The 5-Step Process for Getting a Business License

Establishing a business may be a daunting task in and of itself, much alone keeping up with all the complicated regulations that the government imposes. One or more business licenses may be required of you depending on the kind of firm you run and your region. Here you will discover all the information you want to determine which licenses are required and how to get a business license in your specific area.

Business Licenses: What Are They?

The term "company license" is somewhat generic and may mean any authorization you need to legally run your business and provide your services to customers in your region. Government agencies at the federal, state, county, and local levels issue a variety of licenses to businesses.

A company license may serve several purposes, such as assuring compliance with industry regulations or registering your corporation with the government for tax purposes.

Is a Business License Necessary?

What goods and services you provide, as well as your residence and the location of your business's headquarters, will determine whether you are required to get a license to run your business.

Most states don’t require a general business license—a.k.a. firm operating license—just to do business in that state. However, you may still need a business license from your city or county. You may also need a license from a qualified state or federal regulatory agency to perform specialized commercial activities, such as agriculture or medicine.

If you run an online firm, you register the business and get relevant permissions in the state and city where you base the business. If you’re a digital nomad, consult with your lawyer and accountant about the best strategy to set up your firm.

Types of Business Licenses

To provide your goods or services, you may be required to get one or more of these sorts of business licenses in your state:

Business operating license. This is what many people mean when they say “business license.” This is a license that authorizes you to run a business in your state or location. In some regions, you must obtain a business license from the state, while in others you’ll need a business license from your city or county.

Seller’s consent. If you sell products in person or online, most states require this approval, which permits you to collect sales tax from customers.

DBA or bogus name accusation. A “doing business as” statement permits you to run the firm under a name separate from your legally registered business name. You may need to register a DBA at the municipal or state level, depending on your state.

Special permits. Many industries require particular licenses to operate. If you manage a brick-and-mortar firm, you’ll definitely want permits for planning, zoning, building, signs, and fire in your city or county.

Industry licenses. You might demand a special license to perform your services in companies like salons, electrical, daycare, medical, and legal. You get these licenses from the competent licensing body in your state.

Federal licenses. Select businesses, such as alcohol and gun sales and aviation are governed by the U.S. government and require a federal license or permit. The Small Business Administration outlines which types of firms require federal licenses and where to apply.

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How To Get a Business License

The method to get a business license differs by state—and it’s not essential for every state for every form of firm. Follow these procedures to discover whether you need a license and to apply with your state if you do.

1. Form Your Business Entity

A business license with your firm name is essential. It’s important to design a company structure and business name before you apply for a business license. That way you don’t have to renew or amend your company license later.

Common legal structures for small enterprises include:

A sole proprietorship one-owner corporation is regarded as a sole proprietorship if you don’t file documents to incorporate any other kind of business structure. Sole proprietors are exclusively accountable for business obligations and liabilities, and they record business revenue as self-employment income on their tax returns. If you’re a lone owner, your name is the formal name of your corporation, but, you may elect to use a dba, such as Joe Jones, dba Affordable Lawn Care.
General Partnership A general partnership is equal to a single proprietorship for tax purposes. For liability concerns, partners divvy up responsibilities, and personal assets aren’t separated from the corporation. General partnerships utilize the partners’ last names as their legal business name, and they may also have a DBA.
Limited liability business (LLC) (LLC): A basic company structure where revenues and losses are passed through to owners for tax purposes, but personal assets are sheltered from business liabilities (such as debts or litigation) (such debts or lawsuits).

Corporations tend to have a more fixed operating structure and may be better than LLCs for attracting outside investment.

Nonprofit corporation. A legal organization is founded similarly to a corporation, however, revenues can’t be transferred to owners. Some NGOs acquire tax-exempt status.

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If you create an LLC, corporation, or nonprofit company, you’ll establish a name for your business when you file formation paperwork with your state. Depending on your state, you may be able to acquire a DBA from the state, or you may need to file your DBA with your local government.

2. Apply for an Employer Tax Identification Number

Depending on how your state processes company licensing, you may need to give your federal tax ID number on your business license application.

Sole proprietors who don’t have workers may use their Social Security Numbers instead of a tax ID number, but all other enterprises need a federal employment ID number or FEIN.

You may receive an EIN from the IRS online. The method is uncomplicated and you’ll acquire your number directly away.

3. Determine Which License(s) You Need

Which types of business licenses you require depends on federal, state, and local legislation and what kind of firm you manage.

You may find out the licenses and permissions you need through:

Your state’s Secretary of State office, Department of Revenue, or analogous organization that awards business licenses.
Resources are available via your local Small Business Administration office.
Working with a corporate lawyer to determine and submit the appropriate licenses and papers.

4. Apply for a Business License

You may have to submit for licenses and permissions with state, county, and municipal agencies—for example, a sales tax permit from the state, health permits via a department of health, and planning permits via the city.

Look for tools from your state or your local SBA office that collect all the information you need in one location, so you don’t have to spend hours exploring every relevant organization. Step-by-step instructions in your state could guide you through the method and supply links to vital apps on numerous websites.

In most states and many localities, you may get a general business license online via the applicable agency’s website. Industry-specific licenses may have a more strict application process.

You normally won’t have to wait long for a firm operating license or a sales tax permit to be issued. Other forms of licenses and permits may have a longer and more complete approval process.