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 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.

Examples include:

• 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 Level

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

Federal Level

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)

Combination Cases

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.

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.

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.

State	Cost	Department
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
Colorado	$150	MyBizColorado
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.