Small Business Licenses and Permits: Three Levels
To make this process easier, we will break down licenses and permits into three categories: local, state, and federal. The documentation required for your business depends on your industry and location. Odds are, your business will need at least one license or permit from at least one category.
We’ll start from the local level and work our way up.
What are Local Business Licenses and Permits?
The following licenses and permits may be required by your local, county, or city governments. Some businesses don’t need any of them, while others might need all of them simply because of their location’s requirements for their industry.
Here are the most popular local small business licenses and permits:
Local Business Operating License
Without this license, you cannot legally operate your business within your town’s or city’s limits. You must apply to your local or city government and pay the required fee.
Contact your city’s business license department to learn how to obtain your local business operating license (a.k.a. local business license). You may have to go to the department’s physical location. Not sure where to find the building? Contact your local city hall or courthouse to find out exactly where local business licenses are obtained.
You may conclude that the location of your business is outside of your closest city limits. If so, use this SBA tool to check the business operating requirements for your county. Local business licenses can be issued by county governments as well.
Zoning and Land Use Permits
After filing your application for a local business license, the city zoning department will check if your location is zoned for your type of business. The parking area around your business must also meet local zoning codes.
If your area has already been zoned for your business type, you do not need to obtain zoning and land use permits. If not, you must go before your city’s planning committee and request a variance or conditional-use permit. This shouldn’t be too difficult. All you have to do is prove that your business’s operations will not endanger your area’s residents’ safety and overall well-being.
Building permits are usually only required for businesses located in entirely new buildings, existing buildings that will soon be renovated, or existing buildings with new utilities or appliances. All three situations require the help of a contractor. It’s this individual’s responsibility to know what kind of building permits your local government requires. Building permits confirm that your new or renovated building does not violate any local safety codes.
Fire Department Permit
If your business is open to the general public, you almost certainly need a fire department permit. Such businesses include restaurants, hotels, fitness centers, retirement homes, doctor’s offices, etc. Every town, county, or city government interprets a “public” business, so you should check if your business fits the criteria.
Businesses that use flammable materials need fire department permits as well.
In some cities, nearly all types of businesses cannot legally open their doors until they have obtained this permit. Other cities don’t require permits at all. Companies need to conduct periodic inspections to confirm that they meet all local fire safety regulations. Failing to adhere to either rule could result in citations.
Health Licenses and Permits
Health licenses and permits apply to businesses that directly impact customers’ health, like restaurants or fitness centers. Like fire department permits, companies that require health licenses and permits typically cannot open their doors until they obtain the necessary documents. The license costs around $25, and the health department will probably want to inspect your business before giving you the permit.
The amount of health licenses and permits required for different businesses varies tremendously from location to location. You can find out which licenses and permits are required for your business by visiting your local town hall.
Signage Licenses and Permits
Believe it or not, some cities and counties have specific rules for the appearance of a business’s signage. This may include the sign’s size, location, or degree of visibility. Signage licenses and permits denote that your business complies with local signage codes. Failing to adhere to these rules could result in surprisingly steep penalties. So, before putting up your signage, contact your local government to see if your signage requires any licenses or permits.
Environmental Licenses and Permits
It’s usually the state and federal government that enforces environmental regulations for small businesses. Recently, however, an increasing amount of local governments have developed their own environmental regulations to protect their land and residents from pollution.
Such regulations mostly apply to businesses that burn materials, discharge waste into sewers, or use products that send gas into the air, like painting equipment. For instance, your city or county might require permits to show that your business stands no chance of endangering the local air or water quality. Other permits might denote your compliance with local waste removal regulations or permit you to do construction.
If you live in a busy area, environmental regulations may have increased as of late. For this reason, you should check with your local government or state environmental protection agency about any environmental licenses or permits you might need.
What are State Business Licenses and Permits?
Once you’ve applied for every license or permit required by your local government, you can move on to the state level. Since every state has its own requirements for every type of business, it’s best to visit your state’s government website for the full list of everything you may or may not need.
But like the previous section, virtually all small businesses must obtain specific state-level licenses or permits. Here’s a general list of your state government most probable requirements:
State Business Operating License
Most types of businesses must obtain a license to operate in their home state. It’s just like your local business license but at the state level. Instead of granting you the right to operate in your city, your state business operating license grants you the right to operate in your state. This license also allows the state to track your business’s revenue to ensure appropriate taxation.
State small business licenses can be obtained at your state’s business license office. If you’re unsure where to find this building, visit the US Small Business Administration’s state business license office locator.
Which Businesses Need Seller’s Licenses?
Every state requires licenses or “certificates of authority” to sell certain types of products. Common examples of such products include liquor, firearms, or gasoline. The list of applicable products for some states, however, can range far beyond these few examples. So, contact your state’s government office to check if you need any license or permit to sell your products.
Tax Registration and Permits
The law requires certain businesses to obtain an Employer Identification Number (EIN) or federal tax identification number. Such companies include corporations, general partnerships, or almost any business with employees. An EIN acts as your tax registration by allowing the IRS to tax your business appropriately.
Depending on your state and type of business, you may need to register with your local and state government for additional tax permits. This could include your sales tax permit (which we’ll discuss in the next section) or permits for withholding income taxes. You can find all tax permits required by your state by visiting your state government’s website.
Sales Tax Permit
Sales tax permits allow you to collect, report, and pay sales taxes on your products or services. You must register for sales tax permits in all of your business’s “tax nexus” states. This term refers to your business’s location(s), your goods, and your customers.
