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Operating a Business Without a License [e160]

Nasir and Matt end the week by discussing the importance of securing the necessary licenses for your business and how operating without a license can ruin your business.

Transcript:

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist like a little lemon at the end of a story. And my name is Nasir Pasha.
MATT: And I’m Matt Staub.
NASIR: I’m all business today. Last Friday, I went on a rant that lasted probably twenty minutes.
MATT: That’s true.
NASIR: And the feedback has been that that was too long. So, I was like, “Okay. Now we have to get more serious. This is all about business and the law, and we can’t make one joke,” because people don’t have a sense of humor, apparently. So, this is now serious.
MATT: This will be like a semi-rant for me because of the topic we talked about or we’re talking about today.
NASIR: Perfect.
MATT: We’re going to deal with licenses, but not the licensing we’ve talked about in the past. This is the actual license that you need to sell your product or conduct your services – more so services. I’ll start with my semi-rant. So, I do some estate planning from time to time and there’s people out there that are doing estate planning that aren’t estate planning attorneys and I don’t really understand how it’s done because there’s a thing called the “unauthorized practice of law” and, if you’re not a licensed attorney, you can’t practice law. So, some people are out there advertising themselves as a certified estate planner or something along those lines, and I don’t even if know if that’s… like, I can come up with my own certification system and make someone certified in something, but that doesn’t really mean anything other than it’s a certification that I made up, and I feel like that’s what these people get into.
NASIR: Oh, and you’re right because these guys – guys or gals – they actually produce forms, don’t they? I mean, they have these templates and so forth and trust and estate planning. I mean, that can be just a mess if they make a mistake, you know?
MATT: Yeah. Well, I’m not talking about LegalZoom or anything like that.
NASIR: No, no, no, I know. No, I’m talking about – not to pick on any particular industry but, you know, – when you have insurance agents that relate to a lot of estate planning, they sometimes can fall into that trap. But it’s not only estate planning. I mean, from a legal basis, there’s also immigration law and family law for whatever reason. Like, if you go on Craigslist, you can find a bunch of people that are not attorneys advertising these services for cheap and, of course, you know, you get what you pay more. but the main problem is that they’re not regulated and so they don’t really have any – besides, you know, getting maybe a bad customer that’s upset – they don’t really have any consequence too if they mess up. You know, what happens if they mess up? What are you going to do?
MATT: Yeah, exactly. That’s a reason that you – not just in law but in any area where there’s some sort of licensing – you go with people that have a license because, if there is an issue, that’s something you can go after. So, there’s a couple of examples that we have and the one here is kind of interesting. This was actually a Supreme Court case, right? Yeah.
NASIR: I think it’s a state Supreme Court though, right?
MATT: US Supreme Court, six to three decision. A business that was selling teeth whitening services, whether you need to have a license. It seems like a stretch but…
NASIR: Oh, I see. This was actually an FTC lawsuit against the North Carolina State Board of Dentistry.
MATT: Oh, okay. That’s what it was. So, the Supreme Court did rule six to three that the North Carolina State Board acted illegally by excluding the competing businesses from offering teeth whitening services which, I mean, I never would have even thought about that, really. It never would have crossed my mind that that’s considered dentistry. It’s not like they’re a kiosk that’s offering, like, free fillings. Like, “Come over and we’ll drill into your tooth,” or something.
NASIR: And it kind of depends upon, like, to me, if there’s any risk of teeth whitening that could damage your teeth or whatever – which I suppose they could – I don’t know, I would want to make sure that they are regulated. I think that’s the whole point. I think a lot of people complain that there’s too much regulation but, sometimes, that regulation, like we said, creates standards for which there’s some recourse because do we as consumers – I’m thinking from a consumer perspective instead of, you know, our business client’s perspective – do we want to have to go after a company because they didn’t perform well because they weren’t regulated where rather can we just report them to the regulatory agency and have their license revoked or disciplined because they’re cheating their customers? I think that is a much easier way to go about it and it puts the burden on the business to perform.
MATT: See, for me – well, maybe not for this but – for a lot of these businesses, like, here’s an example of one in Colorado with this hair, nail, and waxing salon, I would think, if your insurance – whoever you use for your insurance – would ask if they were licensed or for a copy or whatever to make sure. But wouldn’t there be something that the insurance agent would want to see?
NASIR: You would think, and there’s probably going to be exclusions, like, if you’re an operating, like you said, this talks about a hair, nail salon that wasn’t licensed. They opened for business without a license and, of course, the department – which I guess is the Department of Regulatory Agencies – requires such a license to happen and they didn’t have one and, of course, they got in trouble for it. So, in the event that happens, the insurance policy may not even cover that because there may be some exclusion relating to you not being licensed. I don’t know if they’ll actually ask you. Maybe if you’re in a highly regulated industry like – I don’t know – banking license or something to that effect, they’ll confirm that stuff. But, for a small business like that, I don’t know, not necessarily they would.
MATT: Yeah, that’s a good point. For whatever reason, I was thinking of insurance agents as, you know, nice people that would go the extra mile for you. Maybe it’s because the ones I know do go the extra mile but I think, a lot of times, you’re right. It’s one of those things, it’s like the people with the life insurance policies and if there’s a suicide, you’re not going to get the pay-out or something like that.
