search to insure the use of the name you select. You may also want to protect the name you select by establishing a trademark at the state and/or national level. The SBTDC at Warrensburg offers assistance with trademarks and trademark searches. For more information on their services, contact Mark Manley at (660) 543-4402.
State sales tax numbers can be obtained through the Missouri Department of Revenue - (573) 751-7191 or dor.mo.gov/tax.
In Missouri, any person or company making retail sales of tangible personal property in Missouri is required to collect and remit Missouri sales tax. It is the business' responsibility to ensure that sales tax is collected at the correct tax rate. You must have a Missouri Retail Sales License prior to making sales. If you conduct retail sales without a valid Missouri retail sales tax license, you will be assessed a penalty in the amount of up to $500 for the first day and $100 for each subsequent day, not to exceed $10,000, in addition to any other penalties or interest that may be imposed. For the first twenty days, this penalty does not apply to persons opening a business in the state of Missouri for the first time.
A bond must accompany the application for the license. The amount of the bond is based on your estimated monthly gross sales. The amount of your bond is calculated as follows:
Estimated monthly gross sales is the amount of sales you estimate your business will make in taxable sales in an average month. If you estimate your sales to be less than $500 for three months, you can file the minimum bond of $25. Any amount over that starts with a minimum bond of $100.
If you are unable to estimate your bond, you can contact the Tax Administration Bureau (573) 751-5860. The Tax Administration Bureau reviews all bond amounts to be sure it is sufficient in accordance with Missouri Statutes. The following items are taken into consideration when determining a sufficient bond amounts: previous ownership of business, types of products or services sold, location of business, business hours, operating expenses, etc. Bonds may be posted through a cash bond, surety bond, certificate of deposit or irrevocable letter of credit. Complete information on the types of bonds is included in the Missouri Tax Registration Application.
Craft sellers and other vendors selling from temporary sites must charge the sales tax rate at the point of sale. For example, a vendor from Independence who sells at a show in Springfield, must charge the sales tax rate for the city of Springfield and note those sales separately on their sales tax report to the MO Department of Revenue. If you go to a show in another state, you need to obtain a sales tax number for that state unless the sponsor of the show has obtained a sales tax number and is collecting and reporting for all vendors at the show.
Out of state vendors making sale of goods to the final consumer located in Missouri, are required to collect and remit Missouri Vendors Use Tax. They must obtain a Missouri Use Tax License and post a bond.
For more information on sales tax, visit www.missouribusiness.net/sbtdc/doingbusiness/taxes.pdf.
States generally certify or license certain occupations and/or activities. Occupational licenses can range from accountants, doctors, insurance agents and architects to pesticide applicators, junkyard dealers and egg processors. Some occupational licenses require education and experience and some require testing. Contact the state to determine if there are any specific state licensing requirements for your business. Most licenses are listed in the "Occupational Licenses" section of www.missouribusiness.net/sbtdc/doingbusiness/legalform.pdf.
As a home-based business owner, first look back at the regulations you obtained from your own city or town. Many home occupation guidelines state that "no person shall be engaged in such home occupation other than a person occupying such dwelling unit as his/her residence." Such restrictions would allow you to hire a spouse or someone else who resides within your home, but it would not allow you to hire others to come into your home to work for you in your business.
If you make it past the hurdle allowing you to have employees, you may need the following at the state level:
Additional information on registering as an employer in Missouri can be found at www.missouribusiness.net/sbtdc/doingbusiness/hiring.pdf.
Most home-based business do not require licensing at the federal level. Check with the state clearinghouse to determine if any federal regulations will apply to your business. The most common examples include businesses affected by health and safety requirements or environmental regulations.
Home-based business owners do have numerous federal obligations related to taxes. The three main obligations are income tax, self-employment tax and employment tax. To learn about the federal obligations, a new business should review the following resources from the IRS:
Call 1-800-829-3676 (TAX FORM) to order publications or visit the IRS website at www.irs.gov.
You will be required to identify yourself/your business on tax forms using either your social security number or a Federal Employee Identification Number (FEIN). Sole proprietors without employees generally use their social security number. Partnerships, corporations and LLCs must have a FEIN even if they do not hire employees. All businesses that pay wages to one or more employees must apply for an FEIN number. It is important to note that a Federal ID Number is a different number than a state ID number and a sales/use tax number. Each require their own numbers. An immediate Federal ID number may be obtained by calling (866) 816-2065 between 7:30 AM and 5:30 PM customer's local time.
The types of business taxes you may be required to pay:
Federal Income Tax. Every business files an annual income tax return. Which IRS form to use depends on the legal structure of the organization. Business taxes are estimated and paid quarterly.
Self-employment Tax. This is the Social Security Tax and Medicare Tax for those individuals who work for themselves.
Employment Taxes. Any form of business can have employees. If you have employees, the business is required to withhold the federal income tax from employees' wages and withhold and match the Social Security Tax of the employees wages. These dollars are submitted to the federal government by the employer. No matter what form of business organization, the owner(s) or stockholders of the business are personally liable for payment. Request a copy of Circular E - Employer's Tax Guide from the IRS at (800) 829-3676 or their website at www.irs.gov/pub/irs-pdf/p15.pdf.
Federal Unemployment Tax (FUTA). FUTA is paid by employers if you pay more than $1,500 in wages or have employees for 20 weeks in a calendar year.
To learn more about home-based businesses, download How to Start and Manage a Home-based Business. For personalized assistance, contact a business specialist at a Small Business & Technology Development Center. Visit our calendar of events for a listing of business training events in Missouri.
- Barbara Cunningham, former business specialist, MO SBTDC.