If you want to sell your own car, you can do it without too much hassle. To sell cars for a living, however, you must have a dealer license. The purpose of the license is to help identify your car business, to ensure that you will be accountable for your business actions, to protect the public, and to enable tracking of your finances for tax purposes. Flipping cars for a profit without a license is risky, as you could face fines or jail time for the crime. Although each state in the United States has its own car dealer-licensing department and its own procedures, there are steps in the process common to all states. If you are interested in obtaining a car dealer license, here are the basic steps.
Know the Rules
Become aware of your state’s specific car dealer licensure requirements. Keep in mind that there are different licensure processes for new car dealers and used car dealers. Contact the Department of Motor Vehicles (DMV) and obtain the required forms for applying for whichever licensure you seek.
Testing and Investigation
First, pass the DMV test to get your car dealer license.
You might need to pass a criminal background investigation, and your past business dealings may be subject to scrutiny as well. The DMV will want to know if you would or would not tend to adhere to ethical business practices in your car dealership.
Registration of Business and Tax ID Number
Register and incorporate your business, or form a limited liability company. If you are not going to incorporate, complete the necessary paperwork and register your name or the name that you are giving your business.
Get a tax identification number: you’ll need this number because you will have to put it on forms when you pay mandatory business income taxes and sales taxes.
Manufacturer Agreements and Insurance
Get the manufacturers of the cars you will be selling to sign any necessary documents. Also, be prepared to give the DMV a copy of any franchise agreements you have with manufacturing companies. You will also need to obtain car dealers’ insurance to cover your car sales business activities.
Take pictures of your company’s entryway, the lot where you will have cars, the building where you will meet customers, and any other area that the DMV requires you to photograph. Also, the DMV inspector will come in-person to see the place in order ensure it meets DMV standards.
Getting a Bond, Zoning, and Trustworthy Business Partners
Purchase a surety bond to go along with your car dealer licensure application. You will need to disclose information about your business, and you will need to state how much bonding you need. Also, sign a credit lease agreement.
Contact the zoning department in the locale where your dealership will be, and make sure that the property is properly zoned for your business.
Conduct a background check on every owner, member, manager, and director of your car dealership. Make sure that you trust them: at the very least, you will want to know that they have a solid financial history with no criminal background.
Visit the DMV and arrange to pay for car dealer tags so that you will be able to give dealer license plates to customers who purchase your cars.