Getting a business license is often an overlooked process when forming your business. We know that companies need to create a legal entity within their state or local jurisdiction, obtain an Employer Identification Number (EIN/Tax ID), and complete any other required documentation. Getting a business license may also be necessary, and how to obtain them and which licenses are needed can be tricky.
What is a business license?
A business license is a form of permission granted by a federal or state agency that enables a natural person or entity to engage in a specific business activity within a jurisdiction. Although not all types of businesses require a license, some may need them according to the applicable state, municipal, or county rules and regulations.
When starting a business, conducting research and attaining all required licenses to operate that specific business legally is advisable. Not having the legally required licenses may result in the imposition of fines or the forced closure of your business. (Cornell Law School)
When do I need to get a business license?
A business license should be obtained before you start your business, if the business moves or changes locations or if there is a change in ownership.
Why do I need a business license?
Specific business licenses are required to operate your business legally, and they vary depending on where your business is and the products and services you offer. Each state and jurisdiction has its list of requirements. Three key determining factors are:
- Industry Type. Personal services such as a nail salon or stylist. Businesses that sell food, alcohol, tobacco, or any other industry that requires it.
- Location. State requirements and local licenses from towns, counties, and municipalities.
- Profession. Many states also require professional licenses and certifications to work in specific fields. These licenses prove you or your employees have the necessary knowledge and experience for the job.
Federal, state, and local government agencies issue business licenses, while professional organizations provide certifications and associations. A business license shows that the company complies with the rules required to obtain a license. Those regulations are in place to protect both your business and customers from liability or harm.
Business licenses are essential tools for companies in almost every industry. Operating without the appropriate license can result in fines and penalties, having your business shut down, or even incurring criminal charges. Knowing which licenses you need and how to secure them is vital. (Chase.com)
What are the most common business licenses?
The most common business licenses are:
- Sales Tax Registration
- Unemployment Payroll Registration
- MBE/WBE and Veteran Owned Certifications
- Federal Tax-Exempt Status
- Weights & Measures
- Liquor License
- Controlled Substance Registration
- Adult or Child Day Care
- Salon and Fitness
These represent a small representation of the types of licenses. Certain types of businesses, such as restaurants, construction companies, online businesses, or even home-based businesses, may have requirements that are particularly important to understand; however, you may be unfamiliar with them. Requirements can range from a basic business license to operate within a city or county to a specific permit to sell alcohol or lottery tickets.
Is forming an LLC or corporation the same as obtaining a business license?
Forming an LLC or a Corp is different from obtaining a business license. These are separate legal processes for other purposes for your business. Forming an LLC or Corp provides a legal structure for your business that can separate your personal and business assets.
Forming an LLC or Corp deals with your business’s legal structure and liability protection, while obtaining a business license deals with the permission to operate your business in a specific jurisdiction. In many cases, you would need to both form a legal entity (like an LLC or corporation) and obtain the necessary business licenses to operate your business legally. The specific requirements will depend on your location and the nature of your business. It is essential to research and comply with both components to run your business legally.
How do I get a business license?
Obtaining your business license will vary by state and local requirements. The licenses and permits you need from the state, county, or city will depend on your business activities and business location. Your business license fees will also vary.
States tend to regulate a broader range of activities than the federal government. For example, business activities commonly regulated locally include auctions, construction, dry cleaning, farming, plumbing, restaurants, retail, and vending machines. Some licenses and permits expire after a set period. Keep close track of when you need to renew them — it’s often easier to renew than apply for a new one.
You’ll have to research your state, county, and city regulations. Industry requirements often vary by state. Visit your state’s website to find out which permits and licenses you need, or contact a service provider such as Accumera for assistance. (SBA.gov)
What do I need to do after receiving my business license?
Some licenses and permits expire after a set period. Keep close track of when you need to renew them — it’s often easier to renew than apply for a new one. Utilizing a service provider is suggested to ensure the business information is current and the license is being monitored for renewal.
I am overwhelmed! What can I do to get help?
Accumera provides customized business license research packages based on your activities to determine the correlating necessary licenses required within each state where you are conducting business. The search results generated will answer the following questions:
- What licenses are required at the state level?
- What licenses are required at the county level?
- What licenses/registrations are required at the municipal level?
- What are the forms, processes, and costs to obtain the required licenses?
When the search is completed, you will receive a comprehensive License Research Package in electronic form, with all necessary application forms, state fees, and filing instructions. After reviewing the package, you can proceed with the required applications and file directly with the associated department or request that Accumera assist with preparing and filing the specific applications. Contact us, and we can walk you through the process.
Resources: SBA.gov, Cornell Law School, Chase.com
