Legal Requirements For Starting A Travel Agency [2021 Edition]

Legal Requirements For Starting A Travel Agency [2021 Edition]

If you love traveling and enjoy putting together itineraries, you might consider starting your own travel agency.

While entrepreneurship can be an exciting adventure, getting started involves a number of processes to complete before you can open your doors to the first customer.

One of the things you must comply with is the legal requirements. So, what are the legal requirements for starting a travel agency?

In this post, we look at the legal requirements for starting your travel agency. Let’s jump straight in.

Licenses and Permits Needed To Start a Travel Agency Business

Here is an overview of the licenses and permits you may need to start and run a travel agency business.

1. City Business License

Validity: 1 Year

To operate a business in any city, you need a city business license.

Before the approval and issuance of a city business license, the city planning or the zoning department checks to ensure the area is zoned for the purpose you intend to use it for, and that you meet the codes.

In case you plan to operate the travel agency from your home, check the zoning ordinances carefully. Typically, the residential neighborhoods tend to have strict zoning regulations, preventing businesses from operating within the zoned area.

Tip: Contact your city`s business license department to find out about the requirements and the application fee for a business license.

2. County Permits

Validity: 1 Year

Some local governments require essentially the same type of permits or licenses as the cities. If your business operates outside of the city or town's jurisdiction, these permits apply to you. The good news is that the county regulations are usually not as strict as those of the adjoining cities.

However, it helps if you check with the local county government to find out the requirements, and verify whether the license is mandatory.

3. Business Signage Permit

Validity: Period Varies from one state to another

Some cities and the suburbs have sign ordinances restricting the size, the location, and sometimes the lighting and type of sign you can use outside the business.

If your travel agency does not meet the ordinances, you will most likely incur fines and possible restrictions in the future.

Therefore, check with the local authority department on the requirements for use of signage within different locations.

4. Travel Sellers Registration License

Validity: 1 Year

All you require to acquire the travel seller's registration license is filling a simple application form, paying a small fee and you can begin selling travel in the USA, so long as you have other relevant licenses and permits.

However, note that some states, like California, have their individual “seller of travel requirements”. For instance, the state of California will require all sellers of travel to register with the Attorney General's Office and to display the registration number on all advertising.

Verify the requirement within the state you intend to operate and submit the seller of travel registration application at your state department attorney general's office.

5. Certificate Of Occupancy

Validity: Period Varies from one state to another

If your travel agency will run out of a physical location, you need the Certificate of Occupancy.

Typically, the certificate of occupancy confirms that you have met all building codes, zoning laws, and government regulations.

However, in the case of a leased office, the certificate of occupancy remains the proprietor's responsibility.

6. Business Insurance

Validity: 1 Year

Another legal requirement for starting a travel agency is business insurance. Ideally, the business insurance protects the company’s financial wellbeing in the event of a covered loss. While business insurance protects you from financial loss, insurance is also a legal requirement.

At the start, you could buy general liability insurance, which is a great place to start.

7. Employer Identification Number

The Employer Identification Number is also known as the Tax Identification Number (TIN).

You need the TIN while filing the IRS tax returns.

Since the IRS expects all the operators of travel agency businesses to file the taxes, you will need the Tax Identification Number. Refer to the here for more information.

8. Sales Tax License

A sales tax license, or what some states refer to as the sales tax permit, is an agreement with the state tax agency to collect and remit the sales tax on the items or services sold by a business.

The sales tax license is necessary if you plan to sell or provide certain tangible services such as airline tickets or tour packages to your customers.

9. Seller of Travel Bond

Validity: 1 Year.

The seller of travel bonds or travel agency bonds represents a guarantee for your business partners that the travel agency will clear all due payments on bookings made via your company.

Apart from protecting the business associates, the travel bond provides security to the customers who book to travel in advance.

In that regard, the travel agency bonds are a strong assurance to business partners that indeed, you are safe to work with.

The seller of travel bonds is renewable annually, and there is the option to renew the bond coverage each year.

Tip: Applicants with industry experience and strong personal credit can be approved at standard market rates of between 1 to 3%.

For customers with no experience or bad credit, rates for sellers of travel bonds will be higher, to account for the risk.

10. RV Drivers License / Commercial Drivers License

A majority of travel agencies are venturing into the RV industry. While the standard driver's license may be sufficient to drive your RV, you may need a special license or a commercial driver's license to register, own and operate the RV in some states.

Typically, the transport department requires a commercial driver's license to operate large or heavy vehicles.

Every state issues different licenses, and so you need to check the regulations and requirements applicable to your specific state.

11. IATA Number

The IATA accreditation is important since most airline bookings are done through the IATA portal.

The IATA accreditation is one of the most basic requirements for travel agencies. Note that the travel agency must get registered with the IATA as a travel agent.

Check IATA card eligibility here.

When it comes to setting up your business, you may find yourself in a place where you have to make some financial and legal decisions.

The first thing you'll want to decide on is whether you want to be an LLC, S-Corp, or C-Corp.

These three options are found to be the most common when starting a small business, and all serve to protect your personal assets and also provide you with certain tax benefits.

  • LLC: All income and expenses from the business are reported on the LLC personal income tax return.
  • S corp: Owners pay themselves salaries + receive dividends from profits.
  • C Corp: C Corps are separately taxable entities that file a corporate tax return (Form 1120). No income tax is paid at the corporate level and any tax due is paid at the owners individual expense.

Depending on where you're conducting business, you'll also want to consider securing the proper permits, licenses and liability insurance.

Learn more about securing the right permits and licenses ➜

Need to start an LLC? Create an LLC in minutes with ZenBusiness.

How Do I Become a Registered Travel Agent?

The process of becoming a duly registered travel agent involves filling the license application forms and paying small fees.

Upon meeting the registration requirements, the relevant department will issue the registration number, which the travel agency must display at their place of business at all times.

What States Do You Need a License to Sell Travel?

Currently, 13 states have specific laws if you wish to be a seller of travel. The states are Nevada, Washington State, Massachusetts, Michigan, Virginia, Louisiana, Iowa, Illinois, Hawaii, Florida, California, New York, and Pennsylvania.

Among the 13 states, five states require registration as a seller of travel, regardless of where the agency is located. They are California, Florida, Hawaii, Iowa and Washington.

Yes, you can start and operate your travel agency business from home.

However, there are several legal requirements for starting a travel agency, and you must fulfill them to become operational. Besides, it is worth noting that in-home agency owners may experience zoning restrictions when it comes to scheduled walk-in meetings with their customers.

Therefore, before you decide to set up an in-home travel agency, check the zoning laws to find out if such operations will be allowed in your neighborhood.

Can I Start A Travel Agency Without IATA Accreditation?

Yes, you can start and run a non-IATA travel agency!

But note that while IATA accreditation may not be one of the legal requirements for starting a travel agency business, it may be an added advantage. Typically, to gain access to the airline's inventory, the travel agency must undergo the IATA verification.

That means once your travel agency is IATA accredited, you are no longer required to undergo the examination by the airline or the hotel chain supplier. Hence, compared to non-IATA travel agencies, the IATA compliant agencies enjoy a simplified booking process for their customers.

Conclusion

If you plan to become a professional travel agent, start doing some research to find out the type of license required.

Note that the licensing requirements in the US for the travel agents may not require testing, training, or even the qualification process.

However, you need is to ensure you have met the statutory requirements. For the travel agency, you may need the federal licenses/state licenses highlighted above.

Pat Walls,  Founder of Starter Story

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