Brick-and-mortar stores typically have just one nexus state because they get their products from one state and sell to customers in one state. However, if you have a business in other states, you must check if those states meet the tax nexus criteria.
The following factors can establish nexus states:
- Physical locations: Locations of your business
- Sales Volume: The amount of sales you collect in a specific state
- Staff: Location of your employees
- Inventory: Where you store your products
- Distribution: Where your products are shipped from
Which Businesses Need Occupational Licenses?
Many states require licenses for certain professions, even if you don’t have your own business. You must renew this license periodically because it’s against state law to conduct business without it. Some states have very long lists of professions requiring licenses. Thus, you should check with your state’s business licensing office to see that it includes your profession.
The following list shows professions that require occupational licenses in most states:
- Real estate brokers
- Private security guards
- Private investigators
Which Businesses Need Federal Licenses and Permits?
Federal business licenses only apply to federally regulated industries. Most businesses, therefore, do not have to worry about federal business licenses. Businesses that do require federal licenses cannot operate without them, and may actually need several licenses from different federal authorities. The following list shows the most well-known federally regulated industries along with the industry-specific licenses they require:
Though most people associate agriculture with plants, the term refers to livestock as well. So, if your business sells animal or plant products, transports animals, or involves some form of biotechnology, you cannot operate without a permit from the US Department of Agriculture. You can learn what kind of businesses need this permit and apply for it on the USDA’s website.
If your business manufactures, sells, or transports alcoholic products, you need a federal business license in addition to a state business license. Different alcohol-related companies have different license requirements. So, you must visit the website for the US Alcohol and Tobacco Tax and Trade Bureau to ascertain what’s required for your business.
Businesses that manufacture, operate, or fix air crafts must obtain numerous federal business licenses and permits. This includes licenses from the federal government and separate licensing from the Federal Aviation Administration, which mainly denotes your official membership in the field of aviation.
Firearms, Ammunition, and Explosives
Businesses that manufacture, sell, or import firearms, ammunition, or explosives require special licensing to operate. To learn which licenses apply to your business, visit the US Bureau of Alcohol, Tobacco, Firearms, and Explosives website.
Fish and Wildlife
These environmental permits and licenses apply to businesses located in the wild, businesses directly involved with wildlife, and commercial fisheries. You can see which types of wildlife businesses need, which permits on the website for the US Fish and Wildlife Service.
This refers to businesses that ship cargo overseas. Such businesses must apply for licensing from https://www.fmc.gov/resources/ocean_transportation_intermediaries.aspx to the Federal Marine Commission to operate.
Mining, Drilling, and Nuclear Energy
Most businesses involved in any of these three activities must have federal licenses or permits. You can apply for mining and drilling permits through the federal government. The US Nuclear Regulatory Commission, on the other hand, issues nuclear business licenses.
Radio and Television
Businesses that broadcast over the radio or television need licenses to do so. To check what kind of license your business requires, contact the Federal Communications Committee (FCC) and apply.
Transportation and Logistics
This mostly applies to businesses that operate oversized or overweight vehicles, like large trucks. Even though the federal government regulates transportation, it’s the state that usually issues the related permits. Thus, the criteria for “oversized” or “overweight” varies from state to state. If you’re unsure whether your company vehicle meets the criteria for your state, contact your state government about the required documentation.
Do Home-Based Businesses Need Licenses and Permits?
Up until this point, this guide has only discussed licenses and permits that apply to small businesses that operate in commercial spaces. But what about small businesses that operate out of the owner’s home?
Yes, home-based businesses need licenses and permits as well. This includes some of the same documentation required by businesses in commercial spaces. Every year, many home-based business owners receive fines for neglecting to obtain the necessary licenses and permits.
The following list contains the general licenses and permits required by most home-based businesses:
Home Occupation Permit
Virtually all home-based businesses need state-issued Home Occupation Permits. If your home-based business revolves around consulting or freelance work, you might not need any other permits aside from this one.
Recipients of Home Occupation Permits have proven that their businesses will not disrupt the peace in their neighborhood. In other words, their businesses will not bring excessive traffic, noise, or environmental hazards.
You can apply by contacting your state government.
Property Use and Zoning Permits
Some cities have zoning regulations designed exclusively for home-based businesses. Particularly strict regulations might only allow home-based businesses that have obtained variances or conditional-use permits. Obtaining this permit likely won’t be an issue; however, nationwide support for home-based businesses has only increased as of late.
You can find out local zoning regulations for your area by contacting your local or city government.
General Business Licenses and Permits
Aside from location and employees, home-based businesses have a lot in common with conventional small businesses. Hence, nearly all home-based businesses require numerous licenses and permits listed in section one. You’ll probably need at least a few solely to sell your products or services legally.
Home-based business owners can expect to need the following licenses and permits:
- General business license
- Professional and trade licenses for certain industries
- Sales tax permits
- Health, safety, and environmental permits
- Signage permits
- Building and construction permits
I Have All The Licenses and Permits I Need. What’s Next?
Suppose you can say with 100% certainty that you now possess every license and permit required for your business, congratulations! Arguably the most boring, tedious part of your job as the business owner has come to an end. You can finally move on to the exciting stuff you’ve been looking forward to ever since you started this journey.
It’s time to put your plan into action and launch your business.
But first, be sure to make copies of each document for your records and display them for your customers to see.
As mentioned before, you must periodically renew some of your documents to continue operating legally. These documents should, therefore, always remain within your sight. Allowing them to get lost under stacks of other paperwork makes it harder to remember renewal due dates. But as long as you keep track of those dates, you won’t ever have to worry about your business’s legal status problems. Stay organized and get back to doing what you love!