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It’s a common prerequisite for businesses to need a license in order to get up and running.
Having said that, each business’s licensing needs will be unique — as they can depend on factors like location and niche — and so this can often be a challenging step for business owners attempting to handle it independently.
This article will guide you on how to get a business license, breaking down how you can identify the permits and licenses your business needs, as well as their associated requirements and costs.
Let’s get started.
What is a Business License
A business license is a legal permit issued by a government authority that allows an individual or a company to operate a business within a specific jurisdiction.
Let’s take a look at how your licensing requirements can vary on a local, state, and federal level.
Local jurisdictions, such as cities and counties, often have their own sets of rules and requirements for business licenses. These licenses are usually essential for any business operating within the jurisdiction, regardless of whether the business also needs a state or federal license.
- General Business License: Most businesses operating in a city or county will need general business licenses from the local government
- Health Permits: Restaurants will often need a health permit from the local health department
- Sign Permits: If a business wants to erect a sign, a local permit can often be required for that
State licensing requirements can be broader and may apply to more types of businesses. These licenses are often mandatory for professionals in various fields, and they might also include specific permits for the sale of particular types of goods.
Here are a few examples of how your business license requirements can be impacted at the state level:
- Seller’s Permit: Your business may be responsible for collecting sales tax if it sells or leases tangible personal property. For example, if you’re planning to launch a retail store, you may need to apply for both a sales tax permit and a sales tax license depending on your state
- Professional Licenses: Doctors, lawyers, architects, and many other professionals need state-specific licenses in order to practice legitimately
- Construction: Construction firms usually need a state business license in order to operate legally
Even though most small businesses will not need a business license that is regulated at a federal level, this can be the case depending on your sector and niche.
Businesses that will need a federal business license include:
- Alcohol, Firearms, and Tobacco: Alcohol and Tobacco Tax and Trade Bureau (TTB), Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)
- Agriculture: US Department of Agriculture (USDA)
- Aviation: Federal Aviation Administration (FAA)
- Fish and Wildlife: US Fish and Wildlife Service (USFWS)
- Fisheries: National Oceanic and Atmospheric Administration (NOAA) Fisheries
- Maritime Transportation: Federal Maritime Commission (FMC)
- Mining and Drilling: Bureau of Safety and Environmental Enforcement (BSEE)
- Nuclear Energy: US Nuclear Regulatory Commission (NRC)
- Radio and Television Broadcasting: Federal Communications Commission (FCC)
Keep in mind that most businesses will need licenses or permits from multiple levels of government in order to operate legally.
For example, a restaurant that serves alcohol could need:
- A general business license from the closest applicable city and/or county
- A health permit from the local health department
- A liquor license from the state
- A radio and television broadcasting license from the FCC
Note: It’s important to do research to see which local and state taxes you will need to pay as well as where to apply for licensing. Make sure that you’re complying with all local and state regulations, as failure to do so can result in penalties, or even in your business being shut down.
Alternatively, you can use a third-party service to guide you through the process of business licensing for a small fee.
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How Do I Get a Business License
As you form your business, one of your first steps is to secure the appropriate business license. This license varies by state, industry, and even by city or county.
Below are the common steps and requirements you’ll encounter on the path to obtaining a business license.
Step 1: Register Your Business
Even though this step is optional, we recommend registering your business with your state’s Secretary of State before getting a business license and beginning to operate.
There are various types of business entities, each with their own structures, benefits, and tax implications.
Let’s take a look at some of the most common ones:
- Sole Proprietorship: This is the simplest form of business entity. Sole proprietorships are free (no registration is required), have pass-through taxation, and offer no limited liability benefits.
- Partnership: This is similar to a sole proprietorship, with the two main differences being that registration is required, and there needs to be two or more owners. In partnerships, each partner is personally liable for debts and decisions made.
- Limited Liability Companies (LLCs): LLCs are relatively cheap to start and maintain, and are also a tax-flexible option that can be used to protect your personal assets in the event of a lawsuit or other legal dispute.
- Corporation: A corporation, or C corp, is generally not ideal for small businesses. This is because it’s subject to significant time-consuming processes (particularly when it comes to operating legitimately), and also does not benefit from pass-through taxation.
As a small business, we recommend going with an LLC. This is because LLCs are relatively affordable, quick to form, and allow you to retain significant autonomy regarding how you can operate whilst giving you limited liability in law.
Recommended: Interested in getting started? More than 72% of our readers form their LLCs through a specialized LLC formation service in order to save time and avoid being caught up in procedural rigmarole.
