9+ Licenses and Permits You May Need to Open a Auto Dealership

Are you an ambitious entrepreneur with a passion for automobiles, ready to take the plunge into the lucrative world of auto dealerships? If so, you're probably well aware that opening an auto dealership requires more than just a love for cars and a keen business sense. In fact, navigating the legal and regulatory requirements can be a daunting and complex process. But fear not, because we're here to help! In this article, we'll explore the 9+ licenses and permits you may need to open an auto dealership, ensuring you're well-equipped to tackle the administrative side of your dream venture. From zoning permits to dealer licenses, we've got you covered, so you can focus on what really matters – turning your passion for cars into a thriving business. So, buckle up and let's get started on the road to auto dealership success!

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Written by:
Nick
Updated on:
April 17, 2023
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Table of Contents:

Our List of 9+ Licenses and Permits You May Need to Open a Auto Dealership:

Below is a list of possible Auto Dealership licenses and permits needed. Please note it will vary state by state, so please do extensive research before starting.

1. Dealer License.

A Dealer License is a legal authorization that allows an individual or business to sell vehicles to the public. It is issued by the state's Department of Motor Vehicles (DMV) and is required by law to operate an auto dealership. To start an auto dealership, you need a Dealer License to legally buy and sell vehicles. This license helps to ensure that the dealership operates within the laws and regulations governing the sale of vehicles. It also provides credibility to customers and allows the dealership to access wholesale prices from manufacturers and auctions. Without a Dealer License, you cannot legally sell vehicles, and doing so can result in fines and legal consequences.

Check if your state requires a Dealer License.

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2. Sales Tax License.

A Sales Tax License is a permit issued by the state government that allows a business to collect and remit sales tax on taxable items sold to customers. This license is required for businesses that sell tangible goods or taxable services.Auto dealerships are required to have a Sales Tax License because they sell tangible goods, such as vehicles, which are subject to sales tax. The license allows the dealership to collect sales tax from customers and remit it to the state government. Failure to obtain a Sales Tax License can result in penalties and fines for the dealership.

Check if your state requires a Sales Tax License.

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3. Federal Employer Identification Number (EIN).

A Federal Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business entity for tax purposes. It is also known as a Tax ID number.To start an auto dealership, you will need an EIN to file taxes, open a business bank account, apply for business licenses and permits, and hire employees. The EIN is also required if you plan to apply for financing or credit for your dealership. It is an essential requirement for any business entity that intends to operate in the United States.

Check if your state requires a Federal Employer Identification Number (EIN).

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4. State Employer Identification Number.

A State Employer Identification Number (SEIN) is a unique identification number assigned by the state government to businesses operating within the state. This number is used to identify the business for tax and employment purposes.In order to start an auto dealership, you may need a SEIN to register your business with the state and apply for necessary licenses and permits. Additionally, if you plan on hiring employees, you will need a SEIN to report payroll taxes and withholdings to the state.

Check if your state requires a State Employer Identification Number.

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5. Surety Bond.

A Surety Bond is a contract between three parties: the principal (in this case, the auto dealership), the obligee (usually a government agency), and the surety (a third-party company that provides financial backing for the bond). The bond ensures that the principal will fulfill their obligations to the obligee and provides financial protection in case the principal fails to do so.In the case of starting an auto dealership, a Surety Bond is typically required by state law as a form of consumer protection. It ensures that the dealership will comply with all applicable laws and regulations and will fulfill their obligations to customers, such as providing clear titles and paying off liens on trade-ins. The bond also provides a way for customers to seek financial compensation if the dealership fails to meet these obligations.

Check if your state requires a Surety Bond.

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6. Liability Insurance.

Liability insurance is a type of insurance that provides coverage for damages or injuries that you may be responsible for, either directly or indirectly. Liability insurance is important for businesses because it protects them from financial loss in the event of a lawsuit or other legal action.As an auto dealership owner, liability insurance is essential because you are responsible for the vehicles you sell, and any accidents or damages that may occur as a result of those vehicles. Liability insurance can protect you in the event of accidents or other incidents that may occur on your property, as well as any legal action that may be taken against you as a result of those incidents.Without liability insurance, you could be held personally responsible for any damages or injuries that occur on your property or as a result of your business activities. This could result in significant financial loss and even bankruptcy. Therefore, liability insurance is a necessary requirement for starting and running an auto dealership.

