As a new or soon-to-be business owner, figuring out what steps you need to take to officially start your business—including figuring out how to get a business license—can be super confusing. Especially since the rules differ depending on your location and business structure. Gone are the days when you could just set up a lemonade stand on your front lawn without a food handler’s permit. 😮💨
While it may be frustrating, figuring out how to get a business license on the local, state, and federal levels is necessary if you want to legally operate your business (and we’re all law-abiding citizens here, aren’t we? 😉).
Luckily, we’re here to break down how many and which types of business licenses and permits you might need. We’ll provide an all-encompassing rundown of how to get a business license, including:
- What the different types of business licenses are
- An explanation of why licenses and permits are so important for businesses
- The five steps to getting a business license
Navigating the legal side of starting a business is definitely complex, but we know you have what it takes. Let’s jump into it!
What is a business license?
A business license is issued by government agencies, and gives you permission to operate your business in a certain location. This means a “business license” can be as general as an operating license that lets you open up shop in your city, or as specific as an industry-specific license that lets your business conduct certain activities. In other words: a business license is a crucial part of starting a business.
Do I have to get a business license?
Certain businesses will require a business license (or business licenses), while other businesses may not require a business license at all. It really depends on your area, industry, business structure, and what you’re selling.
Getting at least one business license is mandatory for most business owners, though. You may need to get business licenses on the local, state, or federal levels. According to the Small Business Association (SBA), most small businesses will need a combination of licenses and permits on the state, federal, and local levels.
It’s crucial to do your research and due diligence about what type of licensing your business needs in order to legally operate, since it really depends on your unique situation. If you don’t get the proper licensing, you may have to pay fines, face penalties, and other scary things I’m sure you’d rather not deal with.
We wish we could telepathically communicate with you and let you know exactly what licenses and permits you may need, but hey, this blog is the next best thing until we get our hands on that kind of technology.
How much does a business license cost?
Certain business licenses and permits may have different fees and processing fees, and each state will have different costs. If we had to provide a rough estimate based on the range of prices across states, we’d say the total average cost is a few hundred dollars. You may also need to pay a renewal fee every year. While the price tag may make you cringe at first, it’s really a small price to pay for following your dream and doing what you love!
Where do I get a business license?
Where you get a business license will depend on a number of factors, like your state, city, and location; the government level; and your industry and business activities. You can find the information you need to get a business license on:
- Your city’s/county’s website
- Your state’s website
- The state license bureau
- Federal government websites
- Any relevant industry agencies
Unfortunately, there’s usually not just one website where you can register for every single business license you need. It’s always better to do as much research as possible to make sure you’re covering all your bases.
What are the different types of business licenses?
Let’s go over the most common types of business licenses and permits businesses may be responsible for getting. Depending on your state, they might have slightly different names, so keep that in mind.
This section is a biiit lengthy, so feel free to grab a snack and a pen and paper (or the notes app in your phone) to jot down the licenses and permits that apply to you, which will help make this information more digestible (pun totally intended) and provide you with a solid jumping-off point for more research.
Business operating license
A business operating license refers to a general business license that gives a business owner the privilege of running a business within a certain area. Depending on your location, you may need to get one on the state-level and the city-level.
A seller’s permit (also known as a “sales tax license”) is usually required if you’ll be selling goods and collecting sales tax on any purchases. Aside from a seller’s permit, there are other licenses and steps businesses need to take in order to comply with tax regulations, so remember to do your research.
Permits to collect state tax are usually secured by registering your business with your state’s Department of Revenue. To get started, you can visit your state’s Department of Revenue website and search for “sales and use tax” (remember, this permit might go by a different name in your state!).
“Doing business as” (DBA) statement
A “doing business as” (DBA) statement, also called a “fictitious name statement,” is needed if you want to use a different name for your business other than the one you’ve already legally registered.
For example, if your name is Keanu Reeves and you want to call your business “Cakes by Keanu,” you’ll need to register that as your trade name by filing a DBA.
You can file your DBA through your town or city clerk’s office. Keep in mind, a DBA doesn’t cover you on the federal-level, so you might want to file for trademark protection of your trade name through the U.S. Patent and Trademark Office (USPTO).
But wait! Before you file a DBA, make sure your potential business name hasn’t already been snatched up by another business. You should:
- Check with your local county clerk’s office and your state’s filing office
- Search the U.S. Patent and Trademark Office’s trademark database
- Do some good, old-fashioned googling!
If you offer a specialized service, you might need an industry-specific license in order to legally operate, which you can get through the appropriate licensing board. Here’s a list of some industries you’ll probably need specific licenses or permits for:
- Child care
For some industries, you may need proof of insurance or surety bonds, certain certifications or education levels, and audited financial statements before getting your license.
Any federal business licenses or permits you’re required to get will be based on your industry. The US Small Business Administration (SBA) has a list of the industries that need licensing on the federal level, which includes:
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
If your business has a physical location, you’ll need to check if you need zoning, building, signage, and fire department permits.
