If you are contemplating starting a business or have already started your business its highly likely that you will need one or more business licenses or permits. According to the U.S. Small Business Administration most small businesses need a variety of licenses and permits. To help ensure that you comply with all the requirements for your business we’ve made this detailed guide to help you understand what business licenses are, the types of business licenses and how to get a business license. Follow our guide below to learn more and ensure you’re compliant.
Table of Contents:
- What is a Business License?
- Types of Business Licenses and Where to Get Them
- How Much Does a Business License Cost
- How to Get a Business License
- Frequently Asked Questions (FAQs)
A business license allows a commercial enterprise to operate legally within a specific jurisdiction. The permit makes it easier for the authorities to hold a business accountable for its actions and track tax compliance. Depending on the nature of the company’s operations, it may be necessary to apply for an industry-specific license.
The majority of companies must comply with both state and federal business license requirements. Licensing conditions and fees applicable vary based on local rules and the company’s operations. In some cases, licenses and permits compel businesses to comply with specific public health and safety protocols or risk penalties.
Licenses enable various government and state agencies to track your company’s income for tax purposes. Some licenses cover specific sectors like healthcare, finance, security, aviation, and construction.
Federal and local authorities require companies to apply for licenses based on several factors: location, industry, or the number of employees. These factors may also influence the fees payable to acquire relevant permits or licenses.
States often regulate a more comprehensive list of commercial activities than the federal authorities. They typically require licenses for dry cleaning, retail, farming, auctions, plumbing, and other sectors.
With a wide variety of licenses available to businesses, you need to familiarize yourself with the requirements and rules. Enlisting the help of a business license specialist is a prudent move that simplifies the entire process.
Types of Business Licenses & Permits:
- Federal Licenses and Permits
- State Licenses and Permits
- Local Business Licenses and Permits
Businesses involved in industries regulated by the federal government must apply for a federal permit or license per the law.
Activities regulated by federal agencies:
The Department of Agriculture issues licenses and permits to companies involved in the transportation or importation of animals, biotechnology, various animal products, plants, and biologics.
If your business focuses on liquor-related activities, you need a license from the Alcohol and Tobacco Tax and Trade Bureau. The license allows your company to sell, manufacture, distribute, or import alcohol beverages at designated locations.
- Firearms, explosives, and ammunition
The Bureau of Alcohol, Tobacco, Firearms, and Explosives issues permits to organizations involved in the sales, importation, or manufacture of weapons, including explosives, firearms, and ammunition.
- Mining and drilling
If you plan to establish a business focusing on exploring mineral resources on federal lands, you should apply for a permit from the Bureau of Safety and Environmental Enforcement. In turn, you can legally drill or mine oil, gas, and other resources.
Aviation is another regulated sector in which all players need relevant permits from the Federal Aviation Administration. The permit gives your company the right to operate airplanes, handle aircraft maintenance, and provide air transport services.
- Fish and wildlife
Your firm also requires a permit to engage in various wildlife activities, such as fishing and exporting and importing animals or derivative products. U.S. Fish and Wildlife Service processes the permit applications.
- Transportation and logistics
To operate abnormal load haulage vehicles, you need to possess applicable licenses. State authorities handle applications for overweight and oversize haulage permits.
- Commercial fisheries
The law compels organizations involved in commercial fishing activities to apply for permits. These permits make it easier for the government to regulate inland and offshore fishing operations.
- Radio and television broadcasting
Broadcasting is another area that requires special licenses for companies to start disseminating information via various channels. These platforms include radio, cable, television, satellite, and wire. The Federal Communications Commission is the agency responsible for ensuring compliance.
- Maritime transportation
If you are looking to provide maritime transportation services, you need to secure a valid permit from the Federal Maritime Commission. The agency also issues licenses to companies facilitating maritime shipment services.
States issue various licenses to commercial enterprises to ensure compliance with local regulations. The licenses differ depending on whether an entity sells certain products or services. Some of the business licenses issued by state authorities include:
- Professional Licenses
- Sales Tax Permits
- Employer Registration
- “Doing Business As” (DBA) and Fictitious Name Filings
Professional licenses enable experts in various fields to operate legally in a given state. Examples of professional services include:
- Massage therapy
- Veterinary services
It is vital to inquire with state agencies or business license specialists to determine the required documentation and permit application criteria.
Sales Tax Permits
If your business offers taxable services and products, the law compels you to obtain a sales tax permit in your state. This type of permit also applies to companies selling products or services via online platforms.
Learn More: Sales and Use Tax Guide
If you employ people to handle day-to-day operations, you need to register with state authorities. Employer registration is a vital step for tax purposes as it enables your business to comply with regulations concerning worker’s compensation and unemployment tax.
Learn More: How to Hire Employees
“Doing Business As” (DBA) and Fictitious Name Filings
This type of filing allows your business to operate a different name from the legally recognized LLC, corporation, or partnership name. The majority of fictitious name filings come from sole proprietorships. Registering the name helps the authorities and other stakeholders to link the entity with your organization. Corporations typically use these filings to cater to the branding needs of franchisees.
