What Licenses Do You Need to Run a Business?
November 8, 2021 | Last Updated on: March 1, 2023
November 8, 2021 | Last Updated on: March 1, 2023
Making the decision to start a new business is not an easy one and probably not something you entered into lightly. There were many long hours that went into creating the business plan for your startup. You chose the logo, secured financing, and even started marketing, so what’s left?
For most businesses, you will need to explore which regulatory licenses are required. There are often licenses and permits required at the local, state, and federal levels. In this guide, we’ll walk through how to get started with each of these requirements.
Local business licenses and permits are usually regulated by the city, although some counties also have licensing requirements. Zoning permits, health permits, construction permits, and a few others are all handled at the local level where you are doing business.
A great place to start is on your city’s government website. You can find resources about which permits and local licenses you will need. The website will usually have information on how to apply and may even allow you to apply for the correct permits and licenses electronically. Look around the website for links to learn more about the requirements and even workshops that may be available to you. Another resource is the SBA, where you can get started with local requirements and contact information for small business owners.
If you are a first-time business owner, arranging to meet with someone in person may be an easy first step. Many cities work hard to support local economic development, so do not be afraid to reach out. You can get basic information or connect with a small business consultant by going to city hall or using online resources. Your city may even have a small business development center. Some questions to start with is which licenses you need, the license fees, the length of time a permit or license is valid, and where to apply.
Here’s a list of different licenses and permits you may need to apply for from your local government. Before reaching out to your local agency, you’ll need to know your intended business activities, business location, and have a business plan.
Once you have met all local requirements for doing business in your city, you will need to check with state agencies as well. State licensing requirements vary depending on the type of business you are operating, and which state you are going to conduct business in.
State licenses may be required for your business if you are selling products and paying or collecting sales tax. State agencies also regulate certain occupations and services provided to the public. Your local office of the Secretary of State or their website is a great place to start finding out what is required for your business at the state level.
The U.S. Small Business Administration, or the SBA.gov website, can offer resources as well for your state’s specific licensing requirements. The website offers an office locator tool for each state, so if you prefer to inquire in person about business licenses you can find the correct contact information there.
Licensing and permit requirements are different depending on the state you are operating in. Here are some of the regulations commonly mandated by the state government:
Federal licensing requirements may exist for your business entity in addition to local and state requirements. Many businesses do not need to get licensed at the federal level at all, so check with the requirements for your specific business.
Even if your business needs do not need approval from a federal agency, you may be required to get an EIN from the IRS for identification and taxation purposes. A federal tax identification number is not required for every business, so checking the IRS guidelines is the right place to start. If you have employees, are incorporated, or operate a limited liability company (LLC), you probably need an EIN. If you operate as a freelancer or a sole proprietorship, you may be able to use your social security number in place of an EIN.
There are certain industries that are federally regulated. These industries require special federal licenses. If your business activities fall within these industries, you’ll need to consult with federal government sources for more information on licensing requirements. Resources vary and are specific to the business activities. The U.S. Small Business Administration can offer more information on federal regulations.
Federal regulations on selling alcoholic beverages most often affect small businesses. If your business manufactures, transports, or sells beverage alcohol, you will need special licensing from both the state that you operate in and the federal government. Alcohol is regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB). This includes beverage alcohol (beer, wine, and liquor), as well as non-beverage alcohol (fuel, medicine, food, and toiletries, etc.). You must get approval from the TTB, before opening a business selling beverage alcohol.
There are federal licenses and permits required for operating a business in several different industries including financial investment advising, tobacco manufacturing and import/export, firearms and explosives, meat products, fishing and wildlife, ground transportation, and radio broadcasting. If you are unsure of whether you need federal licensing check with the SBA.
Many state, local, and federal licensing requirements apply only to businesses operating with a brick-and-mortar presence. You may think that your home business or online business is exempt from regulations. That is not the case. There are necessary licensing and permit procedures to follow for all businesses, even those operating from a home office.
In order to operate a business out of your home, you must obtain many of the same licenses as listed earlier issued by the city or state. For some small businesses, licensing is as simple as registering your business name with the county clerk’s office. A business name that is different from your legal name is your “doing business as,” or dba, and will need to be registered.
Business licenses are not simple, but there’s no need to panic—millions of entrepreneurs just like you have successfully navigated the red tape and launched successful ventures. Take advantage of available resources like your city’s small business development center or the SBA website. You will want to secure the proper permits and licenses as soon as possible and before actually opening for business. Once all the proper city, state, and federal licenses are secured, it will be as simple as keeping track of expiration dates. After all, these regulations are just a small step on the journey to launching your successful venture.