You can’t turn around these days without seeing the government’s hand in your business. One case in point highlighted by a recent article in The Wall Street Journal, which shows the number of state licenses growing at a disturbing rate. The percentage of workers needing licenses to do what they do has grown from 5% in the 50’s to 10% in the 70’s to 23% in 2008 (the most recent year for statistics).

Are licenses an important way to regulate activity or are they merely revenue raisers? No one argues with licensing requirements for professions, such as those for doctors and dentists, nurses, attorneys, and even daycare services. These state-level licenses are granted by the state; some licenses, such as those for certified public accounts, are granted by professional organizations. Clearly, these long-standing licensing requirements are designed to protect the public and ensure the integrity of a particular profession.

But as the article points out, Alabama has the strictest licensing requirements for manicurists—750 hours of schooling plus a practical and written exam—and it averages about 4 complaints a year. Connecticut, with no licensing for manicurists, has just 6 per year, most of which concern gift certificates rather than manicurists’ performance.

A look at licensing requirements, state by state, shows a wide array of business-types that require licensing that arguably go well beyond protecting the public. In New Jersey, for example, you need a license to run a junk yard or be a mover.

Every business is accountable to the public for what it does; being licensed doesn’t necessarily protect the public from poor performance. Whether businesses need licenses, permits, or registration to do business, it is an added cost of operation and yet another form of taxation.

 

Barbara Weltman is an attorney, author of several business books including J.K. Lasser’s Small Business Taxes, and trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and her monthly e-newsletter Big Ideas for Small Business®; both are available at www.barbaraweltman.com, and host of Build Your Business Radio. Follow her on Twitter at twitter.com/BarbaraWeltman.