Cities and counties also provide a comprehensive list of permits to local businesses. You need to identify the permits and requirements applicable to your business to avoid fines and penalties. For instance, municipalities require home-based businesses to apply for a variance, permitting commercial operations in a residential area.
Likewise, companies may require special permits to conduct business activities during craft fairs or sporting tournaments. With a permit, you can sell alcohol and engage in various activities that require the city’s or county’s approval.
Types of Local Business Licenses and Permits:
- Planning and development permits
You can apply for these permits if your company requires a zoning variance. The permit allows you to switch to relevant zoning for the business location.
- Building permits
Any alterations to an existing building or new construction at your company’s premises require the municipality’s building department’s approval. You can receive the building permit via a contractor. If in doubt, contact the city authorities or consult with a business license specialist for clarification.
- Sign permits
Most municipalities have sign ordinances that impose restrictions based on location, sign type, size, and even lighting. In some cases, landlords and facilities like malls also provide specific signage guidelines. Hence, the need to familiarize yourself with local requirements to avoid legal ramifications.
A good sign complies with local building and zoning codes. Your company may need to apply for several permits for the sign.
- Fire department permits
Operational permits issued by the fire department help city authorities ensure that companies do not create conditions hazardous to residents’ lives. With the permit, your firm has the permission to handle or store materials deemed to create fire hazards. The law compels you to adhere to provisions of the city’s fire code.
Counties and cities also issue permits to businesses if their premises are open to the public. Periodic inspections are still necessary even if your premises are not open to the public.
- Public health licenses and permits
f your firm engages in food-related activities, you need to possess permits from your city or county’s public health department.
Some states and municipalities allow businesses to operate without purchasing a general business license. The authorities adopt this policy as a way to promote business. For instance, the federal government eliminates the need for businesses to acquire this type of license.
Depending on the type of license your organization is applying for, you may pay fees ranging between $50 and $400. The amounts paid by businesses help government agencies cover the administrative costs of processing the applications.
Examples of Business License Costs
As regards license fees, the authorities may charge additional processing fees of $25 or more. Several cities, including Greenville, SC, and Decatur, AL, charge fees based on your company’s gross revenue. On the other hand, Sparks, NV, requires businesses to pay business license fees of $105 in addition to a $4 tech fee.
If your company applies for a license in Chino Hills, CA, you can expect to pay $20 in annual license fees. To determine the applicable fees for the permits and licenses you need, contact the relevant government departments or a business license specialist. Doing so allows you to plan appropriately before lodging applications.
Conducting thorough research and consulting with third-party specialists before applying for a business license is a prudent move. In turn, you make an informed decision, enabling your organization to avoid costly oversights.
Third-party business license consultants have many years of experience providing accurate license information to businesses of varying sizes. You will find it easier to access the relevant forms and the list of required documentation.
Obtaining all the necessary permits and licenses prepares your organization for greater success. The best part is that you no longer need to worry about compliance issues, thanks to experienced business license experts’ assistance.
Steps to Get a Business License:
- Gather the Necessary Information and Documents
- Submit Business License Application
- Receive your Business Licenses
- Comply with Required Renewals
To lodge a successful application, you need to submit the required documentation. Some of the documents required when applying for various business licenses include:
- EIN Number
- Proof of insurance
- Audited financial statements
- Business registration documents
- Surety bonds
- Lists of ownership and management
- A description of your company and a list planned activities
Once you identify the right permits and licenses applicable to your business, you are ready to submit applications. Each application must include the required information and documents. Government agencies typically provide step-by-step instructions to help you file for permits correctly.
Agencies allow you to file for permits via fax, in-person, snail mail, online, or email. In many cases, the application forms require multiple signatures of various parties. Also, you may need to submit notarized documents plus original forms. For clarity on these requirements, you can directly consult with third-party business license service providers or government agencies.
Once you apply, you may receive feedback from the government regarding the approval status or get approved immediately. It is also common for the process to take several weeks or months, depending on the licensing requirements. In some cases, agencies limit the number of businesses given permits or licenses in specific sectors. Hence, new licenses may be unavailable.
Many business permits and licenses require renewal periodically. For this reason, you should set up automated reminders to avoid the expiry of your permits.
Most business activities require some type of permit or license to operate legally. These licenses include general business licenses, tax registration, and industry-specific permits.
Most states require business license registration for online merchants, including sellers on Etsy. If in doubt, check with relevant authorities or business license service providers.
The law compels all businesses to obtain operating licenses regardless of whether they conduct business on the internet or physical premises.
No, a business license is different from an LLC. Business licenses grant permission to engage in more specific activities, whereas an LLC is a legal business structure that provide personal liability protection to its owner. LLCs will still need to obtain all relevant business licenses and permits in addition to completing the legal formation process to be recognized as an LLC by their state.
This depends on the activities your business will be conducting as well as where you’ll be doing business. As a rule of thumb, you shouldn’t start doing business without properly researching if you are required to obtain one.
A Tax ID could be considered a type of business license, however there are more licenses than just a Tax ID and you’ll likely need more than just a Tax ID to get started. The term Tax ID could be referring to a variety of ID or account numbers issued by various government agencies. In most cases when someone is referencing a Tax ID its either a federal tax id or EIN or a State level sales tax permit/ID which is required to remit Sales or Use Tax