Importance of Licensing
Licensing is the process by which a government allows or gives permission to a firm or business organization to carry out certain operations. It is the authorization by the government to operate a business. When one is starting a business, they are required to allow for a license, that is an authorization, for it to be legally allowed to continue with their undertaking. This is almost mandatory for every business in most if not all countries. In most countries, both developing there are set up regulation bodies and authorities that oversee how businesses or organizations operate. These regulatory bodies determine which activities a firm is allowed to undertake and ones that it is not. Governments in most countries have agents located all over the nation or state to ensure that citizens in need of licensing or authorization are able to access those services within the shortest time possible.
For one to be issued with a license they have to provide information concerning what they are dealing in and for how long they are going to be doing it. A license therefore needs constant updating of the information it contains every time changes are made or take place in the person’s business. Since licenses are only given for a specific amount of time, they are bound to expire or lose meaning. One is therefore required to renew their license when the contract period expires as well as when main or major changes have taken place in the business or firm over a long period of time usually ten years.
The process of application for an authorization or license to put up a business as well as the updating and renewal processes after expiration all require that one pays money to the government. This brings us to the various benefits of licensing to a country or nation and more especially to the government. The government of any country benefits in innumerable ways from the process of licensing and these benefits are what this article attempts to put across in the following paragraphs.
One advantage or benefit of licensing to a federal government is that it helps regulate the business activities carried out within its jurisdiction. This helps in preventing illegal activities such as drug trafficking from being carried out. A license in most cases defines what the scope of a firm’s activities. This determines the activities that are legal for a firm to undertake as well as those ones it is not supposed to. If a firm therefore carries out activities that are not within its scope the government can withdraw its license therefore making a licensing a good control measure.
Another importance or benefit of licensing is that it enables the government to collect revenue from the activities that businesses take part in. As earlier stated, the entire process of obtaining a license, updating license information as well as renewing after expiration are services that are offered to citizens at a fee and therefore this acts as an avenue for the government to collect revenue from the firms.