ComplianceJanuary 17, 2024

How to get a business license

If you operate a small business, you will likely need to obtain a business license or a permit from your state or local government or the federal government in order to legally operate. 

Licensing 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 require, and how to apply for a business license.

What is a business license?

A business license is issued by a state or local government agency. It grants your business the legal right to do business and operate within a jurisdiction.

Having a license proves that you are complying with rules and regulations that protect your business and customers. It also protects your reputation as a company that customers can trust to do business with. 

There are many licensing requirements; however, the most common is a general business license, also known as a business privilege license, business tax registration, or basic business license.

A general business license is typically issued by a county or municipality. It grants you the privilege of doing business in that jurisdiction. If you operate within several locations, you may need to adhere to licensing requirements in each city or county you operate within.

Note: It’s important to check local requirements. Not all cities and counties require a general 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 location. Requirements may also change over time. Your business will likely need to obtain one or more of the following licenses or permits:

  • 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, 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.
  • Sales tax license: If your business collects 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 Washington and Alaska, require that a business obtains 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, which 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.
Easily manage complex requirements
There are over 75,000 federal, state, and local jurisdictions.  As their compliance requirements become more complex, we’re the partner that can help you manage them all.

What are the penalties for not obtaining a business license?

Each jurisdiction has its own penalties and sanctions for failing to maintain the right licenses or pay the appropriate licensing fees. Your licensing or tax authority may fine you or force you to cease operations until the violation is resolved. In some cases, violations can result in liens or criminal penalties for businesses and their owners. These sanctions can also affect your ability to do business in the future.

Steps for obtaining a business license

Business license requirements – and the process of obtaining a license – can vary significantly by state and local jurisdiction. The general steps for obtaining a business license or permit are as follows:

  • Research licensing requirements: If it's your job to stay updated on licensure prerequisites,  researching these requirements takes precise planning, persistence, and organization. Licensing needs exist throughout the business life cycle, but it is vital to address them during the business planning process. To open on time, it is imperative you determine what licenses are required and allow enough time for them to be obtained. When checking local licensing requirements, verify the precise location of your business location and check zoning requirements.
  • Form your business entity: If you are forming a legal entity, such as a corporation or LLC, you must register your business with your state’s entity formation office. During this process, you will choose a name for your legal business entity.
  • Obtain an EIN: An EIN or Employer Identification Number, is a requirement for many businesses and is crucial for filing and reporting federal taxes, banking, and payments.
  • Obtain state licenses, registrations, and permits: These can include a sales tax ID and occupation-related licensing and permits.
  • File a DBA (optional): If you want to use a trade/assumed/fictitious/DBA name for your business, you may need to file a DBA in each jurisdiction where you plan to operate.
  • Apply for local business licenses and permits: If required, be sure to provide your legal business name and DBA as it is filed with your Secretary of State or County Clerk.
  • Renew/update your business licenses: Licenses and permits are not valid indefinitely. Carefully track renewal dates and update your business licenses if there are any changes to your business, such as a name change, address, officer/directors, etc.

No matter what your business does, you need to stay on top of your business licensing requirements. This prevents unnecessary fines, helps maintain your reputation, and keeps the wheels of business turning.

For information on which business licenses may be required for your business, contact your state and local government agencies. Additionally, CT Corporation offers a full suite of business license support services including: business license research service, business license assessment service, business license filing/renewal service, and business license managed services that can research license requirements, provide necessary forms/instructions for application, assist with filings/renewals, and fully support your ongoing compliance with business license requirements.

To learn more about how CT can help you manage your business license needs, contact a CT Service Representative or call (844) 878-1800.

Devlin Fisher, Global Sales Support Manager
Global Sales Support Manager
Devlin is the Global Sales Support Manager at CT Corporation. He consults with CT Corporation’s global law firm and corporate customers on matters related to global compliance.
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