Business Licenses and Permits, Oh My!

Don’t forget that any kind of business you start needs to comply with local, state, and federal regulations related to your business. Failing to do so is one of the most common mistakes new entrepreneurs make. Some of the issues regarding licenses and permits can be handled alone, but some may require the help of a lawyer.

Federal Requirements

Most businesses do not require a federal business license or permit. However, if your business is in one of the following highly regulated areas you should contact the responsible federal agency to determine the requirements for doing business:

  • Broadcasting
  • Drug manufacturing
  • Ground transportation
  • Investment advising
  • Preparing meat products
  • Selling tobacco, alcohol, or firearms

For more information see “Federal Licenses & Permits” on sba.gov

State Requirements

Many states and local jurisdictions require you to get a business license or permit before beginning any business activities. A business that operates without the required license or permit may be subjected to fines or may be barred from further business activity. In some localities, a business operating out of a residence may require an additional permit.

While business licensing requirements vary from state-to-state, the most common types include:

1. Basic Business Operation License – a legal document issued by a local governmental authority that authorizes a person to conduct business within the boundaries of the municipality. Many states have established small business assistance agencies to help small businesses comply with state requirements.

2. Fictitious Name Certificate – a document, usually filed with a state agency, which is required to operate a business using an assumed name or trade name (essentially, any name other than the full, formal name of the individual or company).

3. Home Occupation Permit – a permit that may be required to conduct business from a residence.

4. Tax Registration – if the state has a state income tax, a business owner must usually register and obtain an employer identification number from the state Department of Revenue or Treasury Department. If the business engages in retail sales, the owner must usually obtain a sales tax license.

5. Special State-Issued Business Licenses or Permits – these permits may be required for a business that sell highly regulated products like firearms, gasoline, liquor, or lottery tickets.

6. Zoning and Land Use Permits – may be required to develop a site or property for specific purposes.

7. Employer Registrations – if the business has employees, the owner must usually make unemployment insurance contributions.

In many states, people in certain occupations must have licenses or occupational permits. Often, they have to pass state exams before they can get these permits and conduct business. States usually require licensing for auto mechanics, plumbers, electricians, building contractors, collection agents, insurance agents, real estate brokers, repossessors, and anyone who provides personal services (i.e., barbers, cosmetologists, doctors and nurses). Contact your state government offices to get a complete list of occupations that require licensing.

For more information see:
State Licenses & Permits” on sba.gov;
Starting an Online Business: Licensing Requirements” on E-CommerceLaw.com; or
Business Licenses and Permits” on Entrepreneur.com

Local Requirements

Your local licensing requirements will vary. Some examples include the following:

  • You may need a zoning compliance permit before you can open for business. Make sure the space you own or lease is properly zoned for the specific type of business you select.
  • You may need a special license if you’re conducting business out of your house, a beauty salon for example.
  • Are you planning on remodeling your space? You may need to get a permit, so you will want to check the building codes first.

Where do you go to get a license?
The best place to start is your local city hall or courthouse. See the city clerk, who should be able to direct you. You can also phone the city or county clerk’s office with questions, or look in your local phone book under municipal government offices. Run an online search on Google or Yahoo to find the Web site for your local city hall.

For more information see “Business License & Permits” on myownbusiness.org

Please Note: To help you identify the specific licenses or permits your business may need, the SBA has a tool called Permit Me. Simply enter your zip code and business type to view a list of the licenses or permits you’ll need, together with information and links to the application process.

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