Do you want to open a car rental business and you want to know the requirements? If YES, here are licenses and permits you need to run a car hire business.

Several permits and licenses are needed to operate a car rental business and they vary by state, locality and municipality. Each permit and/or license is governed by local regulations pertaining to both general business operations and special zoning permits needed to operate that particular business in that area of town. Other licenses and permits needed are peculiar to the car rental business.

Car rental businesses mandate clients to sign a service agreement before starting a rental. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership.

It’s advisable you visit the closest finance office in your area and submit a license application. It is a short application you use to describe your business. Some basic questions to expect will include the name of your business, what service your business provides, how many employees you intend on hiring, and the name of your insurance provider.

You will be expected to pay a small application fee, and then wait for about two weeks to receive your license in the mail. Although it all depends on where you live, you may need to submit a separate application to your state government. The state government provides you a business permit requiring you to keep insurance records and to follow zoning laws. You may not be able to open your business without this permit.

Required Licenses and Permits for a Car Rental Business

It’s very important to state that failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down. So, to avoid this mishap, below are licenses, permits and mandatory legal requirements for your car rental business.

  • Licenses

Almost all licenses needed for a rental car business is more or less handled on the local level. First, you’re expected to fill the application on behalf of the company, and then receive a certificate of authority to do business. You are then expected to appoint an insurer to handle rental car insurance coverage and payment of a licensing fee to the state.

The government entity then mails the license directly to the rental car company and the company is then charged with notifying the chosen insurer that the license was issued. In most cases, licenses must be renewed annually by the payment of a fee.

Permits

Unlike licenses, permits are usually issued by the state in which the rental car company is licensed to do business. Note that having a license is not a guarantee of being able to obtain and maintain the necessary permits.

There are several stipulations for obtaining permits to rent cars that vary by state, but most or all require you to keep insurance records for the state insurance commissioner, as well as to comply with local and city ordinances pertaining to zoning laws and waste disposal.

Note that car rental businesses that operate at airports are expected to pay “concession” fees, and all owners are subject to city and/or state audits of financial records and on premise inspections from time to time.

  • Insurance

Meanwhile, you will need to be protected with liability insurance as well as make it available to your customers. Generally, two types of insurance apply to rental car companies, liability insurance for your business and the insurance you offer customers when a car is delivered to them for the rental term.

Your potential clients are under no obligation to accept coverage as some of them can be covered by the credit card issuer or have coverage under their own policies.

Howbeit, the coverage provided for your clients will consist of loss damage waiver, liability, personal accident and personal effects insurance. When permits are issued, most states require renters to be a minimum of 21 years old and some states require them to be at least 25 for insurance purposes.

Other Licenses and Permits

In this business, if you are planning to have employees—front office or out on the lot, you will need a federal tax identification number and a state tax ID number as well. Business registration fees may apply too. Also note that you will be required to know the types of cars to rent as well as the size of your fleet.

Zoning laws often dictate these matters and must be checked before starting this business. Take your time to analyze which location would be best to generate the most traffic for your company—locations near airports and high tourist areas are best.

Plan extensively in advance for the costs of advertising and marketing; set up a database and payment system for clients; keep well-maintained automobiles and have a lawyer look over all contracts and agreements. Also have a vendor you contract with who handles things like routine repairs and maintenance.

  • Conclusion

Car rental is a very profitable but competitive industry. To successfully start and manage this business, you will need to decide on a business model, find an ideal location, and build your fleet. In most states, you will need to make regular quarterly, semi-annual and annual reports. These will include such things as gross rental receipts, federal interstate commerce records, and worker’s comp if you have employees.

Note that records must be kept on the vehicle identification number (VIN) of each car, as well as the make, colour, and model, the tag and license requirements, depreciation values, and the county ad valorem taxes paid for each vehicle, mostly for income tax reporting purposes.