NASIR: Yeah.
MATT: I really took that in a dark direction for no reason.
NASIR: For no reason whatsoever.
MATT: I started thinking of an example.
NASIR: But, anyway, every state has license for even the smallest types of businesses or the types of businesses that you wouldn’t think of but it is state by state. But they cover everything like, for example, New Jersey has a law where the state law requires any movers to be licensed with the Division of Consumer Affairs and that imposes some kind of cargo liability insurance, they have to register the vehicles that they’re using, and all these different items because, in particular in New Jersey, they’re having problems because too many consumers are being ripped off by movers who basically hold the furniture and other goods hostage while demanding outrageously inflated prices. I even had a friend that had to go through this too. I think it was out of Florida. I can’t remember what happened. Maybe there was some damage or something to that effect and going after these guys was a whole ordeal and, a lot of times, when you’re in these kinds of industries, you’re required to be bonded and, if there’s a bond, it’s much easier to make a bond claim than it is to file a lawsuit, even in small claims.
MATT: Yeah. What’s really useful in California – which I don’t know if a lot of people know about it – is there’s this really nice, useful tool. It’s a search and I can link it. We’ll link it in here. But you basically type in your city and county and then you type in the type of business that you are and it populates. It’s going to give you more than you need but it’s going to give you all the potential licenses and permits that you’re going to need to do business. So, if I typed in “San Diego County…”
NASIR: Oh, that’s really cool. Yeah, I’m going to put “San Diego County” and I want to open up…
MATT: I did a brewery in San Diego. I tried to do something that’s going to have a lot. It’s going to range. You’re going to have things that might not necessarily apply, but you’re going to have other ones as well. Like, here, obviously, your alcoholic beverage license. If you’re a brewery, you obviously need to have that.
NASIR: That’s pretty cool. They go through a local level and we weren’t going to talk about this but there’s simple business licenses that, on a local level, they apply. I think some states may require that as well and that’s separate from your entity or your corporation or LLC that you’re forming, and it looks like they get pretty exhaustive.
MATT: Yeah.
NASIR: It covers everything from getting an EIN number which is, like, yeah, I guess that’s a license but not really.
MATT: It’s a good tool for new businesses so lots of cool stuff. What did you end up going with?
NASIR: I ended up going with a hobby toy and game store. I know it’s kind of random but there’s no special permits for that. It looks like it’s just all basic, generic ones. This is actually a really, really great tool. It’s basically issue spotting. It goes everything about discrimination law, corporation company or partnership filings. Pretty cool find, Matt.
MATT: I found this randomly years ago just by searching. For some reason, I stumbled across it. Yeah, what are the better tools? I mean, there’s a lot of good info on the California State websites if you search around enough but you’ve just got to kind of know about them. I’m surprised you didn’t do a cat business or a vet or cat café.
NASIR: Actually, that’s a great look. Let me just do “cat café.” Oh, no matches found.
MATT: I don’t know if I said it on the podcast but, after we recorded that cat café episode, I think, like, within a week or two of recording that, I had an event that was right by the cat café and I was going to go but it was at night and the cat café was already closed.
NASIR: Oh, that’s sad.
MATT: But I saw it! I didn’t see any cats.
NASIR: Oh, there’s no cats in there. It’s just for show.
MATT: Ah.
NASIR: I wanted to just mention these tow companies in Houston because there’s just a bunch of these guys that their licenses were revoked yet they’re still operating and the only reason I wanted to mention this is because, a lot of times, you’ll see industries like this where it’s just rampant where the state is happening to not have a really good grasp on the enforcement aspect of the regulatory rules and sometimes that can be very tempting to not follow it as well. Basically, you know, if they’re not doing it, then why should we? There are some real problems with that because one is that the enforcement aspect could change on a dime and literally tomorrow the state could start enforcing. There’s a lot of times this is a money-maker because they can issue fees and start collecting licensing fees or penalties and so forth; and number two is that it can be misleading because maybe the industry is full of it but maybe it’s a bunch of small guys but, once you get bigger, then you’re going to be targeted and, at that point, it’s going to be too late to really fix it. So, just keep that in mind as well, you know, if you’re operating a business, maybe you’re not licensed yet and you’re thinking about whether you need to or not, it’s always better to air on the side of just going through the process.
MATT: Yeah, I think we say that all the time as a general rule of thumb.
NASIR: Yeah.
MATT: If you’re not sure whether you need something or not, just do it.
NASIR: Yeah, be safe.
MATT: I’m sure there’s some way that can be turned around against me but, generally speaking…
NASIR: Generally speaking, of course.
MATT: Yeah.
NASIR: All right. Well, happy Friday episode, everyone. Don’t forget to leave a positive five-star review on iTunes.
MATT: Yeah, I haven’t gotten my Red Bulls yet. Still waiting. If you listened on Monday.
NASIR: If you’ve listened on Monday’s episode and you’re listening now to this episode, you’ve already missed your chance to get the Red Bull.
MATT: Unless you hacked into our system and listened to our recordings, but I don’t know why you’d want to do that.
NASIR: All right. Thanks for joining us.
MATT: Keep it sound and keep it smart.

Nasir Pasha & Matt Staub

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The Podcast Where Nasir Pasha and Matthew Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to ask@legallysoundsmartbusiness.com.

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