If you are starting a new business, it’s important to make sure you’re in compliance with all laws at the local, state, and federal levels.
Depending on your location and type of business, you may need business licenses and permits. So, before you launch your business, it’s wise to do your research and determine which licenses you need.
This will of course take time, but it needs to be a priority, or you could face steep penalties. Read on to learn how to ensure your business is in compliance with all relevant regulations.
What Is a Business License?
A business license essentially authorizes a business to operate within a specific jurisdiction. In some areas, and for certain types of businesses, multiple licenses may be required.
For instance, business licenses may be required by your city, county, and state, and some could be industry-specific. You need to have all required licenses before you open for business, or your business could face sizable fines or even be shut down.
Business licenses are meant to protect consumers and track business activity for tax purposes. They also provide revenue for the jurisdiction, allow the county or city to impose zoning restrictions, and control which companies can do business in the area.
There’s also an advantage for the business, as the license adds credibility and helps win the trust of customers.
Types of Business Licenses
Business license requirements vary greatly between cities, counties, and states, as well as by industry, so it’s a good idea to check with governments in your area to determine what you need. Consulting with an attorney can help ensure your business is in full compliance.
Here are some common licenses you may need.
- Business operating licenses are simply licenses to operate and may be required by the city and the state.
- Industry-specific licenses may be required, depending on what your business does. Businesses involved in construction, childcare, plumbing, electrical, food and liquor, insurance, finance, landscaping, and architecture all require licensing, for example. In some highly regulated industries, you may require licensing from a federal agency, such as the FDA or Department of Transportation.
- Zoning permits ensure you’re operating in an area in which you’re allowed to operate. They are issued by municipalities.
- Building permits verify that the building you’re operating in is up to code. Home occupation permits, which some areas require, allow you to operate a business from your home.
- DBA permits allow you to do business under a name that is different from your legally registered business name.
- Sales tax permits allow you to sell products and collect sales tax.
- An employer identification number (EIN) is required if you plan to have employees, no matter what your business entity type.
- Health licenses and permits are required for certain businesses based on industry, and you will be required to maintain health and safety standards. Environmental permits are also required for certain industries in some locations.
- Fire permits certify that your business is up to fire safety codes. Depending on your location, this may be required for all businesses, while in other areas it’s required only if you work with flammable materials.
- Sign permits may be required for your location or other signage if there are rules about sign size and location.
- Again, check with government offices in your area for specific requirements, and consider hiring an attorney to advise you.
Steps to Get a Business License
You can file applications for licenses on your own, hire an attorney, or hire a third-party service, such as MyCorporation or MyCompanyWorks, to help you file. The process can take anywhere from a few days to several months, depending on your location and industry.
- Research which licenses you need at all levels (city, state, federal) by contacting the relevant licensing offices or visiting their websites for information. Applications may require your EIN and evidence of your sales tax permit, so apply for these first — both are easy to acquire.
- Get all of your forms and documentation together. Various licenses require different documents, so review the application requirements thoroughly. Applications may require:
- Description of your business and its activities, as well as your location
- Articles of incorporation, if applicable
- Ownership and management structure
- Sales tax permit
- Proof of insurance
- Financial statements
- File your applications. This may be done online, in person, or by mail, depending on the government office. Check to see if any of the forms need to be notarized.
There are fees involved in getting various licenses, usually no more than a few hundred dollars each, but be prepared for those costs. Your application may be approved immediately, and you will receive your license, or it may take some time for approval. It can take days, weeks, or even months.
It is also possible that you may not be able to obtain a license because of specific requirements, or because the jurisdiction limits the number of licenses issued. This is why it is critical to start this process very early when starting a business.
Finally, many business licenses must be renewed periodically. Check the renewal requirements and put the dates on your calendar so you stay in compliance. Also, plan for renewal fees as a business expense.
To find out the business licenses that are required by a state where you’re operating your business, choose a state from the list below. You will find the most commonly needed permits and licenses in that state — and the steps required to acquire them.
How Long Does It Take to Get a Business License?
How long it takes to get a business license depends on your type of business, your state regulations, and your locality. It can take as little as one day, or as long as six months.
Some types of licenses or certifications that you may need require a certain number of hours of education. For example, a real estate brokerage business has educational requirements that must be met before a real estate broker’s license can be issued.
The consequences of not having your business properly licensed can range from steep fines to the closure of your business, so make sure to thoroughly research the requirements and get the licenses you need.
Start early so that the launch of your business is not delayed any longer than necessary. To make sure everything goes smoothly and that you’re doing everything correctly, it is highly recommended that you engage an attorney to help you through the process.