Check if your state requires a Liability Insurance.

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7. Zoning Permit.

A Zoning Permit is a legal document that allows a property owner to use their land or building for a specific purpose, as specified by local zoning laws. In the case of an Auto Dealership, a Zoning Permit may be required to ensure that the property is zoned for commercial use and that the dealership meets all local zoning and land use regulations. This permit is necessary to ensure that the dealership is located in an appropriate area and that it complies with all local laws and regulations. Without a Zoning Permit, the dealership may be subject to fines, penalties, or even closure by local authorities.

Check if your state requires a Zoning Permit.

8. Vehicle Auction License.

A Vehicle Auction License is a permit issued by the state government that allows an individual or business to buy and sell vehicles at auction. This license is required for anyone who wants to operate a vehicle auction, including auto dealerships that want to sell cars through auctions.To start an auto dealership, you may need a Vehicle Auction License if you plan to sell vehicles through auctions. This license allows you to legally participate in auctions and bid on vehicles for resale. Without this license, you may not be able to purchase vehicles at auction, which can limit your inventory and sales potential. Additionally, having a Vehicle Auction License can help you establish credibility and build relationships with other dealerships and auction houses in the industry.

Check if your state requires a Vehicle Auction License.

9. Vehicle Leasing License.

A Vehicle Leasing License is a permit that allows an individual or business to lease vehicles to customers. This license is required for anyone who wants to operate a vehicle leasing business or offer leasing as a service within an auto dealership. To start an auto dealership, you may need a Vehicle Leasing License if you plan to offer leasing as an option for customers. This license ensures that you are operating within the legal requirements set forth by your state and that you are properly registered to lease vehicles. Without this license, you may be subject to fines or legal action for operating a vehicle leasing business without the proper permits.

Check if your state requires a Vehicle Leasing License.

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Frequently asked questions

Everything you need to know about the business licenses.

What is the best business formation license for a Auto Dealership?

The best business formation license for an auto dealership would typically be a Limited Liability Company (LLC) or a Corporation (S or C Corp). Both structures provide limited liability protection, which is essential for businesses with significant assets or potential liabilities, such as an auto dealership. However, the specific choice depends on factors such as tax considerations, ownership structure, and management preferences. It is advisable to consult with a business attorney or accountant to determine the best option for your specific situation. Additionally, you will need to obtain an auto dealer license from your state's Department of Motor Vehicles.

Is it required to have a general business license for a Auto Dealership?

Yes, it is generally required to have a general business license for an auto dealership. Licensing requirements may vary depending on the state or local jurisdiction where the dealership is located, so it is essential to check with the appropriate authorities to ensure compliance with all necessary regulations. Additionally, auto dealerships may need to obtain specific licenses or permits related to motor vehicle sales, such as a dealer license or a salesperson license.
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Nick

Founder and CEO

I'm Nick, co-founder of newfoundr.com, dedicated to helping aspiring entrepreneurs succeed. As a small business owner with over five years of experience, I have garnered valuable knowledge and insights across a diverse range of industries. My passion for entrepreneurship drives me to share my expertise with aspiring entrepreneurs, empowering them to turn their business dreams into reality.

Through meticulous research and firsthand experience, I uncover the essential steps, software, tools, and costs associated with launching and maintaining a successful business. By demystifying the complexities of entrepreneurship, I provide the guidance and support needed for others to embark on their journey with confidence.

From assessing market viability and formulating business plans to selecting the right technology and navigating the financial landscape, I am dedicated to helping fellow entrepreneurs overcome challenges and unlock their full potential. As a steadfast advocate for small business success, my mission is to pave the way for a new generation of innovative and driven entrepreneurs who are ready to make their mark on the world.