Pitfalls of Being Unlicensed

Ignorance is bliss. When it comes to business licenses, obliviousness reigns supreme throughout corporate America. Companies are blissfully at peace, even while being fully aware that their business license compliance is wholly deficient.

Some brief statistics are in order. Licensing is imposed at the federal, state, county, and municipal levels.  There are over 74,000 licensing authorities in the U.S. administering around two hundred different license types, governing most every business activity.  Furthermore, most licenses have to be renewed annually, biannually, or biennially.

This phenomenon can be ascribed to many reasons. But chiefly among them is the false sense that even if discovered by a governmental authority, there will always be enough time to rectify the situation by getting a slap on the wrist and moving on.

However, those that have been caught red handed – and there are more of them every day – can attest to the fact that it is painful, costly, and quite damaging to be found unlicensed or under licensed.

There are multiple risks in not being fully compliant with all business licenses. The risks can be categorized as follows:

  • Financial
  • Operational
  • Reputational
  • Personal

Financial

  • A company may be hit with costly penalties and interest
  • Fines can be imposed retroactively to the date of inception of the locations, items, or services found to be unlicensed or operating with expired licenses

Operational

  • New locations cannot be opened
  • New items or services cannot be introduced
  • Existing  locations may be padlocked

Reputational

  • Padlocked locations, fines, or even the delay of new items, services, or locations may make headlines, causing untold damage to a company’s reputation.

Personal

  • Officers’ names are required on many licenses. Not being in compliance may reflect on them personally, in more ways than one. Officers may be held personally liable, and incur monetary fines, or even criminal offenses.

All in all, it is in every company’s best interest to be fully compliant. The old adage “you can’t fight city hall” is alive and well in modern day America.