About Me

My photo
Rachel Kosmal McCart is a lifelong horsewoman and the founder of Equine Legal Solutions, PC, an equine law firm based in the Portland, Oregon area. Rachel is a member of the New York, California, Oregon and Washington State bars and is admitted to practice before the U.S. District Court for the District of Oregon and the U.S. District Court for the Central District of California. Rachel currently competes in three-day eventing.

Monday, September 29, 2008

Business Licenses and the Horse Industry

At Equine Legal Solutions, our boarding stable, breeding farm and trainer clients frequently ask us if they need to go and get a business license. The term "business license" can be confusing, because it seems to imply that special qualifications are needed to operate. In fact, many states and municipalities do regulate certain types of businesses, such as nail salons, and those regulations do typically have a basis in public health and/or safety. However, equine businesses generally are not regulated businesses for which special licensing is required, and so for the purpose of this article, "business license" will refer only to the general type of business license.

Municipalities (and sometimes counties) often require businesses of all types to obtain a business license. A business license is a lot like a dog license: it evidences nothing other than payment. The business license serves primarily as a revenue generator for the municipality. It is a thinly disguised tax. Typically, absolutely no qualifications are required to obtain a business license, other than filling out a short information-only form and paying a fee. Therefore, anyone with a checkbook, including criminals, cheats and liars, can get a business license. A business license is not a stamp of legitimacy.

In consultations, potential clients sometimes triumphantly reveal to ELS that the boarding stable, trainer or horse sales barn with which they have a dispute does not have a business license. They fervently hope that the lack of licensure is a smoking gun that can help them back the business into a legal corner or maybe even shut it down. Sometimes, they are convinced that a licenseless business cannot enforce its contracts. Often, this arises in the context of a deadbeat boarder trying to avoid their bills and take their horse out of the boarding facility without paying. But, the mere fact that a boarding stable doesn't have a business license doesn't change the boarder's obligation to pay for services received. Whether or not a business has a business license has absolutely no impact on its ability to enforce its contracts or carry out its business in any way.

At most, not having a business license means that the business might have to pay some monetary penalities to the municipality or county for not having obtained a license when they were required to do so. On occasion, the monetary penalties can be steep multiples of the original licensing fee (with interest). Some of the more aggressive cities regularly review state corporate filings and seek to collect business licenses from those corporations having listed addresses within their city limits, even if those businesses do not operate any kind of facility open to the public. If the business doesn't pay the notice when they receive it, the city can turn the account over to a collection agency, and it may adversely affect the business's credit. So, to avoid an expensive surprise later on, it makes sense for equine businesses to check with their city or county to see if a business license is required, and if it is, obtain one and keep it current.

One small caveat about obtaining a business license: you may start receiving more junk mail. Municipalities sometimes generate more revenue for themselves by "renting" their business license data to third party vendors, such as credit card companies. So, don't put any information in your licensing application that you would not want to be made public, such as an unlisted phone number.

No comments: