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 Licensing 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.
- Operating license – Before you open your new business, you will want to have your business operating license. If your business is outside city limits, you may need to work with your county government to get licensed.
- Fire department permit – If you are going to be open to the public, you will likely need a permit from your local fire department. Some cities require inspections and certificates, so check with your local government.
- Zoning permits – After you have applied for a business license, the city’s zoning department will make sure that the location is zoned for your type of business. If your area is not zoned for the right types of business, you will need to apply for a conditional-use permit or a variance.
- Health permits – Some businesses, like restaurants or salons, require health permits from the city’s health department. The type of business and your local government’s requirements will vary, so check to see if a health license or permit is applicable.
- Building permits and sign licenses – If your business is going into a brand new space, you will need building permits before starting construction. Cities may also require permits for renovations and signs.
State Licensing Requirements
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:
- State business license – The requirements for an operating license with the state will be like those that were required by city and local governments. A state business license will give you permission to do business in your state and allow the state agency to track your business operations for taxation purposes.
- Seller’s licenses – If your business sells certain goods, you may need a special seller’s license issued by your state. An additional small business license may be required if you sell certain types of products like alcoholic beverages, gas, lottery tickets. These licenses are required on top of the general business license obtained by the city and the state, so verify your requirements with the Secretary of State.
- State tax registration – Certain businesses will need to apply for an EIN, or employer identification number, with the IRS before registering your business with the state taxing authority. You will then need a state tax ID number to file payroll taxes and other state-regulated tax obligations. To get your state tax ID number, you can register online with your state’s revenue department.
- Occupational licenses – Some occupations require a professional license, which is mandated by the state you are operating in. There are different requirements for each occupation concerning education and testing. Some occupations that require special licensing are:
- Physicians and Counselors
- Real Estate professionals
- Cosmetologists and Barbers
- Massage Therapists
- Electricians and Plumbers
- Insurance agents
- Car mechanics and dealers
- Daycare providers and other Childcare workers
Federal Licensing Requirements
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.
Home Office and Online Businesses: Types of Business Licenses
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.
- Sales Tax Permits – To find out if your products are taxable, you can check with the Department of Revenue guidelines for your state. Most states require that you register for a sales tax permit for online sales as well since many online transactions are taxed now. Once you learn your state’s sales tax rules, you’ll be able to register for a permit and pay taxes online.
- Professional Licenses – The occupational licenses issued by the state still apply to home-based businesses. Many entrepreneurs think that by performing services out of their houses, they will not need to follow the same process. They are incorrect.
- Business License – You will still need a general business license to run a business out of your home. Business license requirements come from the local level, so check with your home municipality. Some cities or towns refer to this license as a reseller’s certificate or business tax certificate.
- Zoning permits and HOA approvals – Many cities will check zoning permissions as part of the approval process for your business license. If the zoning is not cleared, you may need to follow up with the zoning department. Many neighborhoods are a part of a homeowner’s association (HOA) that may have rules about conducting business out of your home. If you are part of the HOA, make sure you get the proper approval from them as well.
- Safety permits – If you have customers coming to your home, you may need an inspection and permit from the local fire department. Additionally, if you are selling goods online or in-person and you keep an inventory at home, you may need a health department or fire permit if those goods are food or flammable substances.
- Sign permissions – If you’d like to put a sign in your window or yard to advertise your business, you may need to check with the local authorities first. Some cities and counties regulate the specifics of approved signs. You will also want to check with your HOA, or landlord if you are a renter.
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.