Do you have a passion for cars? Are you a lifelong entrepreneur? Starting your own auto repair business might be for you!
But are you asking yourself, “what permits do I need to open a mechanic shop”? We’re here to help! Let’s cover what you need.
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Registering your business
You first need to register your business as one of three entities:
- Sole trader: As the name suggests, you are the only member running the business as a sole trader.
- Partnership: This term means you share ownership between parties. You will need a written legal agreement outlining the contract between each partner.
- Proprietary company: A proprietary company or an LLC is separate from its owner. You will have limited personality liability with this option if financial trouble or legal action occurs.
Necessary permits and licenses
You might feel overwhelmed by all the legal requirements for opening an auto repair business. It’s not as complicated as you think!
We will walk you through the necessary licenses and permits on both a state and local level.
- State licenses: Depending on your state, the requirements for a license may differ. Make sure you follow the terms to get formal approval for your business.
- Local licenses: These requirements will vary by state, but it’s important to check that you aren’t missing potential requirements.
- Certifications: Your business is only as good as your employees. Certifications for your technicians can take your shop’s productivity to the next level.
- General compliance: Upheld by the state, mechanic shops need to comply with certain safety regulations.
For information about local licenses and permits:
- Check with your town, city, or county clerk’s office
- Visit one of the local associations listed in the US Small Business Associations directory of local business resources.
What is a business license (and how to apply)
You will need a motor vehicle repairer’s license to run your business in the state. A license verifies your qualification to operate a mechanic business and your adherence to all federal, state, and local laws. To legally operate, your repair shop must display its license number and certificate of approved premises.
You will also need to pay a processing and application fee for business licenses. They must be renewed 28 days before expiring and may only be valid for three years in the state where you obtained them.
You must also meet several prerequisites depending on the state (or local area) before applying. Proof of certification is one requirement. Additionally, you will have to share documentation for taxes.
Employee certifications to consider
You might wonder: “Do you need a license to work as a mechanic?” Yes, you do! You must meet the proper qualifications, just like any technicians you hire.
You can qualify for a wide range of repair classifications. The classifications may vary based on what state you live in. You must complete formal training and meet requirements to become certified as a motor vehicle repairer.
Requirements are straightforward. You have to fill out an application, provide evidence that you are eligible, and pay a processing fee.
How you can secure a certificate of occupancy
You will need a Certificate of Occupancy to meet zoning requirements and open your mechanic shop.
So how does your shop obtain a Certificate of Occupancy? The process is straightforward! You can get your COA from the zoning or regulatory office in your respective city or county. But it depends on whether you will lease a garage, purchase a shop or build on location.
Here is how to secure your COA for those different options.
Securing a valid shop premises
Are you ready to secure a business license for your mechanic shop? You should ensure that your facilities are permitted and satisfy the essential requirements.
Your mechanic shop may need to follow state regulations before receiving approval.
General compliance tips
Your mechanic shop may need to follow regulations, enforced at the state level, before approval. These consist of:
- Environmental: It’s critical to ensure your shop opening won’t affect the environment in your area. Depending on where you live, rules will vary. Your repair shop will need to meet requirements for the secure transportation and disposal of hazardous materials. Examples of these items include car batteries and motor oil.
- Health and safety: The health and safety of your clients and employees are crucial considerations. You’ll need to buy workers’ compensation insurance for your staff in case an accident occurs.
Tax registration process
The following papers are necessary for tax purposes:
- Services and products registration for taxes: You must register and pay taxes on services if your gross yearly turnover is above $75,000.
- Tax registration for payroll: You must register for payroll taxes if you plan to hire more workers. The state will need to collect income tax on their salaries.
- Fringe benefits tax registration: You can pay taxes on several employee benefits you offer if you register for FBT. Paying these taxes is often claimed as an income deduction by the employer.
Understanding your federal employer identification number
Your Federal Employer Identification Number (FEIN) is a unique nine-digit number used to identify the company with the Internal Revenue Service (IRS). Other descriptive terms include Employer Identification Number, EIN, or Federal Tax ID Number.
Any company that has workers, forms a corporation, partnership, or in many situations, an LLC, must secure an EIN.
Investing in insurance
Imagine one of your employees sustains an injury while working on a customer’s vehicle. What would be the next step? Without insurance, you, as the shop’s owner, will be liable. Meaning whatever the damage, you will have to pay out of pocket. That’s the fastest way to run out of business!
Insurance is a crucial factor to consider given the inherent risk associated with working as a technician. Potential issues include public liability, worker injuries, and equipment damage. General liability insurance and worker’s compensation insurance are coverage plans you’ll need.
General liability insurance 101
General liability insurance covers basic liability protection. For instance, if you damage a customer’s vehicle by accident, this insurance would pay the costs. If one of your employees gets injured at work, worker’s compensation insurance will cover it.
If a person gets hurt or becomes ill while working, this insurance pays for lost wages and medical costs. Additionally, it stops your employees from suing your company in court.
Final thoughts
Cutting through red tape can feel like a burden. But compliance with your shop’s permits and licenses is an important ownership requirement!
Use the insights in this blog post to cover all your bases and set your shop up for long-term compliance.
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