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6 min. read
Updated October 27, 2023
Everyone has to deal with the nitty-gritty details of starting a business; no matter your industry, getting started safely and legally involves at least a little red tape.
You need to make your business an official legal entity, and take an in-depth look at what business licenses and permits you need at the local, state, and federal levels to be able to operate without fear of being hit with a fine—or worse, having to close down.
Business licenses are permits issued by federal, state, and local government agencies that allow individuals or companies to conduct business within the government’s geographical jurisdiction. You might need to get multiple licenses to be in compliance.
The term “business license” is a bit misleading as it makes it sound as if there is one license you apply for, sort of like a driver’s license, that you obtain and—voila! You’re legally in business. That is not the case.
Getting business licenses or permits goes beyond simply registering or declaring your business entity—like an LLC or corporation; just because you’ve incorporated your business or formed an LLC doesn’t mean you’re done with the fees and paperwork.
You can be denied a business license if your application is incomplete, unsigned, or if you haven’t had it signed by the right people. You can also be rejected if you fail to follow the instructions on the form. It’s a good idea to reach out to the licensing agency and make sure you have the right form (that’s not outdated) and ask them about anything on the form that’s unclear.
Often, a business license is granted at the city level and is a fee paid to get a tax registration certificate that then allows you to legally conduct business in that area. The number and type of licenses and permits you’ll need depends on several different factors: the type of business you’re in, where it’s located, and your specific business needs.
For example, say you’re a restaurant that wants to serve alcohol and have an outdoor patio. Depending on your location, you may need a license to open a restaurant in your selected location, a license to serve alcoholic drinks on the premises, and a permit to build a patio area. Most likely, those would be three different applications, possibly involving you going to three different government departments to obtain them.
Keep in mind that if you’re running a home-based business, you might need to get permits and licenses that differ from those necessary to run a small business with a dedicated location outside of your home.
The federal government in the United States generally only requires permits and licenses for very specialized industries. For instance, you’ll need to check out the federal government’s requirements if you’re manufacturing alcohol, transporting farm animals across state lines, or opening a commercial fishery or gun shop.
If it seems like your industry is very niche or has a high level of liability, the odds are you will need to jump through some hoops. The SBA provides a helpful resource.
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As there are fifty different states, you can imagine the level of diversity among laws regarding permits and licenses. Some states require retailers to register for a vendor’s license so they can remit state sales tax, for example. You can find general information about state permits on the SBA website. While local laws will vary, even more, there are some consistencies; such as every state having an alcohol control board.
Permit types will, of course, vary by state and local law, but there are a few areas where you can almost always expect to be applying and paying for a permit or license. These include land use and construction, signage and building exterior, any business activity involving alcohol or cannabis, parking, natural resource use, and other industry-specific permits and licenses.
If you are creating a building or structure on a piece of land, you will almost certainly need a construction permit from your municipal government, based on local zoning laws. You should be able to find the pertinent contact information and applications on your city’s government website, such as this one.
If you’re using or building any kind of a facility, such as a storefront, office, factory, commercial kitchen, or similar, you will need the space to be outfitted appropriately for your purposes and up to corresponding legal codes.
Somewhat related to the above, many city or county level governments have rules related to the size and placement of signage and the look of building exteriors (such as painting murals or bright colors) that are worth bearing in mind as you decide upon branding for your business location.
If you are selling alcohol, your business and in some states your employees will need a liquor license to do so, which you can obtain at the state level. If you are manufacturing alcohol, you will need a federal permit.
If you have an existing parking lot at your facility, this shouldn’t apply to you, though you may need to negotiate the use of spaces with your landlord if you have one. If you need street parking in your area, you will need to purchase a parking permit from your city government for each of your company vehicles.
If you are constructing a parking lot, you’ll need a construction and land use permit from your municipal government, and don’t forget that it must be compliant with the Americans with Disabilities Act.
In your field, there may be industry associations or state boards that you have to apply to or fulfill testing requirements. Most people immediately think of a lawyer having to pass the bar or a doctor being board certified, but did you know that you also need a license to be a hairdresser, and certification to be a personal trainer?
If you sell food, you will need a clean review from the health department and the corresponding permit. Make sure to do your research into your industry so you have all of the licenses you need.
Most counties or municipalities have rules and regulations involving business use and possible pollution of air and water. Look into which laws may apply to your business, particularly if your business must dispose of a lot of waste, as you may need to apply for a specific permit to do so. If you deal with any hazardous materials, this one should be a no-brainer, and you may need to be in compliance with additional regulations regarding pre-disposal storage of those materials as well.
The short answer is yes—it’s your responsibility to acquire the necessary licenses and permits for your business. While it might be tempting to think you can skate through under the radar, you’d be leaving yourself wide open to all kinds of risks, including fines and legal liability if something goes wrong.
One of the requirements of being a business owner is getting all of your licenses and permits out of the way and keeping them up to date. It can be complicated and time-consuming, but it simply comes with the territory of entrepreneurship.