How to Get A Business License: Everything You Need to Know
How to get a business license varies by state, but many businesses require that you obtain the appropriate licenses and permits.3 min read
How to get a business license varies by state, but many businesses require that you obtain the appropriate licenses and permits. The required permits, licenses, and registrations differ depending on the business's location, ownership structure, and purpose.
Sometimes referred to as a sales tax permit or business tax certificate, a business license's purpose is to:
- Identify the business and make sure it is held accountable for its actions.
- Protect public health and safety.
- Keep track of finances for tax purposes.
Before you can operate your business legally, you must have the required licenses and permits in place. Obtaining the required licenses indicates that your business has been registered with the appropriate government entities and is legally approved to operate.
Does Your Company Require a Business License?
You need to register with the taxing authorities and obtain permits and licenses if your business:
- Has employees
- Sells taxable goods or services
The required permits and licenses might vary depending on the business's location, ownership structure, and purpose.
Examples of businesses that need special licenses include:
- Businesses that operate across state lines
- Businesses that handle or store hazardous materials
- Restaurants, which require food safety, occupancy, liquor, placement of waste bins, etc.
- Cosmetic and hair shops
- Alcohol, tobacco, and firearms
- Nuclear energy
Examples of businesses that don't typically require licensing include:
- Freelance writers
- Hobby animal breeders
- Used book dealers
Common Licenses, Permits, and Tax Registrations
There are many tax registrations, business permits, and licenses a company might need, but some of the most common include:
- Air and Water Pollution Control Permit
- Building Permit
- Business License
- Certification of Occupancy
- Employee Identification Number
- Fire and Police Department Permit
- Health Department Permit
- Home Occupation Permit
- Professional License
- Sales Tax License
- Sellers Permit
- Withholding Tax Registration
- Zoning Permit
Who Issues Business Licenses?
Business licenses, permits, and tax registrations are issued at the federal, state, and local levels of government. There are more than 40,000 licensing jurisdictions in the United States, each with its own licensing requirements.
Depending on your industry, you might need to obtain licenses at each government level. Licenses, registrations, and permits at the state level are more common, but some businesses require them at the federal level, as well.
How to Get a Business License
Obtaining a business license means your business has received approval from the appropriate government entities to run.
- Determine whether your company needs a federal, state, or local license. You can do this by searching on the U.S. Small Business Administration's website.
- Register with the appropriate agencies. Based on the business and industry, you might need to register your business with federal, state, and local government agencies.
- Supply any necessary identification. Some government entities might require you to apply for permits in person and provide photo identification. Depending on the type of business, you might also need to be fingerprinted.
- Pay for each license, permit, or registration. Payments average from $50 to $400, and you might need to renew each periodically.
Information Required for a Business License
To file for a business license, you must provide information such as:
- Name of business
- Type of business
- Business address
- Name of business owner
- Contact information
- Federal Tax ID number
- Number of employees
You must also provide payment for each license and supply any necessary identification.
Penalties for Operating Without a Business License
The process can be time-consuming and complicated, but not complying with the required licenses, permits, and tax registrations can leave you without legal protection, lead to significant penalties, and can jeopardize or end your business.
Many government entities have hired third-party collectors to locate and penalize business license evaders. Until you comply with licensing requirements, these third-party collectors might:
- Suspend the operation of your business.
- Padlock the doors of your business.
- Issue costly penalties, interest, or personal liens.
- File lawsuits against your business.
- Permanently close your business.
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