Permits & Licenses Needed to Operate a Car Rental Business

Licensing for rental car businesses are usually handled on the local level. An application must be filled out by an officer of the company, who then receives a certificate of authority to do business. The owner must then 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 notifies the chosen insurer that the license was issued. In most cases, licenses must be renewed annually by the payment of a fee.

Permits are usually issued by the state in which the rental car company is licensed to do business. 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 an owner 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. Car rental owners who operate at airports also 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.

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. You will need to determine 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 establishing the business. Determine which location would be best to generate the most traffic for your company--locations near airports and high tourist areas are best. Plan far 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. You will need to be covered 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. Clients should be under no obligation to accept coverage. Some are covered by the credit card issuer or they have coverage under their own policies. In general, the coverage offered to 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.

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, worker's comp if you have employees, what kind of commercial liability coverage you have, and what kind of automobile liability insurance you have and offer to customers. Records must be kept on the vehicle identification number (VIN) of each car, as well as the make, color, 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.