Business licensing can be tricky since there are so many different types of licensing available. Essentially, a business license is a permit from the local or state government allowing you to do business within the borders of that locality. However, licensing requirements change depending on certain factors, like what city you do business in, the size of your company, and your industry. In fact, some businesses have to apply for and receive multiple permits, certifications, and licenses before they can even open their doors to the public. The first step in the process is figuring out what type of license you need.
Do you need a business license?
The answer is yes. Nearly all local governments require that every business within the city or county apply for a basic 'business license' and pay a fee. This is, effectively, a minimum tax levied against all of the business within a particular area - in fact some places even call this permit a tax registration certificate, rather than a business license. Even if you're running a sole proprietorship out of your garage, you will still likely have to register and pay this tax.
If you are a retailer, your city or county will probably require that your business has a Sales and Use Tax permit. Even if the state you do business in doesn't have a sales tax, your city or county might, so make sure you know what your tax obligations are before you open for business. On the other hand, if your business provides some sort of professional service, you will probably have to be licensed to provide that service, even if it is something that doesn't initially appear to need a formal license in place like computer repair or marketing. Finally, if you are engaged in any sort of business that is overseen by a federal agency - commercial fishing, firearms, alcohol, aviation, etc. - you are going to need a federal permit as well.
Additionally, we recommend that you either take advantage of the business licensing search tool that the United States Small Business Association maintains, or you can check out our business license compliance package which will help you identify and apply for every license and permit you need. The last thing you want is to get hit with a fine, or be forced to closed, because you overlooked an important detail.
Where do you apply for one?
Start from the city and work your way up. Bigger cities almost always have a myriad of business licenses and permits, so if you are in a major metropolitan area, the city's website is a good place to start. If you are in a smaller town and/or your city doesn't have a licensing bureau, go to the county level and see if you can find any information on licensing on the county website. After that, move up to the state government. Most states will have some sort of licensing guidance application, but at the very least you should be able to find a PDF document with licensing requirements. The US Small Business Administration also has a very useful, comprehensive guidance tool on their site that you should take advantage of too.
Do you have to renew your licensing and permits?
Yes - if you had to apply and receive a license or permit, you are going to have to renew it. There are exceptions to every rule, but it is a safe bet to assume that your city, county, and state are all going to want you to renew and pay an annual fee. Luckily these fees are usually on the cheaper side, so you won't have to break the bank in order to renew. However, if you fail to renew your licenses and permits, you could get hit with a fee of hundreds, or even thousands, of dollars. As with all matters related to business maintenance, it is very important that you stay on top of all obligations and deadlines.
Along with applying for licensing, you are going to have to file plenty of other compliance documents, including an application for a DBA name, OSHA certification, zoning permits, and an EIN number. While it may be tempting to try and slip through the cracks and assume your business will be fine for a bit without a few of these documents, it will wind up costing you a lot more than the time and money it would take to do everything properly. Take your time, research what need to apply for, and get your licenses and permits.