A guide to business licences - what is one and does my company need it?
Setting up a new business is an exciting process. From choosing how and when your business will operate to the colour you want to paint the walls, going through your company's formation is a big step.
But, before setting your business up, you have to make sure that you secure the right business licences for you to operate legally. Knowing which business licences you’ll need can feel daunting, but the good news is it’s easier than you might think.
To get a better understanding of how business licences work, and which you’ll need for your company, take a read of our easy guide to make sure you’ve got the right licences in place.
What is a business licence?
Simply put, a business licence is an official permit that is issued by the government or a professional body that instructs how certain business activities should be run.
The licenses your business will need will depend entirely on the type of industry that you operate in, and where you’re based within the country. Not all businesses in the UK require a licence provided you’re properly set up with HMRC: in many cases, small businesses can trade without one.
Some individual activities, like street parties or other public events, may also require a one-off licence.
Each licence is designed to keep owners, clients and customers safe, as well as hold businesses accountable for their actions.
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Why do you need a business licence?
Before setting up a business in the UK, you may want to get in contact with your local council. This way, you can easily find out if there are any area-specific requirements, industry-specific permits or zoning restrictions that could limit or halt your businesses activities.
The main benefits of getting a business licence are:
- Protection for employees and the public — Knowing you have the proper, legal licences in place will have you covered should an accident happen. If you sell food or a product that touches the skin, you will be required to have a specific licence plus pass an annual inspection.
- Privacy — If you obtain a licence for your business, this should mean that you’re ensuring any personal information will remain private. This also helps to allow your business to be held accountable for its actions.
- Keep track of your finances for tax purposes — This makes it easy to file your taxes once you know which businesses licence you’ll need.
- Good for the economy — With so many new businesses starting every day, making sure your business is registered and licenced helps to formalise the economy, as it shows the business sector is thriving.
Make sure that you get any type of business licence before your business begins operation, as you’ll be breaking the law if you don’t.
What businesses need a business license?
If you’re planning on opening a retail business, it’s important to get everything in place. From nail technicians to makeup artists and boutique owners, there are lots of accidents that can happen and leave you seriously out of pocket if you don’t have the proper business licences in place.
In the retail industry, there are a few common business licences that you should consider before you being trading:
- Licence to play background music or TV licence — If you’re planning on adding a touch of atmosphere to your setting, it’s important to make sure you apply for the right licence, whether it’s soft music playing in the background or a reality TV show. To legally play music you’ll have to apply for the PPL PRS Ltd.'s TheMusicLicence, which could cost from just 78p a day.
- Pavement or street display sign licence — If you’re planning on advertising your business on the pavement or roads, you’ll need to get written permission from the council. This costs £400 and lasts up to six months.
- Notification to process personal data — If you process customers personal data, such as their email address or phone number, which can be used to easily identify them, then you need to make sure you’ve got the right GDPR in place.
Whether you’re an accountant, architect, business consultant or photographer, making sure your business is set up correctly is important.
Some of the most common business licences you would have to consider include:
- Money laundering registration — If your business is based in the financial sector, you’ll need to register with an anti-money laundering scheme as well as with a professional body that regulates your industry sector.
- Financial Conduct Authority (FCA) authorisation — If you work in business finance and planning on offering financial advice or issuing payments or settlements, you’ll need to have authorisation from the Financial Conduct Authority before you can carry out any regulated financial services. If you don’t get proper authorisation before carrying out any activities, you could be fined or imprisoned.
- Public space surveillance (CCTV) licence — You’ll need to get this licence if you plan on using CCTV equipment to record any activities on your businesses premises. You’ll need to acquire the licence from the Security Industry Authority (SIA), which is £210 for a three-year licence.
Read our guide to professional indemnity insurance that can help protect your business if you need to pay compensation to clients.
Providing the best service is at the top of your priority list if you work in a trade-based business. Whether you’re a painter and decorator, carpenter, plumber or electrician, your reputation as a tradesman is dependent on working with the correct licences.
Before you carry out any activities, here are some of the business licences you’d need to consider:
- Skip licence — This licence allows you to place a designated skip on a footpath or public road. If your client has space to put the skip on their private property, you won’t need to obtain a licence. The cost of a skip licence varies depending on where you are in the UK, but the average cost is around £30.
- Goods vehicle operator licence — If your business uses goods vehicles above a certain weight, you’ll need to obtain this licence. There are three different types of licences - standard national, standard internal and restricted. The one you need will depend on where you transport goods to and from, and who you do it for.
- Scaffolding and hoarding licence — Whether you’re carrying out maintenance, building work or removal, this licence is required. You’ll need to make sure that the application is submitted at least 15 days before work is due to be carried out. A licence for both scaffolding and hoarding is £151 each which you can get from the GOV.uk website.
- Register to carry out gas work — To legally carry out any gas work, you must make sure that your business is on the Gas Safe Register. Find out what the Gas Safe Register is and why it’s so important with our guide.
- Street works licence — If you plan on placing heavy or street work machinery on a public road in England, Scotland or Wales, you’ll need to obtain this licence from your local council. If you fail to obtain the right documentation or have it in place when carrying out any work, this could result in a fine of up to £5,000.
