If you have a small business, you will probably need to obtain at least one business license or permit from your state or local government to legally operate. For some industries, there are federal-level licensing and registration requirements.
Business licensing and permit requirements will vary depending on your specific business activity, location, and governmental regulations.
In this article, we explain business license rules, what licenses or permits you may need to obtain, and how to apply for business licenses and permits.
What is a business license?
A business license is an official document or registration that grants your business the legal right to do business within a jurisdiction. It can be issued by a state or local government agency, or both.
Having a license represents that your business is complying with rules and regulations that protect both your business and customers. It also demonstrates to customers that your business is reputable and trustworthy, thereby helping to preserve its reputation.
The most commonly required type of business license is a general business license, sometimes referred to as a business privilege license, business tax registration, or basic business license.
A general business license is typically issued by a county or municipality. This license grants you the privilege of doing business in that jurisdiction. If you operate in other locations, even within the same state, you may need to obtain a separate business license for each.
In places that have a state-issued business license, you may be required to obtain both state-level and local-level general business licenses.
Note: It’s important to check local requirements. Not all cities and counties require a business to obtain a business license. Others may collect a business licensing fee each year.
What business licenses and permits do I need?
Business licenses and permits vary by the type of business and state, and local jurisdiction. Specific requirements may also change over time. Your business may need to obtain one or more of the following licenses, permits, or registrations:
- Federal registrations: Federal licenses are generally required only for businesses regulated by a federal agency, such as the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), the Securities and Exchange Commission (SEC), and the Bureau of Alcohol, Tobacco, and Firearms (ATF). Businesses subject to these licenses include grocery wholesalers, trucking companies, individuals and facilities handling controlled substances, food service companies, restaurants that sell alcohol, and gun stores, just to name a few. In addition, any individual who buys or sells more than 2,000 pounds of fresh or frozen fruits and vegetables in a day must obtain a USDA-issued PACA license.
- Employer identification number (EIN): An EIN is a federal tax ID number issued by the IRS. Many businesses are required to obtain an EIN, whether or not they have employees.
- Sales tax license: If your business is required to collect sales and use tax, you must comply with sales tax registration requirements from your state tax authority and obtain a state tax identification number.
- General business license: These are typically required by local counties and municipalities for the privilege of doing business in that jurisdiction. Certain states, such as Washingtonand Alaska, require that a business obtain a general business license or the equivalent from both state and local governments.
- Professional/occupational license: A number of industries (such as medical and pharmacy, law firms, architects, insurance, and construction) are highly regulated in each state. This means your business may need to comply with industry-specific licensing and certification rules.
- Special state-issued licenses and permits: If your business sells liquor, lottery tickets, gasoline, and/or firearms you must obtain a state-issued permit for these activities.
- Miscellaneous local permits: Additional permits may be needed for alarm systems, signage, food preparation, home-based businesses, buildings, zoning, and more.
