Why would a business license be revoked?
A business license can be revoked for several reasons, including:
- Failure to renew
- Lapsed requirement (i.e., a failure to obtain a required surety bond or insurance certificate)
- Violation of local codes or ordinances
- Violation of state law
- Business misconduct
- Failure to pay fees, taxes, or judgments
In several states, a business license can also be revoked for failure to pay child support.
Heavily regulated industries have more rigorous licensing requirements. For example, contractors who operate in California and Louisiana must report certain events or information (such as changes in personnel, bonds, and insurance) or face an automatic license suspension. In some cases, the license may be revoked for one to five years, and the business can incur fines up to 10% of the total contract value.
Marijuana businesses are also closely regulated. These businesses must meet numerous state and local requirements to maintain a marijuana license once approved, including product testing, compliance reporting, and ensuring the business is operational by a certain time. In South Lake Tahoe, California, a marijuana dispensary’s cannabis and business licenses were revoked for failing to open on time! And in 2021, Missouri state health authorities revoked several medical marijuana business permits for failure to meet operating deadlines.
Consequences of having a revoked business license
If you operate without the required business licenses, you can face several penalties, including:
- Financial penalties
- Interruptions in business operations
- Criminal sanctions
- Negative publicity
A revoked business license can also impact your relationship with clients and future business opportunities. For example, contractors with a revoked license may fall into breach of contract. Contracts with general contractors often stipulate that the contractor maintain compliance with all laws. If a license is suspended it can create challenges with the state contractors’ board and with clients.