Any service-based business in the UK will have to register for any licences accordingly. A service-based business can be anything from a gardener to a taxi driver, a tutor, or a window cleaner, so it’s important to make sure that you have everything in place to successfully (and legally) run your business.
Before you start your business, here are a few of the licences you’d need to acquire:
- Permission to distribute leaflets — If you want to advertise your business through leaflets or flyers, you’ll need to obtain this licence to get consent to distribute free printed materials in areas that are controlled by the local council.
- UK driving licence — You’ll need to hold a full UK driving licence as well as a taxi driver licence if you want to drive a black cab.
- Environmental permits — To dispose of waste safely, you may need to apply for an environmental permit from your local authority.
Whether you’ve made it to the high street or you’re tucked away in a hidden nook, there are certain licences you’ll need to obtain to make sure you’re following all food-based guidelines correctly. You’ll more than likely be:
- Preparing, storing and selling homemade baked goods and food
- Selling alcoholic drinks
- Playing background music
- Using advertisement boards on the pavement
You’ll need to make sure that you have business licences in place such as:
- Food premises approval — Before you can begin cooking, you’ll need to make sure you have food premises approval. This will need to be inspected and approved by your local council, and once your status has been approved, you’ll need to display your status according to the council rules.
- Food business registration — If you plan on storing, cooking, handling, supplying, distributing or selling food on your premises, you’ll need to register this with your local authority. You’ll need to make sure you register at least 28 days before your business opens. If you don’t, you could be fined and face up to 2 years in prison.
- Premises licence and personal alcohol licence — If you’re looking to serve alcohol on your menu, you’ll need to get a premises licence so you’re legally allowed to serve it. You or a member of staff will also need to hold a personal licence to sell alcohol.
- Permission to place tables and chairs on the pavement — You’ll need to apply for a licence from your local council if you wish to place tables and chairs or other furniture on the pavement outside of your premises. To support your application, you’ll also have to supply a site plan and your businesses public liability insurance certificate.
Do I need business insurance for home or online businesses?
E-commerce sales are steadily increasing. Today, it equates to almost half of all retail sales in the UK.
In many cases, you can trade without a business licence in the UK if you’re an online or small business, but you must make sure that you’re properly registered with the HMRC. This step must be completed no more than three months after you start trading.
General selling online
If you’re selling goods online within the UK, you don’t need a licence but you will have to follow certain rules. You must make sure that your business follows the rules of ‘before an order is placed’. These include:
- Making it clear to customers that they have to pay when they place an order — Through a ‘Pay Now’ button.
- Clearly display the methods that customers can pay — E.g Apple Pay or PayPal. This must also include delivery costs and options.
- Give customers time to amend any orders — ASOS have a ten-minute grace period in which you can cancel your order. Amazon allows 30 minutes to cancel orders if they’re sold via a third party seller.
- Language options — Let customers know what languages are available on site.
- Make customers aware of your terms and conditions — Make sure these can be downloaded and printed off.
- Description of goods — Go into as much depth as possible when describing your items. Product listing, whether it be for goods, services or digital content needs to be detailed.
Selling restricted goods
If you’re planning on selling restricted goods, like alcohol or nail varnish, then you’ll need to apply for multiple licences to do so.
- Personal licence — This requires you to take the BIIAB Level 2 Award for Personal Licence Holders from an accredited provider. You’ll then have to apply for a personal licence on the government website.
- Premises licence — This licence can be fixed on any commercial property, like a shop floor or warehouse, but isn’t usually granted for your home as this is classed as a domestic dwelling. However, a small building that’s on your land, but is separate from your house, could be given a licence. You’ll need to apply for a premises licence through your local authority.
How to apply for a business licence
The first step to applying for a business licence is figuring out which licences you need. The GOV.UK website has a licence tool finder to help with just that.
Many business licences are granted by individual local authorities, typically in the area where you’ll be running your business. You can pick up licence application forms from your local office or download the licence forms from the GOV.UK website.
There are several exceptions for this, however. If you want to run a childminding business, for example, you’ll need to apply for a licence from a specific governing body:
- Ofsted in England
- Care Inspectorate in Scotland
- Care and Social Services Inspectorate in Wales
- Department of Health, Social Services and Public Safety in Northern Island
How much does a business licence cost?
As with many business licences, it’s hard to speculate at the exact cost. The cost of a licence will depend on the type you want to acquire and the reasons for this.
There are many factors to consider, such as individual authorities will set the cost for each licence they provide, and as such, the cost can differ depending on where your business is based.
What happens if I breach the conditions of a business licence?
If you do breach any conditions of a business licence, whether it be accidental or otherwise, you could be fined and have your licence revoked.
You also may not be able to apply for the relevant business licences again, leaving you without the legal cover to carry out your business activities.
Read our guide on legal expense insurance to make sure you’ve got the proper cover in place should the worst happen to your business.
A guide to business licences
Whatever your business, it’s important that you have the proper business licences in place. While this can sometimes feel overwhelming to know the exact licences you’ll need to acquire, it’s important you get the right ones before you start trading, to save yourself from some hefty legal fees.