Northwest Registered Agent ($29 + state fees)
Step 2: Get an Employer Identification Number
An Employer Identification Number (EIN) is a nine-digit number that the Internal Revenue Service (IRS) uses to identify your business. You need this for things like paying federal taxes, hiring employees, getting a business bank account, and applying for licenses.
If your business has made any certain changes to its structure, name, or location, you might need a new EIN. To find out if you need to change or get a new number, it’s best to check with the IRS website.
Note: If you operate as a sole proprietorship, you will be able to use your Social Security Number (SSN) instead (as long as you do not have employees).
Step 3: Apply For a Business License
Your business license application can usually be filed online, by mail, or submitted in person, depending on your state or local jurisdiction’s preferences.
Here are the general steps to apply for business licenses:
- Identify the appropriate agency: Licenses are usually issued by the state, city, or county where your business is located. For example, in California, if your business sells alcoholic beverages, you must apply for the appropriate licenses with the California Department of Alcoholic Beverage Control. In Texas, they don’t have a general business license that applies at the state level. However, many cities across Texas require businesses to get a license in order to operate legitimately
- Check the requirements: Each state, city, or county has its own requirements for obtaining a license. You may need to provide information about your business, such as its name, address, and the nature of its operations
- Fill out the application: The application will ask for information about how your business operates, as well as its owners. You may also need to provide additional documentation, such as a copy of your lease agreement or proof of insurance
- Pay the fee: Business license fees can vary depending on the type of business you’re running and its location. Some cities charge a flat fee, while others base the fee on the size of your business or its expected revenues
- Wait for approval: Once you’ve submitted your license application and fees, the regulating state department or local agency will review your application. This process can take anywhere from a few days to several weeks
Be aware that some licenses and permits have an expiration date. This means that you will need to track when you’ll need to renew them in order to avoid penalties.
Step 4: Renew Your Business License
Operating with an expired license can lead to fines, legal disputes, or even having to shut down your business.
Here are a few simple pointers that should help you understand how to renew your license:
- Keep track of expiration dates: Be aware of when your licenses and permits expire. Mark these dates on your calendar and set reminders to start the renewal process well in advance
- Check renewal requirements: Different states and local jurisdictions have requirements for renewing a license. Visit your state or local government website — or consult the agency that issued your license — to understand what you’ll need for renewal
- Gather necessary documents: Just like when you applied for your business license(s), you may need to submit certain documents, such as financial statements, annual reports, or proof of insurance for your renewal. We recommend having all of these documents prepared beforehand to speed up the process
- Submit renewal applications and pay fees: Most government agencies offer online renewal services nowadays, making the process easier. You will need to fill out the required forms and pay any applicable renewal fees
Note: To ensure that you don’t encounter any hurdles, we recommend proactively seeking out all of the information you’ll need in order to ensure that you’ll be able to renew your local and/or state licenses on time.
How Much Does a Business License Cost
It is quite difficult to accurately state a general “average” cost for business licenses.
This is because this will be highly dependent on the nature of your business, as well as on your location (e.g., city, state, etc.).
Having said that, below we have provided a table with the general fee range of each state.
|Alabama||$15 – $1,000 depending on type of business||Alabama Department of Revenue Business and License Division — Business Privilege License|
|Alaska||$50 – $100 depending on type of business||Alaska Department of Commerce, Community, and Economic Development Business License Application|
|Arizona||$12+ depending on type of business||Arizona Department of Revenue Transaction Privilege Tax Application|
|Arkansas||$50||Arkansas Secretary of State Business Services|
|California||$15 – $100+ depending on type of business||CalGold|
|Connecticut||$100+||Connecticut State Department of Consumer Protection — Business Licenses, Registrations, + Permits|
|Delaware||$75+||Delaware One Stop|
|Florida||$35 – $965+ depending on type of business||Florida Department of State Business License information|
|Georgia||$10 – $1,000 depending on type of business||Georgia Tax Center Website|
|Hawaii||$20||Hawaii Department of Commerce and Consumer Affairs, Business Registration Division|
|Illinois||$100 – $2,000 depending on type of business||MyTaxIllinois|
|Idaho||$20 – $500 depending on type of business||Idaho Business Wizard|
|Indiana||$25+||Indiana Business Owner’s Guide|
|Iowa||$12.50 – $2,028+ depending on type of business||Iowa Department of Revenue|
|Kansas||$25 – $7,000||Kansas Business Center|
|Kentucky||Varies based on license type and location||Kentucky One Stop Business Portal|
