When starting a business, you may be required to get various licenses and permits at the state and local levels, or in some cases, at the federal level. It’s extremely important to meet all of these requirements to be in compliance with the law. This will of course take time, but it needs to be a priority, or you could face steep penalties.
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.
What is a Permit?
Business permits are required to regulate the safety, structure, and appearance of businesses and prove that you’re in compliance with laws in your jurisdictions. Various permits are required at various government levels for various types of industries, so you need to check with your local governments for specific requirements.
Types of Business Licenses and Permits
Business license and permit 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 and permits 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. You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
Steps to Get a Business License or Permit
You can file applications for licenses and permits 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 and permits you need at all levels (city, state, federal) by contacting the relevant licensing and permitting 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 and permits, 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 permit, 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 early when starting a business.
Finally, many business licenses and permits must be renewed periodically. Some types may involve an inspection of your business by a governing authority. Check the renewal requirements and put the dates on your calendar to ensure you stay in compliance. Also, plan for renewal fees as a business expense.
How Long Does It Take to Get a Business License or Permit?
How long it takes to get all your required business licenses and permits 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 may 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.
It’s extremely important to have all the licenses and permits you need to be in compliance with the law, or you could face stiff penalties or even the closure of your business. It can seem like a daunting task, so again, an attorney is recommended or use a third-party service, such as MyCorporation.
Using a professional service will ensure that all your bases are covered and protect you from future issues that could have a negative impact on your business.