A business license number is required for some businesses before they begin operation. Others may get by with just a tax ID number. This is dependent on the city, county, and state where it is formed and operating, as well as the type of business.

Several factors come into play in determining whether a business requires a license or a tax ID number. In many cases, it may need both. Learning about this requirement is just one of the many steps an entrepreneur must take when starting a business.

Steps for Launching a Business

Getting started with a new business is not complicated, particularly if it will have a simple business structure such as a sole proprietorship or partnership. First, Choose a unique name for the company and register it with the state. Not only does that protect your chosen name, but it also means that you intend to comply with all local, state, and federal regulations. Typically, you will be able to register the business with the secretary of state.

Your business may need a state license to operate legally. Even if you find that it does not, it's possible that your city, township, or other local jurisdiction requires a license to operate there. If you aren't sure whether you need one or not, the state will likely let you know as soon as you register your business.

Does Your Business Need a Federal License?

Certain types of business require licensing from the federal government. Obtain the proper license(s) by contacting the federal agency that regulates your industry. Some business types that need federal licensing include:

  • Manufacture, wholesale distribution, import, or sales of alcoholic beverages.
  • Operation of aircraft, air transport of people or merchandise, or aircraft repair.
  • Manufacture, import, or sales of firearms, explosives, or ammunition.
  • Commercial fishing.
  • Transportation or shipment of merchandise by an oceangoing vessel.
  • Drilling for oil, gas, or mining for mineral resources on federal land.
  • Production of nuclear energy or materials.
  • Broadcasting via cable, satellite, TV, or radio.

If you need assistance in determining the licensing requirements for your business, you can get in touch with the state's regulatory office. Tools and resources for permits are also available at the Small Business Administration's website (SBA.gov).

Some types of licenses, whether they are federal, state, or local, have expiration dates. For this reason, you need to know their valid time frame ahead of time and keep track of renewal dates. You might find that it is easier to renew a license, as well as less expensive than to apply for a new one. All of this information is typically accessible on the relevant jurisdiction's website.

How Much Does a Business License Cost?

Along with finding out what types of license your business requires, your local, county, and state government websites should provide information on the license fees. In fact, there are usually guides available on the website to answer frequently asked questions and help you with the entire process. Further, local agencies will meet with you in person to assist you. After all, they want businesses to locate and thrive in their region, so it's in their best interest to help them get off the ground.

License fees can vary widely depending on your location. A business license may cost less than $100 or can go up to $500 or even more. Fees are also dependent on your type of business.

How Long Does It Take?

As with the cost, the amount of time it takes for a business license to arrive depends on the jurisdiction and industry. It may take a few days, or a few weeks, to come in the mail. Some agencies require that you pick it up in person, providing identification and proof that you own the business. They may even require your fingerprints for their files.

Other Types of Licenses

Your business may need additional licenses or permits before it can legally operate. Some examples include:

  • Fictitious Business Name Registration.
  • Home Occupation Permit, if you are working from home.
  • Zoning Permits, if your business violates zoning laws.
  • Building Permits, if you are constructing a new facility.
  • Permit from the Health Department, especially if you are selling food.
  • Seller's Permit or Sales Tax License.

Failure to obtain the necessary licenses could land you in big trouble and severely impact the success of your business.

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