What Happens if Your Business License Has Lapsed?

Obtaining and maintaining the correct business license may require contacting more than one government agency. State and local governments may may expect business owners to file in several locations. In addition, professional licensing may be required before certain types of businesses can operate. Some business licenses require renewal on a semi-annual, annual or bi-annual basis. If you lapse on a renewal requirement, you could incur fines or be required to re-apply.

State License Requirements

Some states require a one-time application for a business license. The license is active until the business owner closes the business and does not require renewal. This means the license cannot lapse. However, the license may require the business to regularly file sales tax reports or other documents. A lapse in the filing of a report or the failure to make a business sales tax payment can lead to additional interest, penalties and fees. In cases where the business owner avoids payment or does not cooperate, the state can prosecute the business owner.

Local Business License Requirements

Local governments, such as a city or county, may ask business owners to apply for a local business permit in addition to registration with the state. The permitting process allows the municipality to track zoning requirements and assure the community the business is operating legally according to city codes and laws. This type of permit is usually an annual permit requiring a yearly registration and fee. The city or county clerk or tax assessor's office usually manage local business license applications.

Lapsed Local Business Licenses

Some local governments send business owners registration reminder statements on an annual basis. Returning the statement and stated fee renews the business license for another year, and in return the business owner receives a license permit to post in his place of business. Statements for unpaid fees may be sent every 30 days with an interest penalty or additional fee added to the owed amount. Businesses that do not comply by paying the renewal fee are in violation of local law and can be taken to court by the municipality. Most governments are willing to work out a payment plan with offenders before taking them to court.

Read More: How to Verify a Business License Online

Lapsed Professional Licenses

Professional licensing is not a business license but may be required to operate certain types of businesses. Professional licenses qualify people to practice certain types of professions such as cosmetology, real estate and law. Professional licensing is managed by the state and requires the applicant to pass an exam and prove they have completed the correct educational requirements.

Professionals are required to renew their state license on an annual basis, which typically requires the payment of a renewal fee and proof of completing a continuing education requirement. A lapsed professional license may require a person to retake the state exam and pay late fees to re-establish their license. Practicing without a valid professional license is illegal and can be prosecuted by the state.

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