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Many businesses need professional licenses at the county, state and city levels. Those who run those companies must research to identify all the relevant requirements. But the demands on business owners’ time are many so that these behind-the-scenes tasks can be pushed aside. And when regulators knock, a company could face costly penalties.
Conduct Research
The first step in ensuring business license compliance is conducting thorough research on the licensing requirements for all locations. It can be a complicated task, as businesses are often required to have registrations, licenses, employer obligations, and permits on file in various jurisdictions across the country. It can be further complicated when a company experiences structural changes, such as changing from an LLC to a corporation, moving headquarters, or opening new offices. These changes can trigger license requirements in new jurisdictions or cause existing ones to expire. It makes it critical for a company to be proactive in conducting business license research. Managing license compliance requires a robust process that isn’t dependent on the efficiency or reliability of government agencies. It is why companies need to adopt a comprehensive license management system that can help them keep track of their requirements and ensure the use of licensed software and intellectual property align with stipulations in their licensing agreements.
Develop a Strategy
When your business was just getting started, you likely worked with a legal professional to register your business name and obtain all required licenses and permits. Keeping those licenses and permits up to date is critical as regulations change often. Each year, enterprises face fines and penalties and may even lose their ability to operate if caught without the appropriate license. Developing a solid compliance strategy can reduce the cost of penalties, internal investigations and inquiries by reducing mistakes caused by a lack of resources or human error. Using compliance analytics, ISVs can tap into a previously unidentifiable market and generate actionable leads by targeting customers using software illegally — whether through overt piracy or unwitting use of expired licenses. As the data shows, 95 percent of customers using software outside their license are willing to correct it if provided with a solution. It provides a strong customer relationship opportunity for partners and can help to ensure a profitable future.
Take Action
The business license compliance landscape is complex. Regulations are always changing, making it challenging for businesses to satisfy the demands of numerous local, state, and federal agencies. Failure to properly address these obligations can result in fines, fees, penalties and work site closures. The first step in addressing these issues is understanding the licensing agreements. It is important to know what a company’s rights and responsibilities are about its use of licensed software and intellectual property, as well as any penalties for non-compliance.
Once an organization clearly understands its licensing agreements, it can implement a license management system, conduct regular audits and provide training and education to employees. Establishing a dedicated business license compliance team is also a good idea. It will help ensure that the correct people know what they need to do to maintain license compliance and prevent them from being distracted by other business priorities or getting lost in the complexity of managing business licenses across a diverse portfolio footprint.
Communicate
Most businesses need some license or permit to operate at the federal, state and local levels. Depending on the activity, region, and sector, these criteria change. The stakes are high, as driving without a proper business license can result in fines or penalties, being shut down by authorities, and losing brand trust. The good news is that there are many ways to improve the effectiveness of a company’s business license compliance management function. It starts with identifying which processes are needed to cover a business’s entire portfolio footprint and determining whether these processes can be executed efficiently through a technology-enhanced self-management model or by working with a trusted partner.
Once these processes are in place, it is important to communicate the responsibilities of each group involved. It will prevent business events and changes in activity from triggering license actions that are out of the corporate team’s scope of control. It will also help avoid corporate offices from relying on the due diligence of individual location managers, as this could lead to missed opportunities for the company and a potential failure to meet regulatory standards.
Monitor
Licensors must monitor the actual performance of their licensees. It is not to suggest that licensors should be suspicious of their partners or assume they are untrustworthy. Still, it is the best way to ensure optimal royalties are realized at the negotiated rate. Unfortunately, too many companies treat their business license compliance like an afterthought and fail to devote adequate resources to this task. They are risking their organization if they are too busy with other work, too lazy to spend the time, or too concerned that a royalty audit will damage their relationship with their licensee. As a result, they risk punitive action from government agencies and a negative brand image among the general public. Thankfully, there are techniques to minimize these hazards. Using a license management software solution, performing desk audits, and conducting proactive communication between licensor and licensee are just some of the steps that can be taken to ensure that business license compliance is met.
