In all the excitement of preparing to launch your new business, there’s also a bit of not-so-exciting, but critical, paperwork to handle. In order to ensure you’re legally able to operate your business, you’ll need to obtain the necessary business licenses and permits.
The business licenses and permits your business needs will vary depending on your location and your industry, but typically include:
Municipal/local licenses and permits
Every business needs to obtain a business license from the city where it is located. (This applies even if you have a home-based business; you’ll need to get a license from the city you live in.) Visit your city’s website or contact the city to find out the process for obtaining a business license, as well as whether the city requires any other licenses or permits for your specific type of business.
Before applying for your license, be sure you have obtained a federal tax ID number, filed for a fictitious business name (if your business name doesn’t include your and your partners’ last names) and chosen your form of business (such as a corporation or LLC). You’ll need this information and documentation in order to apply.
You will pay a small fee (typically from $50 to a few hundred dollars) for a business license, which must be renewed each year.
State licenses and permits
If you are starting a business in an industry regulated by state laws or one that provides products or services regulated by state laws, you may need to obtain a state business license as well as a municipal or local one. This generally includes professions (such as dentists, attorneys, realtors), businesses providing personal services (such as aestheticians, hairdressers or nail technicians) or businesses that require obtaining special certification or training (such as auto mechanics or general contractors).
If you sell food or beverages, run a food-service business such as a restaurant or food truck, or serve or sell alcohol, you’ll also need special state licenses and permits. You may need permits before you undertake any type of building or construction, such as remodeling or “building out” a retail space. Last, but not least, retail businesses will need to obtain a sales tax license so they can charge customers sales tax.
Visit the SBA website for links to state-specific business license information and related websites in each state.
Federal business licenses
Most small businesses do not need a federal business license. However, this type of license will be required if your business is in an industry that’s heavily regulated by the federal government. For example, the transportation industry, food and beverage manufacturing, broadcasting on radio or television, agricultural production and any business dealing with firearms are among the industries that require federal licenses. In addition, if you manufacture, wholesale, import or sell alcoholic beverages or tobacco products, you must register your business and apply for permits with the U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB).
Visit the SBA website for more information about federal business licenses and permits you may need to open for business.
Applying for business licenses and permits may seem like a waste of time, but failing to do so could cost you time and money later if your city, state or federal authorities discover you are operating without the appropriate registrations in place. You might have to face fines, close your business temporarily until you obtain licenses or even close down for good. Take the time to start your new business off on the right foot by taking care of the proper paperwork now, not later.