Key Takeaways

  • An LLC (Limited Liability Company) is not the same as a business license; an LLC is a legal business structure, while a business license is a government-issued permit to operate.
  • Most businesses need both an LLC and one or more licenses or permits to legally operate, depending on the type of business and location.
  • Business licenses may be required at the federal, state, county, or city level, with requirements varying widely by jurisdiction and industry.
  • Common types of business licenses include general business licenses, seller’s permits, health permits, and professional/occupational licenses.
  • Home-based businesses and online businesses may still need local permits, such as zoning or home occupation permits.
  • Registering your LLC typically comes before applying for business licenses because license applications often require your LLC's legal name and EIN.

LLC business license requirements vary according to the industry and location of the business. The services and products a business sells may affect the number and type of business licenses required. Depending on where the company is located, the local and state government may have permits and licenses the business has to obtain in order to operate.

What Is a Business License?

For many governments across the local, state, and county level, it is necessary to have certain licenses or permits before you begin business. Filing jurisdictions all over the country — which total more than 150,000 — all have their own individual requirements. There are a wide number of permits and licenses that could apply to your business contingent on where the business operates. 

The following are some of the most common permits and licenses that may be required of your corporation:

  • Tax registration
  • Liquor license
  • Health permit
  • Occupational license issued by the state
  • Lottery license
  • Land use and zoning permit
  • Health department permit
  • Reseller's license
  • General business license

Governments on the local, county, and state level all require a business license; this is a registration or permit necessary to conduct business. It is best for business owners to research all possible requirements when it comes to licensing and take their industry and location into consideration. Businesses that operate without the required permits and licenses could find themselves faced with notices, penalties, or even measures that prevent the business from operating any further. 

Corporations should comply with the requirements the government has put in place in order to run their business properly and legally. Regarding licensing, it may be requested for a business to register with the state, county, and city in order to meet requirements.

Is an LLC a Business License? Understanding the Difference

A common misconception among new business owners is that forming an LLC automatically grants the permissions needed to operate a business. However, an LLC, or Limited Liability Company, is a type of legal business structure that offers liability protection for its owners (called members) and helps separate personal and business assets. It is not a business license.

A business license, on the other hand, is a government-issued permit that authorizes a company to conduct business within a specific jurisdiction. Licenses are often required at the federal, state, county, and local levels, depending on the business activities, industry, and location.

In summary:

  • LLC: Legal entity that provides liability protection and governs ownership structure.
  • Business License: Permit granting the right to operate a business legally in a specific area.

Many businesses require both an LLC and one or more licenses or permits to comply with legal regulations.

What Type of Licenses Would I Need for a Retail Business?

You're required to pay local and state sales tax if you sell any services or goods. Nearly all states require you to have a license of some kind — specifically a sales tax permit, among other permits. In Broward County Florida, you will need a Florida business license. In the event that you have a company that buys cars and transports them, it's likely you'll also need the following:

  • Application for a License as a Motor Vehicle, Mobile Home, or Recreational Dealer
  • Tax Application for the Certificate of Use
  • Application to Collect And/Or Report Tax
  • Local Business and Tax Registration
  • Motor Vehicle Dealer Surety Bond Form

In a number of states, it is required for sole proprietors, partnerships, corporations, and LLCs that sell taxable services and goods to have a seller's permit. The name of the permit may vary. Companies that sell taxable goods must have a sales tax license to sell those goods.

Do You Need a Business License Before or After Forming an LLC?

In most cases, you should form your LLC before applying for business licenses. This order matters because many licensing agencies require your business's legal name and Employer Identification Number (EIN), both of which are obtained during the LLC formation process.

Steps to Consider:

  1. Form Your LLC: Choose a business name, file Articles of Organization, and obtain an EIN.
  2. Identify Licensing Requirements: Research your specific industry and local jurisdiction for applicable licenses and permits.
  3. Apply for Licenses: Use your LLC's legal name and EIN when completing license applications.

Note that certain industries, like construction or childcare, may require licensing approvals before any business activity can begin. Always confirm requirements with your local government agencies.

What Type of License or Permit Would I Need for My Home-Based Business?

Usually, a business will need a local permit as opposed to a license granted by the state or federal government. The location of a small business largely determines the rules it will be governed by. In some areas, installing a sign on the outside of your home is subject to local regulations on signage. A home occupation permit may be required in some areas in order to operate a home-based business, per local zoning laws.

If you have an internet product business located in El Dorado County, California, you'll need to acquire the following:

  • Business License Application
  • Business License Fee Document
  • Home Occupation Application
  • California Seller's Permit Application

However, it's important to know that not all businesses based at home will need a license. Your eBay retail arbitration business is not going to need a business license, nor is a business based entirely on the web going to need a license for the business. If you have a daycare center for children in your home, you will need a business license in addition to other government-issued licenses. The regulations of HOA bylaws would affect a home-based business in areas where there is a homeowner's association.

Do All LLCs Need a Business License?

Not all LLCs automatically need a business license, but many will, depending on the following factors:

  • Location: Some cities or counties require a general business license for all entities operating within their jurisdiction.
  • Industry Type: Specific industries like food service, childcare, automotive repair, and construction often require specialized permits.
  • Business Activities: Selling goods, providing services, hiring employees, or storing hazardous materials can trigger additional licensing requirements.

Even businesses operating exclusively online may require sales tax permits, depending on the state.

The best practice is to check with:

  • Your local city hall or county clerk’s office
  • Your state’s business licensing department
  • The Small Business Administration (SBA) for federal licenses and permits

Operating without the proper license can result in penalties, fines, or forced closure of your business.

What Types of Licenses or Permits Would I Need as an Employer?

It may be required of employers to withhold tax by submitting Income Tax Withholding registration forms. The permits and licenses that you may need will differ based on your area and the type of business you operate. A food vendor with a stand in Orange County, California, will need the following permits according to the requirements of California businesses:

  • Health Permit
  • Registration Income Tax Withholding Application
  • California Seller's Permit Application
  • Business License Application

Frequently Asked Questions

  1. Is an LLC considered a business license?
    No. An LLC is a legal business structure, while a business license is a permit that authorizes you to operate legally within a jurisdiction.
  2. Do I need both an LLC and a business license?
    In most cases, yes. Forming an LLC provides liability protection, but you may still need one or more business licenses depending on your business activities and location.
  3. Which should I get first, the LLC or the business license?
    Generally, you should form the LLC first. Many licensing applications will ask for your LLC name and EIN.
  4. What happens if I operate without the necessary business licenses?
    You may face penalties, fines, or even business closure if you operate without required licenses or permits.
  5. Does an online business need a business license?
    It depends on the type of business, the products or services offered, and your location. Many online businesses still need sales tax permits or local business licenses.

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