The licenses needed to start a business depend on the type of business you're running. You can acquire licenses and permits from certain local, state, and federal agencies.

Why Do You Need a Licenses to Start a Business?

Are you thinking about starting a business? If so, you're going to need numerous federal, state, and local licenses and permits.

Business licenses and permits are required for three reasons:

  1. Customers can see your operating licenses and understand that your business has met a certain standard. This, in turn, protects consumers.
  2. The process of acquiring and renewing licenses and permits is supposed to make businesses more transparent.
  3. Licenses and permits are needed for taxation purposes. In this way, the government can monitor how much money a business has taken in from year to year.

While most small businesses are required to hold some sort of license or permit, business owners will need to be aware of the laws the govern licenses and permits. For instance, federal licenses of the same type are renewed during a set number of years. However, depending on the state where your business is based, you will have to renew your business licenses every year or once every two to three years. Of course, states and localities may have extra rules for special permits, so do your research.

How Can You Figure out Which Licenses You Need?

If you are a business owner, here are three factors that will determine the type of business licenses you will need to hold:

  1. The type of business you're running
  2. The state where your business is based
  3. Any other governmental rules (namely federal) that may apply. If your business is under the purview of a federal agency, you must obtain federal licensing and permits along with your state licensing

There are many licenses out there that cover most types of businesses, depending on the federal, state, and local laws that apply to your business. Below is a sample of businesses that require such licenses.

  • Accounting
  • Automobile repair
  • Childcare
  • Cosmetology
  • Food preparation
  • Insurance sales
  • Legal assistance
  • Medicine
  • Real estate
  • Tax services

Remember: Online businesses have to comply with the same permitting requirements as physical businesses. You will have to abide only by the laws in the state where your business is headquartered.

Which Licenses and Permits Are Required From the Onset?

Below is a quick reference of the permits and licenses most businesses are required to have.

  • A basic business operation license from your city or county
  • A federal employer identification number (EIN) from the federal government
  • A tax identification number (in most states)
  • A fictitious business name permit
  • Professional or occupational licenses
  • A sign permit
  • A building or construction permit

Are There Any Other Permits Business Owners Need to Acquire?

Yes. In addition to the above list, you will need to acquire special licenses at the state and federal level depending on the type of business you will be involved in.

  • Zoning and land use permits. This is true for manufacturing businesses and some home-based businesses.
  • A permit from your state's health department. That's if you will serve or prepare food, deal in hospitality, or work in the health industry.
  • A sales tax license. This is required for most products and services because taxes will be applied through the point of sale.
  • A permit from the local fire department. You'll need this if your business will attract a lot of visitors, like a restaurant or even a museum.
  • Licenses to sell liquor, lottery tickets, gasoline, and firearms in your state.
  • A home occupation permit. That's if you plan on running your business out of your home.
  • Environmental permits. These are for businesses that might pollute or otherwise have a significant environmental impact.

Which Federal Agencies Should Business Owners Contact?

At the federal level, you will need to contact specific agencies to obtain licenses if you'll be involved in the following lines of business:

  • Giving investors advice. Contact the Securities & Exchange Commission.
  • Manufacturing drugs. Contact the U.S. Food and Drug Administration (FDA).
  • Manufacturing tobacco products or alcohol. Contact the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).
  • Producing and/or selling firearms. Contact the ATF.
  • Preparing meat products. Contact the FDA.
  • Transporting people by ground. Contact U.S. Department of Transportation.

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