It’s no secret that starting a new business comes with a learning curve. There is a ton of information that you need to know and compliance rules and regulations to follow, depending on your type of business.
One of the steps you may need to take when starting a new venture is getting the necessary licenses and permits to run your business. The type of business licenses you need depends on the nature and location of your business. In some instances, you may need to obtain multiple ones.
Business Licenses and Permits
This article will give you an overview of everything you need to know about business licenses and permits. You’re going to learn what a business license is, its types, how to get one, and any other additional information.
What Is a Business License?
A business license is any legal permit, warrant, or document that gives you the right to conduct business and provide goods and services in your location. You can get a business license from a federal entity, state government, county, even municipal agency. It depends on the type you need. At times, you may need to get it from all four entities.
Most governments require you to obtain business licenses to guarantee consumer or public safety and ensure you follow the necessary rules and regulations. They also want to ensure you stay accountable for your actions when conducting business.
Do You Need a Business License?
Most businesses require some business license or permit to ensure they operate legally. It depends on the location and type of goods and services sold by that business.
For example, a restaurant needs a food service license, food handler’s permit, building health permit, and liquor license if the owners plan to sell or serve liquor. It also needs a seller’s permit and valet parking permit if the owners plan to provide valet parking as a service.
A gym, by contrast, may require a zoning and building permit, childcare license, spa and massage licenses, music license, and so on. The business licenses you get will depend on the exact service you plan to offer in the gym.
In many instances, you will need a couple of business licenses to operate. But the actual ones that you should get depend on the nature of your business. It’s best to seek the counsel of an attorney or CPA in your area to advise you on which business licenses and permits you need for your business.
Types of Business Licenses and Permits
Let’s look at the various types of business licenses that you may need to acquire to operate your business:
If you conduct business in a state that collects sales tax, you need a seller’s permit. This business license allows you to collect sales tax from your clients or customers then remit it to the Department of Revenue.
A seller’s permit is state-specific, which means it applies only to the state where you sell goods and services. If you conduct business in multiple states, you may need to get more seller’s permits from those states. This business license applies to both online and retail entities.
Some items are exempt from the seller’s permit, for example, clothing and food. It, however, depends on the state where you sell.
Business Operating License
Most states require you to obtain a business operating license, also known as a general business license, to do business in that particular state. You can get this license from the government entity that handles business registration in your state. It can be the Secretary of State or the Department of Revenue. You can also acquire a business operating license from the city and county governments.
If you plan to build or develop a structure for your business, you need a zoning permit. This business license is issued by a zoning officer. It acknowledges that your proposed use of land or property is consistent with the city’s zoning laws and guidelines.
The zoning officer can approve or reject your zoning permit based on your entity location and whether your proposed operation abides by the zoning laws. For example, you can’t set up a steel mill plant in a residential area.
Here are a few parameters that may be used to assess whether you should get a zoning permit:
- Smoke and odor
- Advertising signage
- Number of employees and type of jobs
- Use of dangerous chemicals and materials
- Vehicle traffic and parking
A DBA (Doing Business As) allows you to operate your entity with a name different from your registered business name. If you run a sole proprietorship or general partnership, you should get register a DBA if you plan to use a trading name that’s not the owner’s name or surname.
Most states require some businesses to pass a health inspection and get a health permit. This business license acknowledges that your business environment and practices are safe for your customers and staff. Businesses that may need to get a health permit include:
- Tattoo parlors
- Beauty salons
- Food distributors and manufacturers
- Waste haulers
- Distilleries and beverage vendors
Some businesses need to obtain a professional license for the services they offer. Such businesses include:
- Legal counsel
- Health care
Some states or cities have commercial sign guidelines that regulate the types, location, and size of signs you can use outside your business. They may also restrict the lighting used.
A sign permit is, in most cases, issued by the city government. It allows you to put up outdoor signage at your business. The specific requirements may vary from one city to another, so it’s best to look into those that apply to yours. You may also want to get consent from your landlord if you’re renting a space.
Here are a few additional licenses and permits to consider:
- Fire department permits – for businesses that use flammable materials.
- Environment permit – for entities whose activities are a pollution risk to the environment.
- Building permit – granted before constructing an existing or new building
- Special state license – for businesses that sell particular products such as gasoline, lottery tickets, firearms, and alcohol.
Steps to Get a Business License
1. Register your Business Entity
It’s always a good idea to register your business before applying for a business license. Doing this will help you establish a name and business structure for your business. It will ease the process of applying for a business license.
