Permits and Licenses Needed to Operate a Car Rental Business

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Permits and Licenses Needed to Operate a Car Rental Business

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The pandemic era has added a spiral trend to the US car rental market which is expected to grow at a comfortable pace with a projected market size of $22.3Billion, measured by revenue, in 2021. This means it could very well be a good time to go ahead with that business idea you have been planning around for some time.

Car rental is a lucrative industry. So, as with any industry of perks, it has also become one of the most competitive ones. In order to successfully establish and manage the business, you will first have to produce a bankable business model, find an ideal location and start building your fleet. The next most important step which cannot, at any time be overlooked is, to warrant that your business is legally compliant in all aspects. Failing to do so, will only leave you with hefty fines and in some cases, unavoidable lawsuits or worse; shut down of your business.

There are a few crucial licenses and Governmental permits that car rental business owners are often required to obtain. However, these requirements will differ by the state, locality and municipality. The relevant permits and business licenses are usually governed by local regulations related to general business operations. You will also need to obtain special Zoning permits to operate the business in an area of your choice.

Let’s start with licenses

Almost all the licenses required for a car rental business are governed at a local level. So, first, pay a visit to your closest finance office on any business day of the week. For a small fee, your license application can be submitted there, in which you will provide details such as the name of your business, what services will your business offer, the name of your insurance provider and the number of employees you will be hiring. It will be advisable to take relevant other documents needed to process your application at the time of its submission so that the authorization procedure will be much faster.

Once the authorization process is complete, the business will be issued a Certificate of Authority which will allow it to conduct business outside of the state you initially filed your company and the business license which grants you permission to operate within city limits, State and industry. Usually, these licenses must be renewed annually with a fee.

Your business is then expected to choose an insurer of your choice to maintain rental car insurance coverage and payment of a licensing fee to the State.

Permits

Depending on the area of residence, you may also need to submit a separate application to your State Government. The business permit issued by the State Government, without which you may not be able to open your business, will require you to maintain insurance records for the State Insurance Commissioner, adhere to local and city ordinances pertaining to Zoning laws and waste disposal.

Types of insurances

A car rental business must be protected by two types of insurances. First would be the liability insurance securing your business. The second will be offered to your customers when a car is delivered to them on rental terms which will consist of liability, loss damage waiver, personal accident and personal effects insurance. However, your clients, who should be a minimum of 21 or 25 years of age depending on relevant State laws, are under no obligation to accept coverage. Some of them are covered by their credit card issuer or their personal insurance policies.

Any other licenses?

Yes, yours is a business with a number of employees and a considerable fleet. The nature of the business will require you to obtain a Federal Tax Identification number and a State Tax Identification number as per the Zoning laws.

You must also know the types of cars to rent and the size of your fleet, well before. The business should maintain records of Vehicle Identification Number, the model, colour, license requirements, the tag, depreciation values and county ad valorem taxes paid for each vehicle. This information is expected for income tax reporting.

Things to keep in mind

  • Rental car businesses that operate at airports are subjected to concession fees.
  • All business owners are subjected to the City and/or State audits of financial records and regular on-site inspections.
  • Car rental businesses mandate potential customers to sign a service agreement prior to the start of a rental, describing client expectations while minimizing risk of legal disputes by clarifying service level expectations, payment terms and conditions as well as intellectual property ownership.
  • Maintain an efficient client database and payment system.
  • Ensure routine repairs and maintenance of your fleet.
  • Hire a good lawyer to keep check of all your contracts and legal documents.

Hope this information helped you while researching for your new business venture. The Car Rental Software team at Navotar wishes you nothing but the best!