Starting a business: entrepreneur vs business owner

Before we look at the various business permits and licences a company may need to consider, it’s worth to develop an understanding of the difference between an entrepreneur and a business owner. An entrepreneur is similar to a business owner in that both commonly start a business by themselves. But the main difference is that entrepreneurs often launch their businesses based on an innovative idea or service. The term originates from the French “entreprendre” which means “to undertake”. A good example is a person who develops a unique software product and attracts funding to launch a start-up. Business owners, on the other hand, could be anyone selling goods or services. A sole proprietor selling used books on Amazon is a good example of a business owner. The element of risk can be smaller for business owners because their ideas have often been tried and tested. The risks can be higher for entrepreneurs, but so are the rewards.

One doesn’t exclude the other though. You could start out as a business owner, for example operating a café, and later turn it into a franchise, taking on an entrepreneurial role.

But irrespective of the legal structure you choose, if you’re selling certain goods such as food, supplements or alcohol, or provide services such as a day nursery, you must apply for a business licence.

Business permits are issued by government authorities to ensure that business operators comply with local laws. Procedures to secure them are outlined by HMRC or your local council authority. Importantly, the government has the right to shut down any business that is not compliant with the law, i.e. where a business owner fails to show a valid permit.

Not every company owner will need to apply for a business licence. If, for example, you’re a sole proprietor providing digital design services, you won’t need a special permit to conduct your business. However, if, for example, you sell food supplements, you need to register as a Food Business Operator in the UK because supplements can potentially pose a risk to human health.

Certain types of businesses will also be required to apply for a premises licence. These include venues that sell alcohol, provide entertainment (like cinemas or music venues) and any restaurants selling food and drinks after 11pm. Brands can also register their trademark to licence it in the future.

Although licences and permits are very similar in nature, i.e. they give a business permission to carry out a service or sell a certain product, there are subtle differences. A licence is a more general term and gives a licence holder permission to carry out a certain intent. Licences can also be given to people with specialist skills, for example, hairdressers or chefs usually need to qualify to obtain a licence to practice professionally. Permits, on the other hand, are related to safety standards. A restaurant may need to obtain a permit to serve alcohol and food. Many businesses will have to obtain both, for example, a beauty salon must apply for a health permit and employ licenced practitioners. If your salon plans on playing music, you will also need a licence to play background music. To safe-guard the premises, salon owners may wish to install CCTV, which means they also need to obtain a public surveillance licence.

Where your business activities are overseen by the government, you need to register for a business licence. In many cases, you will be required to comply with government law and council regulations. You can search the UK government’s licence finder to find out if your business activities require a licence or permit.

These include detailed guidance on licences and permits required for businesses and a breakdown of specific activities that require separate licences.

As an example, let’s assume you’re launching a catering business. Firstly, you must register as a food business. The licence finder now allows you to add any of the following activities to check for licences pertaining to “catering services”:

• Handling more than 50 tonnes of packaging in 12 months
• Organising ad hoc events
• Indoor and outdoor events with entrance fees
• Parking of vehicles in restricted zones
• Processing information from individuals
• Selling alcohol
• Using CCTV
• Use live entertainment venues
• Utilise the Olympic Brand
• Cater for air industry

Let’s assume you select to organise ad hoc events, want to serve alcohol and use an entertainment venue, the licences and permits you would need to register for include a premises licence, a temporary event notice, a live music licence and a personal licence to sell alcohol.

Select business activities that require a licence or permit, and corresponding authorities to obtain them from are shown in the table below.

In addition to government permits and licences, you may need to require for permits to operate specialist tools or register your premises. This is the case for special events, farmer’s markets, development projects and planning proposals, among others. For example, if you plan on making changes to property you own, you will need to apply for a permit from your city or local council.

Importantly, it doesn’t matter whether you conduct your business from your home or outside of it. Business and professional licences are required depending on the type of activity your company carries out, not necessarily its place of business. There are, however, special licences for your place of work, for example, food processors will need a special permit to verify they are operating under sanitary conditions.

The cost of a business licence or permit depends on the type of licence you are applying for. Average business licensing costs can range from £0 to £15,000 and more. Alcohol licencing fees range from £300 to £500. Registering premises can cost up to £2,000. Meanwhile, a permit for a food operator can be obtained free of charge.

Many permits will also require renewal after a year or a set amount of time.

Application procedures will depend on the type of permit you’re applying for and whether you are processing your request online or offline. This will be largely dictated by the authority you’re applying to. Let’s look at an example.

Say you’re importing Swiss chocolate from Switzerland to the UK to sell through your online business. Because Switzerland is not part of the European Union, you will need to obtain approval from different agencies. You must take the following steps:

• Apply for approval to import the food products with the Department for Environment, Food & Rural Affairs.
• Notify the Border Inspection Posts of the arrival of your foods which contain animal products (in this case the milk in the chocolate)
• You may be required to submit health certificates in advance, but this will depend on the type of product you are importing.
• The border authority will verify that the foods you’re importing are safe to consume. They may also take a sample from your chocolate and analyse it to ensure it is safe for eating.

Food products that fail these checks will not be allowed to enter the UK. The Food Standards Agency provides further information on the topic.

When applying for a permit make sure to fill out all the required sections, submit any forms on deadline and pay all relevant fees. Otherwise, it may take longer for your request to be processed by the authorities.

Starting your own business is a challenging endeavour, but if you understand the individual steps involved and are well-prepared, the process can often be a little more frictionless.

Please note the legal disclaimer relating to this article.