Why do businesses require a business license to operate? Is there a purpose? Do they add any benefits to my business? Or is it just a money grab for the City?
These are questions I am commonly asked so I thought I would do some research. Since I live and work in the Tri-Cities, that is where most of my research comes from.
“The City of Coquitlam requires every person carrying on, maintaining, owning or operating within the City in any profession, business, trade or occupation, to hold a valid business license.” Similar statements were posted on the websites for the City of Port Moody and the City of Port Coquitlam.
Reading that didn’t really answer the question of “WHY do I need a business license?” so I dug a little deeper and found what I was looking for from the City of Port Moody. “Business licenses help ensure that the City’s land use regulations, under the Port Moody Zoning Bylaw, are complied with. The license process also ensures that building, fire and health requirements are met as well as Provincial regulations such as Liquor Control and Licensing, Motor Dealer Licensing and Film Classification where applicable.”
Now we are getting somewhere…business licenses are important for zoning compliance which means only certain types of businesses can operate in certain areas of the city. Also, depending on the type of business, there may be building, fire and health requirements to comply with. I know that if I am going to eat in a restaurant, I definitely want them to comply with health requirements.
Ok, so business licenses are required so that a City can monitor to ensure businesses are in compliance with zoning bylaws, fire and health requirements and building regulations. That makes sense and I think that answers the general question of “WHY” but doesn’t fully answer the questions for my home-based businesses. So a little more digging…
What type of business can be operated from a home? There are various limitations to what business you can operate from home, a structure located in a residential zone. The City of Port Moody defines a home-based business as an “Accessory home occupation use”…a commercial occupation or professional use which is ancillary and subordinate to the use of a dwelling unit for residential purposes.
What the HECK does that mean?!? Basically, a home-based business is a secondary use for your residence. The primary use, of course, is living in it as your home. Additionally, there are many requirements the business has to fulfill in order to be able to operate in a residential zone, as well as different types of residential zones that have different restrictions.
According to the City of Port Coquitlam, “the City’s Zoning Bylaw restricts the type of business activities that are allowed to operate in a residential neighborhood (in order to minimize disturbances to surrounding properties), limits the size of the area used for business purposes, and regulates parking and storage impacts.” (see Port Coquitlam’s zoning bylaws for home-based businesses for specific information.)
Certain regulations for home-based businesses that seemed, to me, particularly pertinent are: the business cannot be more than 20% of the floor area of a residence; there are specific hours of operation; the number of employees are restricted; dependent on type of business, there is a limit to the number of customers you may have per day; and you may be required to have off-street parking available.
There are also some types of businesses that cannot be operated from a home such as: medical or dental services; commercial food handling or preparation; on-site manufacturing; and the breeding or boarding of domestic animals.
BUT what are the consequences of operating without a valid business license. The City of Port Coquitlam fines up to $150 per day…OUCH!!! It is definitely worth doing some research if you are working from home and do not have a business license.
Now that you know you need to look into getting a business license, here is some general information for you. Business licenses are generally valid for one year and the fees do range depending on the type of business you have. Most municipalities offer a pro-rated fee if you start your business mid-year. And if you operate as a mobile business, the Tri-Cities will has a mobile business license so you don’t have to have one for each City that you work in…at least for the Tri-Cities.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.