Top Regulated States for Business License – What’s Driving Rising Enforcement
ComplianceApril 21, 2023

Highly regulated states for business license

By: CT Corporation Staff

Across the U.S., state and local governments have increased their enforcement of business license compliance. Business license tax collections are increasing faster than other types of mandated taxes and fees.

A strong reason is public safety — especially when it comes to newer business verticals and scenarios, such as contract workers, ride-sharing, and vacation rentals.

Along with the business community, governments have benefitted from the increased digitization of records and better data analytics, giving them the means to better track and pursue non-compliant businesses.

In many cases, business license enforcement is the responsibility of local government agencies, such as city or county business licensing departments. However, some industries may be subject to additional licensing and regulatory requirements at the state or federal level, which may be enforced by specialized agencies or regulatory bodies.

Business license management is complex

The increased enforcement has only raised the bar for risk management. Maintaining business license compliance is as complex as it’s ever been. The number of licensing authorities is staggering – 75,000 authorities that span all jurisdictional levels, from the federal government to states, counties and municipalities, large and small. Keep in mind that each jurisdiction determines its own processes and administers its own requirements.

Determining which license(s) you need is in itself a difficult task. Businesses may need multiple licenses that range from covering basic operations to highly specialized, industry-specific requirements. Managing new and existing licenses requires a deep and detailed knowledge base that must be constantly updated.

Some industries are known to have more complex business license requirements than others. States create specific licenses for industries that they deem to present a higher public safety risk. These more highly-regulated industries include the following:

Industries with more complex licensing requirements can also vary widely depending on the specific business and the state in which it operates. It’s a best practice for businesses to research the licensing requirements in their industry and seek assistance from a professional if needed.

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The more regulated states for business license compliance

Based on general observations, some states are known to have more complex business license requirements than others. These states are:

  • California
  • New York
  • Texas
  • Florida
  • Illinois
  • Washington D.C.

Businesses may struggle with several aspects of business licenses, depending on their industry and location. Here are a few common challenges:

  1. Understanding the requirements: It can be difficult to understand what licenses they need, which agencies they need to work with, and what the application process entails.
  2. Meeting deadlines: Many business licenses have expiration dates and renewal deadlines. Businesses must keep track of these deadlines and ensure they submit their renewal applications on time to avoid penalties or lapses in their licenses.
  3. Cost: Business licenses can be expensive, especially if a business needs to obtain multiple licenses from different agencies. These costs must be factored into budgets.
  4. Time-consuming: Obtaining and renewing business licenses can be a time-consuming process. You may need to gather and submit a lot of paperwork, attend hearings, and wait for agencies to review applications.
  5. Navigating different jurisdictions: Businesses that operate in multiple states or jurisdictions may need to obtain licenses from each one.

A non-compliance enforcement example

States are not losing any time in taking advantage of their new tracking and enforcement capabilities. In case you missed it, here’s an example:

Independence, Missouri sent city business license compliance officers door-to-door to collect unpaid license fees from a wide variety of the city's businesses. Compliance officers stopped operations for 900 local businesses that hadn't renewed their licenses to operate. While the compliance officers sympathized with business owners, they collected $67,000 in unpaid fees.

The officers are using this tactic to inspect liquor licenses and potential health code violations as well. In fact, the city announced that it will conduct these sweeps monthly.

What it takes to manage business license compliance

Business license compliance is critical to maintaining uninterrupted operations for multi-jurisdiction enterprises. Keeping up with the volume, complexity, and constant change demands dedicated, specialized resources, especially for businesses operating in states that impose heavy regulations and strict enforcement.

Expert business license specialists have the knowledge and resources for ongoing research and compliance to help your team successfully navigate what’s needed. Working with an outside partner can be the most effective way to reduce the rising risks of increased enforcement.

Learn more

To learn more about how CT can help you manage your business license needs, contact a CT Service Representative or call (844) 878-1800.

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Top regulated states
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CT Corporation Staff

The CT Corporation staff is comprised of experts, offering global, regional, and local expertise on registered agent, incorporation, and legal entity compliance.

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