Licensure and certification both have to do with the documentation of your education, training practice, and overall ability to perform. They designate you as capable to do your job per standards met through programs or tests. They are often expected, if not required, of anyone who practices specific crafts or offers certain services or goods for sale.
While certification and licensure are similar, there are some important differences between them to consider as you start up or maintain your small business. Certification typically documents your skill in a particular field, while licensure is a document that is often legally required in order to work in certain industries.
What is certification?
Certification refers to the official documentation of your competence in some capacity, whether a specific skill, branch of knowledge or profession. Certification is:
- Generally obtained from educational institutions, with or without governmental oversight.
- Sometimes required to practice specific trades.
Some examples of certification include:
- A digital marketer might earn certification in content marketing from a university.
- A pastry chef might earn a certification from a culinary school.
- A preschool teacher might earn a certification as a child life specialist.
What is licensure?
Licensure is legal documentation of your knowledge of and ability to perform an individual skill. Licensure is:
- Generally obtained from or overseen by government institutions or agencies (federal, state, and local levels).
- Often legally required for administering certain practices (law, medicine, etc.) or working within a given profession (transportation, agriculture, etc.)
- Often legally required for manufacturing, selling, or generally dealing with particular materials (electricity, alcohol, etc.)
Some examples of licensure include:
- A doctor may need a medical license in order to practice medicine.
- A cosmetologist may need a cosmetology license in order to practice cosmetology.
- A general contractor may need a general contractor license in order to engage in construction.
What’s the difference between certification and licensure?
These terms are pretty similar in regards to what they mean and do. In fact, sometimes they are used interchangeably, along with words like “documentation” or “registration.”
However, it’s important to pay careful attention to what specific language pertains to your own business. Licenses and certifications aren’t always created equal. You may need both certification and licensure, either one or the other, or neither. When contrasting certification vs. licensure, the biggest differences come down to what’s required, legally or otherwise, and what each enables you to do. Here are some main differences.
Issuing authority
Certain professions and trades require licensure at the federal, state, and/or local levels. To obtain a professional license, a state board or national board will approve the successful completion of what is required. In contrast, certifications are often issued by educational institutions, and may not be legally required.
Industry standards
Whether legally required or not, some industries have established norms and standards that necessitate licensure, certification, or some combination of the two. Outside of legal requirements, certain institutions and companies also have standard expectations for certification that determine trade, hiring, promotion, and other business processes.
Higher-risk industries, like medicine or finance, are often more likely to have stricter licensing and certification requirements. For example, according to the Bureau of Labor Statistics (BLS), 44.3% of education and health services professionals are licensed, and 28.5% of individuals employed in the financial activities sector are licensed. In contrast, only 7% of employees in the leisure and hospitality sector are licensed.1
Professional reputation
In the absence of legal requirements and professional standards, licensure or certification may be an important face-value difference between whether a client trusts your services or not. You’d typically choose one or the other, depending on norms and demand. For example, according to the BSL, certification rather than licensure is more common in industries including computers and mathematics, installation and repair, and arts and design.2
What else do you need to run a legal business?
In order to run your small business legally and efficiently, there are other things you need besides licensure or certification, regardless of your occupation. Depending on your business, these may include:
- Business structure – While you might start out without a business structure, you need to set up a limited liability company (LLC) or corporation to separate and protect both your personal and business assets. There are other structures you can choose from as well, but an S-Corp and an LLC are amongst the most common.
- Registration – You’ll also need to register your business name at the state level, and maybe a trademark at the federal level. You may also need to register a tax identification number.
- Taxes – Your business needs to pay taxes. Unless you’re a single-member LLC, you’ll need to get an Employer Identification Number (EIN). The EIN will enable you to hire employees and open a bank account, as well as pay taxes separately from your own personal finances.
- Insurance – Finally, you need insurance. Depending on your profession and state, certain kinds of insurance might be legally required for your business. But regardless of what’s required, all businesses should have insurance to protect against inevitable risks of daily operations.
For that last point, in particular, we’re here to help. By clicking on “Get a Quote” or downloading the Thimble app, you can answer a few quick questions and get a small business insurance policy in just a few minutes. It’s insurance that works when you do.
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