- Zoning permit: needed if you’re planning to construct your business in an area that was not originally zoned for your type of business
- Building permit: needed if you’re constructing or renovating a building and/or to prove the building you’re operating out of is “up to code”
- Signage permit: needed if you plan on putting up a business sign
- Fire department permit: needed to verify you’re not violating any fire codes
- Home occupation permit: needed if you’re operating your business out of your house
How to get a business license: Five easy steps
Now that we’re all on the same page about what a business license is and the different types of business licenses and permits you might be required to get, let’s go over what you all came here for: how to get a business license.
1. Establish your business entity
Before you start applying for business licenses, you first need to decide on your business structure, and then officially register your business with your state. Here’s a quick explanation of the most common business structures:
This is the simplest structure, and doesn’t require you to fill out any paperwork or pay a fee to officially register (you’ll still need any appropriate licenses, though). However, there is no distinction between you and your business—so if your business happens to fall into debt, that’s on you.
Limited liability company (LLC)
LLCs are known for combining the best parts of a sole proprietorship and a corporation; they give you the tax benefits of a sole proprietorship, plus the protection of your personal assets from any liabilities your company may face, like a corporation.
This is the most formal business structure, and is the most time-consuming and expensive to register. Corporations are completely separate from you, so your personal assets are protected from any liabilities your company may face.
The purpose of a nonprofit must go toward furthering a social or charitable cause, and—as the name suggests—any profits can’t be pocketed by owners.
Choosing your business structure isn’t a decision you want to rush, so do your research and weigh the pros and cons before proceeding!
2. Determine which business licenses you need
Now, it’s time for some research. (Yes, reading this article definitely counts, so you’re already one step ahead!) Some places to start:
- Your city or county’s website
- Your state’s Secretary of State, or a similar government agency
- The Small Business Administration
- The appropriate licensing board
- State-specific articles for small businesses (psst—we did a series on how to get business licenses in Florida, Ohio, Texas, and California)
Since the business licenses and permits you may need are so specific to your unique situation, we recommend getting in direct contact with any relevant agencies. It might be worth investing in a business lawyer who can help you determine what licensing you need, and help you gather the appropriate paperwork.
3. Apply for an Employer Tax Identification Number (EIN)
An Employer Identification Number (EIN) is used to identify your business for tax purposes, but also lets you open up a business bank account, hire employees, and other fun stuff. Think of it as an SSN, but for businesses.
An EIN may be mandatory to apply for certain business licenses, so do this step before you actually start applying for your business licenses. (FYI, sole props without employees are able to use their SSN.) You can request one through the Internal Revenue Service (IRS)—luckily, this is a fairly painless process!
4. Apply for your business license
Next up is the step you’ve all been waiting for…*drum roll*... actually submitting applications for the appropriate licenses! As we mentioned before, this could mean you’ll have to apply for multiple licenses and permits from multiple different government agencies, on the local, state, and federal levels. Unfortunately, you may have to pay filing fees, so be prepared.
Here’s some of the information you may need on hand when it comes time to apply:
- What your business activities and operations are
- Where your business is located
- The owners or managers of your business
- Proof of tax status
- Proof of insurance or surety bonds
- Certification or proof of relevant education
- Financial statements
Now that you’ve finished the hardest part (i.e., applying for your licenses and permits), you can sit back, relax, and grab a celebratory cupcake (or two). Using snacks as rewards is an important part of starting a business, in our humble opinion.
All you have to do now is wait for your licenses to be approved!
5. Renew your business license when needed
Keep in mind, once your licensing applications have been approved, you’re not done yet! You’ll probably need to renew your licenses and permits every year or two, depending on your location and your industry, so mark that down in your calendar or set up a reminder in your phone!
Be sure to clarify with the appropriate board on when you’ll need to renew (or, as we mentioned before, you may face some scary consequences if you don’t renew on time).
How long does it take to get a business license?
It can take a few days or months (😱) to get your licensing after submitting an application—it really all depends on your business structure, your location, and your industry. For example, some states may be a bit slower than others when it comes to issuing licenses, and some might even put you on a waitlist (yikes!). This is why we suggested getting more than one cupcake in the previous section—you might have plenty of time to eat them.
Plus, businesses in certain industries—including construction, farming, and restaurants—may face more regulations, meaning it will take more time to get licensed. If your business also requires licensing on the federal level, you can expect a longer wait time, too.
If you want to speed up the process, submit your application electronically whenever you can, since applying online is faster than submitting an application via snail mail or in-person.
Do I need to get a business license before forming an LLC?
Nope! You should actually form your LLC before getting your business license, because you’ll need your business’s official registered name to get a business license.
Other resources to help you get a business license
And there you have it—everything you need to know about how to get a business license! Knowing which business licenses and permits your business needs is super important, so we hope this guide helped make the task a little less daunting. Since the process for getting business licenses and permits will differ from business owner to business owner, it might pay off to hire a professional to help you out.
As a next step, you can check out the Small Business Association which is another great resource for small businesses; their website can provide you with more information on how to get a business license.
Wave (psst—that’s us) also has articles on how to get a business license in specific states, including:
And remember, Wave will be with you every step of the way once your business is up and running!
Unlike other 🙄 small business money management software, Wave is designed specifically for business owners (in other words: not accountants). Wave offers an entire suite of money management tools—all in one place—so you can feel confident knowing you look like the pro you are, your books are always organized, and you’ll be prepared for tax season.
Now get out there and get licensed—you’ve got this!
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.