State and local governments (like counties, cities, or towns) usually impose these business obligations, but sometimes the federal government does, too.
CT note: In today’s highly regulated environment, keeping up with your business licensing helps maintain good public relations and your good reputation.
What is a business license?
A business license is a legal document that allows your business to operate within a specific jurisdiction. It can be issued by state or local government agencies.
The most common type is a general business license, also known as a business privilege license, business tax registration, or basic business license. Typically, this license is issued by a county or municipality, and in some cases, you may need both state-level and local-level licenses.
What business licenses do I need?
Given the large number of local, state, and federal agencies, a business may need any variety of specific licenses, permits, and registrations. These requirements vary by location and by type of business, and they can also change over time.
A change in operational activities or the addition of a new product or service may require a new license. Opening a new location may also require a new license, permit, or registration.
Here are five types of business licenses, permits, and registrations that a business might need.
1. Federal licenses
Federal licenses are necessary for businesses regulated by agencies like the FDA, USDA, SEC, and the Bureau of Alcohol, Tobacco, and Firearms. These include grocery wholesalers, trucking companies, handlers of controlled substances, food service companies, restaurants selling alcohol, and gun stores, for example.
2. State registrations
Forming an LLC or corporation requires filing formation or incorporation documents with the Secretary of State in the state where you are based.
Businesses that have to collect sales and use tax have to comply with registration requirements from the state tax authorities, obtain a state tax identification number, and may need to obtain a seller’s permit.
States also commonly require employers to register with the Department of Labor for unemployment insurance.
3. Federal tax identification number
Also called an EIN, a federal tax id number (FEIN) acts as a social security number for your business. An FEIN is issued by the IRS and is required on all federal tax returns filed for your business. It is a requirement for corporations and LLCs, payroll tax filings, and more.
4. Professional/occupational licenses and permits
Certain products, services, and professions have specific licensing requirements. If your business involves the sale of certain types of products (like lottery tickets, liquor, or gasoline) or certain types of services and professions (like architecture, engineering, real estate, or insurance), you might need a special permit or an occupational or professional license.
5. Local licenses, registrations, and permits
Local jurisdictions, such as cities and counties, may impose various licensing and registration requirements on businesses.
- Basic business license. Local counties and municipalities may require a general business license for the privilege of doing business in that jurisdiction.
- Certificate of occupancy. This document states the legal use and/or permitted occupancy of a building.
- Health department permit. Usually required for businesses involved with food preparation.
- Zoning and land use permits. Local zoning laws may limit or prohibit certain business activities in designated areas.
- Alarm permit. Required by many cities for the use of an alarm system.
- Sign permit. Used to govern the appearance and/or location of business signs.
- Fire and police department permit. This permit governs the public safety of a business location.
- Home-based business license. Many local governments require a home occupation permit for home-based businesses. Be sure to check zoning requirements to see whether the type of business you wish to operate is prohibited in residential areas.
- DBA registration. A DBA (“doing business as”) filing allows a business to operate under a name other than its legal name. Corporations, LLCs, and other state-formed business entities can file DBAs to do business using a name other than the one included on their state formation documents. Sole proprietors will need a DBA as well if they are doing business under a name different from that of the owner.
CT note: Many business licenses must be renewed periodically.
