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.