|Louisiana||$75 – $100+ depending on type of business||GeauxBiz.com|
|Maine||Varies based on license type and location||Maine Business Portal|
|Maryland||$0 – $50+||Maryland Business License Online Portal|
|Massachusetts||$50 – $3,500 depending on type of business||Mass.gov Business Licenses & Permits Resources|
|Michigan||$100||State of Michigan State License Search|
|Minnesota||Varies based on license type and location||Minnesota eLicensing|
|Mississippi||Varies based on license type and location||Mississippi Secretary of State|
|Missouri||Varies based on license type and location||Missouri Business Filings|
|Montana||$50+||Montana Secretary of State’s Business Services Division|
|Nebraska||Varies based on license type and location||Nebraska Business Licensing|
|Nevada||$200||Nevada’s SilverFlume Business Portal|
|New Hampshire||Varies based on license type and location||NH.gov|
|New Jersey||Varies based on license type and location||Business.NJ.gov|
|New Mexico||Varies based on license type and location||Finance New Mexico|
|New York||$50 – $150 depending on type of business||New York State portal|
|North Carolina||Varies based on license type and location||NC Department of Commerce|
|North Dakota||Varies based on license type and location||North Dakota New Business Registration|
|Ohio||$25+||Ohio Small Business Development Center|
|Oklahoma||$20 + $10 for each business location||Oklahoma Commerce|
|Oregon||Varies based on license type and location||Oregon Business Xpress License Directory|
|Pennsylvania||Varies based on license type and location||BPOA – Pennsylvania Licensing System|
|Rhode Island||$10+||Rhode Island Department of State|
|South Carolina||$25 – $50 depending on type of business||South Carolina Business One Stop|
|South Dakota||Varies based on license type and location||South Dakota Department of Revenue Tax License Applications|
|Tennessee||$15||Tennessee Taxpayer Access Point (TNTAP)|
|Texas||$15 – $2,500+ depending on type of business||Texas Tax Registration application|
|Utah||$100 – $800+ depending on type of business||Utah’s OneStop Business Registration|
|Vermont||Varies based on license type and location||Vermont Online Business Service Center|
|Virginia||Varies based on license type and location||Virginia Tax QuickPay for Businesses and Individuals|
|Washington||$90||Washington State Department’s Business Wizard|
|Washington D.C.||Varies based on license type and location||Department of Licensing and Consumer Protection (DLCP)|
|West Virginia||$30||One Stop Business Portal|
|Wisconsin||$20+||One-Stop Business Registration Portal|
|Wyoming||$60||Wyoming Secretary of State Online Business Registration|
Understanding the costs not only can help you prioritize getting the necessary licenses promptly to stay compliant with the law, but also helps you accurately plan your budget. Licenses and permits are recurring expenses, and failure to account for them can lead to financial strain or even legal troubles.
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How to Get a Business License FAQ
How do I get a business license?
To obtain business licenses, we recommend checking your state’s regulations, submitting an application with the necessary documents, and waiting for approval. Keep in mind that requirements and fees vary based on your business activities, location, and government rules. For more information, visit our What is a Business License article.
Does Texas require a business license?
Texas does not have general business license requirements. However, some industries and professions are regulated by the state and may require a specific license or permit. Additionally, local jurisdictions like cities or counties in Texas may have their own licensing requirements. Have a look at our Does a Sole Proprietor Need a Business License for more information.
How much does a business license cost?
The cost of a business license is variable and depends on a variety of factors. While it’s challenging to provide a one-size-fits-all answer, due diligence and early planning can prepare you for this necessary expense. All in all, you will need to consult with your local and state government websites or a third-party service to get an accurate estimate that’s tailored to your specific situation.
Is an LLC a business license?
No. An LLC (Limited Liability Company) is a legal business structure, not a business license. Forming an LLC provides certain legal protections and defines how your business is organized, but it does not grant you permission to operate your business. This means that a business license, if required, must be obtained separately to legally conduct business activities.
Do I need a business license?
If you’re starting a business, you will likely need some form of license or permit in order to operate legally. This could be a general business license or a more specific permit, such as online retail or food handling, which will depend on your business type and location. Learn more with our Do I Need a Business License article.
Do I need a business license to sell online?
Yes. Online businesses also require a license to operate legally.
Specific licenses may vary based on what you’re selling and where you and your customers are located. To get started, check out our articles on Do I Need a Business License to Sell Online and Do You Need a Business License to Sell on Amazon.
- What is a business license
- Do I need a business license
- How much does a business license cost
- Do I need a business license to sell online
- Do you need a business license to sell on Amazon
- Does a sole proprietor need a business license