What is a Business License? – Forbes Advisor

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You might be surprised to learn most states don’t require businesses to hold a general business license just to operate in the state. But your business may be required to apply for a license to do business in your industry or in your city or county.

Keep reading for a list of business license requirements by state and how to get a business license if you need one.

What is a Business License?

A business license is any kind of license or permit a state or other government entity requires businesses to have in order to do business. Federal, state and local agencies issue various types of business licenses and permits for a variety of business activities.

What Kinds of Businesses Need a License?

It varies by state but generally, businesses tend to need licenses or permits for a few common reasons:

  • If you operate a brick-and-mortar business, You may need permits to allow commercial activity on the property, and to build or remodel the building. Your municipality might also require permits for things like signage and fire safety.
  • If you sell goods, most states require you to get a seller’s permit.This permit lets you collect sales tax from customers.
  • If you provide services that require licenses, ie a stylist, electrician, childcare provider, lawyer, medical care provider, accountant; or you sell food, alcohol or tobacco; or provide other services that are regulated by state or federal laws, you’ll need industry-specific licenses.

Do you need a Business License?

The types of business licenses you need to legally operate depend on where your business is located and what kind of business you run.

Below is a list of state requirements.

Note that even if your state doesn’t require a statewide license, you may need local licenses or permits from your county or municipality. Check with your city or county clerk’s office to cover your bases.

How do you get a Business License?

A business operating license is not required for every business in every state. The process to get a business license and other permits varies by state, county and municipality. You’ll follow these basic steps in any area to get a business license if you need one:

  1. Form your business entity. You apply for a business license in the name of your business, so if you’re going to form a business entity like a corporation or LLC, do that first.. Otherwise, you might have to file a change later and pay an additional fee .
  2. Apply for an Employer Identification Number (EIN). You might need this on applications for business licenses or permits. forms. All businesses other than sole proprietors with no employees need an EIN. You can get an EIN through the IRS online.
  3. Determine which license(s) you need. Depending on your industry and where your business is located, you may need licenses from federal, state or local agencies. A lawyer or resources from your local Small Business Administration office can help you figure it out.
  4. Apply for a business license. You may be able to apply for licenses online, or you may need to submit paper applications for local licenses. Some licenses, like general business licenses and seller’s permits, can be approved right away. In some states, or for some licenses, the review process might be longer, so plan to apply well before you need to start operating your business.
  5. Renew your business license. You’ll probably have to renew licenses and permits as often as once a year. Talk with your lawyer and pay attention to the regulations in your state and locality to avoid a lapse in your licensing.

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Frequently Asked Questions

Do I need a lawyer to apply for a business license?

No, you don’t need a lawyer to apply for a business license, but hiring one can be helpful in properly filing for and maintaining your business license.

What’s the difference between an LLC and a business license?

A business license is a permit from the state, local or federal government that allows you to operate a certain kind of business. Business licenses also include specialized licensing or permits required to run your business, such as a license to practice medicine. A limited liability company (LLC) is a legal structure for a business that determines how the business will be taxed, and separates business assets from your personal assets in case of any liabilities in the business.

Can you run an online business without a license?

Businesses are regulated by the localities where they’re registered or operate, even if they operate entirely online. Your location and industry determines whether you need a license and what kind. In most states, you’ll need at least a seller’s permit to sell goods online.

How much does a business license cost?

Business license costs depend on the state and what type of business you run. Different kinds of licenses come with different fees, though they’re usually relatively low, around $50 to $200. You might not have to pay anything because many businesses are allowed to operate without any kind of license.

How can I create a small business?

Starting a small business can be simple and doesn’t have to cost a lot of money. Follow our guide to starting a small business in five steps with less than $1,000.

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