What is a 'Licensing Fee'

The term "licensing fee" can be used in several contexts. The common thread between the contexts is that it is an amount of money paid to an entity for a certain right or ability. A licensing fee can be an amount of money paid by an individual or business to a government agency for the privilege of performing a certain service or engaging in a certain line of business. Many types of professions require licenses to participate in the profession. These licenses are usually issued after a certification exam has been passed or mandatory training hours have been completed. A licensing fee can also describe a sum paid to use a copyrighted item, such as a photograph or logo, that is owned by someone else.

BREAKING DOWN 'Licensing Fee'

Examples of licensing fees paid to participate in a certain industry or profession include, among others, restaurants and cosmetologists. Restaurants must obtain a liquor license and pay a liquor licensing fee to serve spirits. Hairdressers must pay a licensing fee and obtain a cosmetology license to operate their business. Licensing fees, combined with the fees to get the training necessary to qualify for the license, create barriers to entry in licensed occupations. These barriers to entry can be easily circumvented if the party looking to join a profession undergoes the necessary certification process. However, the time and investment needed to obtain certification and the fee associated with doing so can drive up the costs of services offered by licensed providers.

Example of a Licensing Fee

An example of a licensing fee paid to use a copyrighted item would be a t-shirt company owner wanting to sell t-shirts imprinted with a Major League Baseball team's logo. The owner of the t-shirt company would need to get Major League Baseball's permission and possibly the permission of the team itself in addition to paying a licensing fee to obtain the license necessary to use the image.

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