Differentiate between licensing requirements designed to protect the public and those designed to generate revenue

Answer 1

States require licenses for anyone who practices a profession, such as law or medicine, works as a contractor or plumber, and for many other kinds of work. These licenses are required in order to protect the public. For example, states demand that an electrician be licensed because the work is potentially dangerous to a homeowner: The person doing the work must know an amp from a watt. When a licensing requirement is designed to protect the public, any contract made by an unlicensed worker is unenforceable.

States use other licenses simply to raise money. For example, most states require a license to open certain kinds of retail stores. This requirement does not protect the public because the state will not investigate the store owner the way it will examine a prospective lawyer or electrician. The state is simply raising money. When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable. Thus, if you open a stationery store and forget to pay the state's licensing fee, you can still enforce a contract to buy 10,000 envelopes from a wholesaler at a bargain price.