Does your startup checklist include how to get a business license? Learn about rules for licenses and permits. Know where to get them. Start clean and avoid legal surprises and fines.
What is a business license?
A license is the right to operate a business in its location. It’s a certificate. Each level of government grants licenses to companies.
What kind of businesses must be licensed?
Any business may need a license. To decide, governments consider:
- The location
- The legal entity
- The business activity
Federal, state, county, and city laws apply.
Does a U.S. federal agency regulate your business?
The licenses and permits section of the SBA guide covers this. Rules call for a federal license or permit in certain industries like agriculture, alcoholic beverages, firearms, commercial fisheries and more.
States regulate general business licenses. In some regions, like Texas, it’s not a requirement.
In many cases, the states also use the industry as a guide for licenses and permits. And they issue professional licenses.
Cities decide who needs a general business license. Some have rules on which businesses can’t operate from a home office. If you can’t use a home office, consider moving into a co-working space or leasing a starter office.
Municipalities have laws on zoning, land use, and construction permits. Additionally, they also have rules on business parking spaces.
How can you check if you need a business license?
First, check your business activity in the same U.S. SBA guide.
Review your state requirements next. And check the site to see which professions, like real estate agents, need a trade license.
Then check county and city laws on business licenses. If you’re in Louisiana, check your parish laws. You can look at each government website. They’ll direct you to the business license area.
Some online companies sell business license packages. You can save a lot of time and hassle by relying on one of these companies. But, be sure that these companies are reputable before submitting any information or money.
How do you apply for a business license?
You can apply for many business licenses online.
Or you can go to the state, county, and city licensing offices. Before you proceed, research what you’ll need and then apply. They’ll issue the license and permits you require.
Pay the fees using allowed payment methods. They may require extra steps like notifying the public. Follow their instructions.
Request an Employer Identifying Number (EIN) from the IRS. Companies use their EIN to get a license, open bank accounts, and file tax returns and business reports. Sole proprietors using their legal names may not need an EIN.
What happens if I don’t have the proper business license?
Nothing good will happen by not having the proper business license. At the minimum, you can expect to pay penalties and fines. The enforcement can include lawsuits, business closure and—in extreme cases—arrest.
Getting a business license is a definitive example of where it’s better to be safe than sorry.
