Business Licenses for Independent Contractors

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What Is an Independent Contractor?

Independent contractors are distinct from employees in that they are the bosses of their own jobs. Independent contractors are hired to complete a certain job or task, but how they reach the final result is up to them, as based on their professional knowledge and experience.

Does an Independent Contractor Need a Business License?

Contractors are trained professionals. As "journeymen," they may need to be licensed by the vocational licensing board in their state. For example, health professionals and lawyers will need to complete licensing requirements for the state they practice in.

Additionally, as non-employees, contractors may also need to hold a local business license, for the right to hire employees or do business. This requirement differs by city and county, and some areas do not have a business license requirement. In some areas, even independent contractors who work from home must obtain a business license.

What Is a Business License?

A business license is essentially a city tax receipt. Contractors may pay a relatively inexpensive fee, around $30 - $50, and get the right to operate their businesses within the city limits. Penalties of several hundred dollars could be assessed for contractors operating without a business license.

How Do I Get a Business License?

In order to obtain a business license, an independent contractor has to do a little research about the city in which they will do business. The first step may include looking at to the city’s website, or going to city hall. The office in charge of business licensing may be, depending on your city, the building and safety commission, the chamber of commerce, the city clerk, the zoning and planning department, department of public works, or simply the tax office.

In San Francisco, for example, a contractor would deal with the Office of the Treasurer and Tax Collector. Most employers would pay a $150 business license registration fee, and then payroll tax would be collected at 1.5%. Failure to register is a misdemeanor, punishable by fine and/or imprisonment.

Do I Need a Lawyer to Get a Business License?

You will not likely need a lawyer to apply for a business license as an independent contractor. If, however, you are being assessed for a fee or are facing criminal charges for operating a business without a license, you should consider contacting an attorney.

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Last Modified: 02-11-2014 12:51 PM PST

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