Types of Business Licenses and Permits

A crucial part of starting a business is acquiring all the necessary licenses and permits at the federal, state, and local levels. Failure to obtain any of them could result in significant penalties, including shuttering your business, so you need to be sure you’ve covered all your bases. 

Lucky for you, this guide describes many of the most important business licenses and permits and shows you how to find out exactly which your business needs – and how to get them.

Common Business Licenses and Permits

The business licenses and permit requirements vary significantly between cities, counties, and states and by industry. The Small Business Association (SBA) offers a useful guide detailing which federal licenses and permits businesses need. 

Review your state and local government guidelines to determine what you need. When in doubt, it’s a good idea to work with an attorney to ensure your business is in full compliance. 

• Depending on what your business does, you may be required to obtain industry-specific licenses and permits. Industries with specific licensure requirements include:
  • Construction
  • Landscaping
  • Architecture
  • Real Estate
  • Childcare
  • Plumbing and Electrical
  • Food and liquor
  • Insurance
  • Financial services
• Sales tax permits are required for businesses to sell their goods and services and collect the appropriate sales tax. 
• Local municipalities use zoning ordinances to separate land zones for specific purposes and uses. Depending on the nature of your business, you may need to obtain a zoning permit to show your business is allowed to operate in a particular area.
• Building permits demonstrate that the building you use for business operations is up to code. If you run your business out of your home, you might need a home occupation permit.
• You might need a DBA permit if you operate your business under a different name than the officially registered name. DBA stands for “doing business as.”
• Depending on the industry, health licenses and permits may be required, along with compliance with all associated health and safety standards. You may also be required to obtain environmental permits and comply with those associated codes and standards.
• You may need to obtain a fire permit to show that your business is compliant with fire safety codes. Requirements vary by area and may be required for all businesses, regardless of industry. However, some locations only require fire permits if you work with flammable materials.
• Local areas with rules and regulations around signage measurements and placements may require businesses to obtain sign permits.

Who Issues Business Licenses and Permits?

In most states, several agencies and departments issue licenses and permits depending on the type of business. Sales tax permits, for instance, are usually issued by the taxation department. 

Again, various departments issue licenses and permits at the county and municipal levels. Check with your local governments for requirements. 

Federally, different departments oversee different industries. As a result, licenses and permits are generally industry-specific, except for health permits from the Occupational Safety and Health Administration (OSHA).  

If you run a farm, the U.S. Department of Agriculture may require licenses and permits for your business. In addition, you must register with the Bureau of Alcohol, Tobacco, Firearms, and Explosives if your business sells fireworks. Most industries, however, do not require licensing at the federal level. 

Again, refer to the SBA’s invaluable guide.   

How to Get a Business License

You’ll apply for various business licenses and permits at different department and agency websites at the federal, state, and local levels. Common state agencies that issue licenses are the taxation, health, and liquor control departments. 

The process may vary slightly depending on the state and type of business, but the general steps are as follows:

1. Determine the Type of License You Need: Different businesses require different licenses. Common types include general business licenses, professional and trade licenses, health permits, and sales tax permits. Research your specific industry requirements.
2. Choose Your Business Structure: Decide if your business will be a sole proprietorship, partnership, LLC, or corporation. This affects your licensing requirements and tax obligations.
3. Register Your Business Name: If you are using a name other than your own personal name, you will need to register it. This is often done through the state government or a county clerk’s office.
4. Apply for an Employer Identification Number (EIN): Most businesses need an EIN, which is issued by the IRS. This number is used for tax purposes.
5. Complete the Application: Obtain the necessary forms from your city or county government office or their website. Fill out the forms with information about your business, including your EIN, business structure, and business address.
6. Submit the Application: Submit the completed application along with any required fees. This can usually be done online, by mail, or in person.
7. Pass Inspections and Approvals: Some businesses, particularly those in food service or healthcare, may require inspections and additional approvals.
8. Receive Your License: Once your application is approved and all requirements are met, you will receive your business license. Display it prominently at your place of business as required by law.

How Much Does a Business License Cost in State?

The cost of a business license varies widely depending on the state and the type of business. Here are some examples:

• California: Business license fees range from $50 to $500, depending on the city and type of business.
• Texas: A general business license may cost between $50 and $400, depending on the municipality.
• Florida: License fees typically range from $25 to $100, but can be higher for certain industries.
• New York: Fees vary widely; for example, a New York City general business license can cost between $25 and $110.
• Illinois: Business license fees in Chicago can range from $75 to several hundred dollars, depending on the business type.

To get an accurate cost, you should contact your local city or county clerk’s office or visit their website. They will provide specific fee structures based on your business location and type.

Do Licenses and Permits Have to Be Renewed?

Yes, most business licenses and permits have to be renewed periodically. The renewal process ensures that businesses continue to comply with local regulations. Here are some key points about renewals:

• Renewal Periods: Renewal periods vary by state and type of license. Common renewal periods are annually, biennially (every two years), or triennially (every three years).
• Renewal Notices: Many jurisdictions send out renewal notices before the expiration date. It’s important to keep your contact information up to date to receive these notices.
• Renewal Fees: There is usually a fee associated with renewing your business license. This fee can be similar to the initial licensing fee or sometimes slightly reduced.
• Late Fees and Penalties: Failing to renew your license on time can result in late fees or penalties. In some cases, operating without a valid license can lead to fines or even business closure.
• Updating Information: During renewal, you may need to update any changes in your business, such as address, ownership, or business activities.
• Online Renewals: Many jurisdictions offer online renewal options to streamline the process. Check your local government website for details.