If you run a sole proprietorship or general partnership, the state may not require you to register. But you still need to obtain a DBA license if you plan to use a fictitious business name.
Here is a comprehensive article on how to register a business.
2. Apply for a Federal EIN (Employer Identification Number)
Before applying for a business license, make sure you get your federal EIN. Most federal, state, and county entities may ask for a federal EIN when applying for your business license. In the case of a sole proprietorship, they may request your SSN (Social Security Number).
You can get your EIN from the IRS website. The application process is free, and you’ll obtain your EIN within minutes.
3. Find Out The Business Licenses You Need
As mentioned above, the type of licenses and permits you need depends on the nature of your business and location. You can get some from the federal government. For others, you may need to obtain them at the state, county, and city levels.
Let’s explore the type of business activities where you need a federal license to operate:
- Alcoholic beverages
- Ammunition, firearms, and any other explosives
- Commercial fishing
- TV and radio broadcasting
- Ocean transportation
- Logistics and transportation
To determine which licenses your business needs, try checking with the following people and entities:
- A business lawyer in your state or city
- Your state’s SBA (Small Business Administration) office
- The Department of Revenue
- The Secretary of State office in your state
- Your city or county clerk’s office
4. Apply for the Necessary Business Licenses and Permits
Once you determine the licenses and permits you require, your next step will be to obtain them from the issuing entity or agency. In most states, you can apply online. The process can be straightforward or complicated, depending on the business license.
Some licenses and permits may take longer to obtain than others. Some such as health permits and professional business licenses will require you to pass a test or inspection to get them. Consult an SBA, county clerk, or Secretary of State agent to find out where to get the business license you need.
Frequently Asked Questions (FAQs)
Next, we will go over some popular questions regarding business licenses and permits.
How Much Does a Business License Cost?
Obtaining a business license will cost you between $50 to $400, depending on the state and type of business license. The cost can, however, be higher for industry-specific business licenses. In some cases, you may need to pay processing and recurring fees.
Before applying, find out the number of licenses you need, then contact the issuing agencies. Note down and calculate the total fees payable to help you budget how much money you need.
Can I Renew an Expired Business License?
It’s advisable to renew a business license before it expires. Otherwise, you may have to reapply. Most business licenses are renewable after one to five years, depending on the requirements of the issuing agency. The renewal fee is, in most cases, lower than the initial license application cost.
How do I Reactivate an Expired Business License?
The process to reactivate an expired business license varies from one state to another and how the business license expired. In some states, you can renew, but you’ll have to pay the renewal and penalty fees. In others, you may need to start a new application.
What are “Deficient” Business License Applications?
A deficient business license application occurs when the license application form is incomplete or improperly filled. For example, the application form might be outdated, incorrectly signed, or does not meet the requirements. It may also be missing the prerequisite attachments.
A deficient business license application lengthens the time required to obtain a license since there may be some back and forth between the agency and applicant.
Who Issues Business Licenses?
You can get a business license from the federal, state, county, and city governments. It depends on your state’s requirements and the types of business licenses you want.
What Should I Do if I Am Unsure What Type of License My Business Needs?
You can seek the counsel of a business lawyer in your area. You can also check with the SBA office, Secretary of State, and county and city clerk offices in your location. Alternatively, you can try contacting a local business licensing service to help you deal with the procedure.
How Long Does the Process Take To Get the Proper Business License?
The time it takes to get a business license depends on the type you need, location, and regulations that apply to your business. It can range from one day to six months.
What Is a Certificate of Good Standing?
A Certificate of Good Standing is a state-issued document that acknowledges that an entity has filed all the necessary fees and reports with its secretary of state. This document shows that the entity files its annual report on time, maintains its registered agent, and pays franchise taxes on time. You may need a Certificate of Good Standing when applying for a foreign qualification in other states.
What Is a Certificate of Authority?
A Certificate of Authority is a document that acknowledges you have the right to conduct business in a state other than your state of registration. You may also need a Certificate of Authority when applying for a foreign qualification in another state.
A business license is any legal document or permit that authorizes you to conduct business and sell goods and services in your state. There are several different types of licenses and permits – seller’s permit, general business license, and professional license, to name a few. The ones you need for your business depend on your location and nature of business.
When applying for a business license, first register your entity the get a federal EIN. The application process can be simple or complicated, depending on the business license. You may also need to renew it after one to five years.
Obtaining a business license may cost you $50 to $400. The fee can, however, be higher. It can take one day to several months to get approval. It all depends on your location and the business licenses you need.