Playing By The Rules: Business Licenses & Permits Guide

Playing By The Rules

Part 11 of Acey Gaspard’s Guide to Starting a Small Business – Made Simple

This article covers how to find out which licenses, permits, and regulations apply to your small business, and how to avoid the costly mistake of skipping that step. It’s written for new business owners who want to get set up the right way from day one.

Not Knowing the Rules is No Excuse

Lenny got his business up and running in record time. He was making sales, building a strong customer base, and enjoying a rather quick success, only to find some visitors from his local municipality informed him that he was in violation of significant safety regulations.

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Unfortunately for Lenny, the consequence wasn’t a mere fine; he was forced to shut down. Lenny was a smart guy with a great personality. His mistake was failing to find out about the rules before putting all his time, money, and effort into his business. You can avoid this by taking the time to get accurate information about your business.

Running a business doesn’t have to be complicated, but skipping the rules can turn it into a disaster. Find out what applies to you first, then follow it. Every industry and location has different standards, so the responsibility to find out falls on you.

Dealing With Different Levels of Government

You have to keep in mind at times that you’re dealing with different levels of government and may need to contact various departments. You may need permits, you may need to look into zoning, you may need to register for a tax ID, and so on. Then there are regulations for health, food, natural resources, product packaging, and many other things. The U.S. Small Business Administration keeps an online tool that shows which federal licenses apply based on your specific business activity, which can save you some guesswork on that layer.

To simplify the process of finding out what regulations apply to you, get clear about your business characteristics.

Write out exactly what you plan to do in your business: manufacturing, retail, sales, consulting, etc.
If your business deals with products, make a list of them: software, electronics, food, etc.
List the characteristics of your business — for example, you have walk-in traffic, you have delivery trucks picking up and dropping off 24/7, you manufacture a product, etc.

Now that you’ve defined a few characteristics of your business, you need to contact your local department that deals with business development and registrations and get the information you need. Many such departments offer products like home business kits and business startup guides.

To find the information relevant to your business in your area, go to your favorite search engine and type in:

Business Startup Guide City State
(e.g., Business Startup Guide Detroit Michigan)

Some states also run their own permit databases — California’s CalGold is one example — which can point you to the right agency faster than a general search.

This should get you the information you need. Once you have the guide, go over the critical issues, and contact an official from the local department for any questions you may have. Be sure to get the documentation to back up the answers you receive. In other words, if the person on the phone says that you don’t need to collect taxes on children’s clothing, ask for the section of the regulations that indicates this so you can add it to your records.

It’s also a good idea to sign up for any newsletters or mailing lists that might be offered, so you can stay up to date with any changes.

Once you’re clear about what you’re required to do, you can get professional help to complete the necessary registrations or complete them on your own.

Once you’re set up and legal, ongoing compliance is mostly a matter of staying current — renewing what needs renewing and watching for changes that affect your business.

Key Points and Facts About Playing By The Rules In Business

The Three Levels of Regulation

Federal — required only if your business is in a federally regulated industry, such as agriculture, alcohol, firearms, aviation, broadcasting, food manufacturing, or environmental activities.
State — most states require some form of registration, tax permit, or occupational license depending on your industry.
Local — cities and counties typically require a general business license and enforce zoning rules.

The Cost of Getting It Wrong

Fines for operating without a required license or permit typically run $500 to $10,000 or more per violation.
Repeated or serious violations can lead to a forced shutdown, as happened to Lenny in this article.

Action Steps to Play by the Rules in Business

Identify what type of business you want to get into. At the very basic, identify the industry, product, and/or service you wish to provide and where.
Do a quick online search for any city or state document regarding setting up your business, or check for a state-run permit database.
List any questions you may have.
Call or visit your local government department dealing with business development and registrations. Ask your questions and make sure the answers you get are backed by existing legal documentation. Otherwise, you still run the risk of violating laws without realizing it.

Important Points to Play by the Rules in Business

Making sure your business is running legally should be one of the first things you do when you start it. Otherwise, you risk investing a lot of time, energy, and money in a business that might be shut down.
Every business has its own set of rules, so don’t fall into the trap of consulting a friend or relative who runs a different business than yours. Different areas and locations have different rules too.
It’s not hard to find out the rules for your specific business. Simply do an online check or visit your local government agency responsible for business registration.
Operating without a required license or permit can cost $500 to $10,000 or more per violation, on top of the risk of a shutdown like the one Lenny faced.

Checklist for Playing By The Rules In Business

Define your business activities
- Write out what you plan to do: manufacturing, retail, sales, consulting, etc.
- List any products involved.
- Note operational characteristics — walk-in traffic, deliveries, manufacturing, etc.
Check all three levels of government
- Search “Business Startup Guide [City] [State]” or check your state’s permit database.
- Check the SBA’s license and permit tool for federal requirements.
Get answers in writing
- Ask for the specific regulation or section number behind any verbal answer.
- Keep documentation on file.
Stay current
- Sign up for newsletters or mailing lists from relevant agencies.
- Track renewal dates for every license and permit.

FAQ: Playing By The Rules In Business

Do I need a federal business license?

Only if your business operates in a federally regulated industry, such as agriculture, alcohol, firearms, aviation, broadcasting, food manufacturing, or environmental services. Most small businesses don’t need one.

How do I find out what my state and city require?

Search “Business Startup Guide [City] [State],” check the SBA’s license and permit tool, or look for a state-run permit database — California’s CalGold is one example.

Do I still need to file a Beneficial Ownership Information (BOI) report?

No. FinCEN permanently eliminated this requirement for U.S. companies and U.S. persons, effective August 2026. If you filed one previously, FinCEN is removing that information from its database. Requirements like this can change, so check FinCEN.gov if you’re unsure of your current status.

What happens if I skip this step?

You risk fines ranging from $500 to $10,000 or more per violation, and in serious cases, a forced shutdown — the same outcome Lenny faced.

References:

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