Do US freelancers need a business license?
The regulations around freelancing are different from country to country. This can make it confusing when you first get started. For example, do you need a business license when you freelance in the US?
A misconception that many people have is that they don’t think of freelancing as running a business. While you might not have a company and might not even feel particularly professional, your government will disagree! You’re creating your own income and you have clients – so you’re operating a business. That also means that in some cases you will need a business license. It gets more complicated than that, so please read on.
NOTE: This article is written from a US perspective. Are you in the UK? Please read the UK equivalent of registering as a sole trade. Please get in touch if you’re in another country and I’ll try to help.
Who needs a business license?
Business licenses in the US are determined on a state or even municipality level, so the rules depend on where you are based. Rules will also often depend on what kind of freelance work you carry out. And in many cases the size of your operation matters.
For example, according to chron.com: “Graphic designers […] commonly aren’t required to get a license if they operate under their names and report business earnings as personal income. But cosmetology is a specialized trade and freelancers must be licensed. Licensing can be subject to federal, state and local regulations, so requirements are also affected by location.”
Confused? Yes, so am I!
Let’s unravel this properly…
Working from home
Your business license is linked to your address and at the beginning you’re likely to be using your home address. Make sure to find out whether local zoning laws allow you to operate a business from your own home. Karen E. Spaeder writes about how to check zoning laws on Entrepreneur.com.
When you work from home, as many freelancers do, you may also need to get what’s called a Home Occupancy Permit. This allows you to carry out business activities from your own home, with certain restrictions.
Again, the requirements here vary. You will need to get in touch with your local city or country government to find out.
To set you on the right track, a Google Search for ‘home occupancy permit’ + the name of your city or country should get you started.
Applying for a business license
To apply for a business license (and to find out whether you need one in the first place), you generally need to go through these steps:
- Register your business name
- Register your business
- Check with your local state whether you need a business license
- Check with your city or county whether you need a business license or other permit
The best starting point for of all of this is the US Small Business Administration website.
Is it all worth it?
I won’t blame you if you’re thinking applying for a business license for just a few freelance projects is too complicated. However the time you spend on getting the correct permits in place now will protect you from many potential issues including financial fines. Spend a couple of hours getting all the paperwork in order and work safely in the knowledge that you won’t fall foul of government regulations.
Still not convinced? Chron.com has a lovely list of what can happen if you freelance without a business license. And Kylie Jane Wakefield on Contently.net mentions a $302 fine for not getting the right permit – that would have paid for your license for 3 years over!
A big shortcut
Nevertheless – there is great way to quickly get all the information you need. Rather than trawling local government websites and trying to speak to a civil servant somewhere, why not go to a local meet-up of freelancers working in the same industry as you? They’ve been through the same difficulties and will be able to help you much more easily. This approach saves you time and builds your network. (and if you’re worried about networking, a question about business permits makes a great ice-breaker!)
I hope this has been helpful for you – please get in touch with any questions and share with friends and colleagues if you liked the article. Thank you for reading!