Man holding a permit in his hand. Surrounded by licenses and certifications.
Starting a business

How to get the right permits and licenses for your business

When it comes to starting your own business, securing the right small business permits may not be the most thrilling part of your entrepreneurial dream, but licenses and permits are very important.

We understand that sorting out business licenses and other regulations for your new business isn’t glamorous, but that doesn’t change the fact that it’s crucial for ensuring your company is compliant and aboveboard.

Feeling unsure about where and how to get started? We break it all down for you in this guide that covers the top business licenses and permits you may need, along with why you need them and how to obtain them.

What are business licenses and permits and who needs them?

The 12 common types of business permits and licenses

Business licenses and permits are the legal requirements your company needs to acquire and follow in order to conduct business. Without them, you may be required to pay fines or close up shop altogether. But who exactly needs licenses and permits? Well, that largely depends on a few factors:

  • What state and city your business resides in: Each city and state has its own recommendations and requirements.
  • How much revenue you produce: In some instances, your revenue can be an indicator of which permits or licenses you need.
  • The types of products and services you provide: Some federally regulated products or services require licenses before you can even start doing business. (More on this below.)

However, there are some licenses and permits that are unavoidable regardless of what industry you’re in.

3 small business permits that can benefit your business

Let’s start with the most essential small business permits you need. Again, many permits are going to depend on your city, county, or state, as well as the type of business you’re operating. But there are a few that are going to apply to virtually any new business.

Tax identification number

This one isn’t technically a business permit, but it’s an important box to check when getting your business up and running.

While some sole proprietors use their Social Security number as their Tax Identification Number (TIN), many small business owners opt to apply for an Employer Identification Number (EIN). This is a separate number that is assigned by the Internal Revenue Service (IRS) to identify your business. It is also used to apply for small business loans and other types of business funding.

Even if you are a sole proprietor, applying for an EIN can still be a worthwhile step because it protects your personal Social Security number. Plus, applying is easy.

Sales tax permit (seller’s permit)

If you’re selling products or services and need to collect sales tax, most states will require that you have a sales tax permit. This is also called a seller’s permit, sales tax license, or a sales and use tax permit.

To get one, visit your state’s Department of Revenue website (or a similar state agency) and complete a brief application with basic information about your business. Some states also require a fee to apply for the permit, but it’s usually pretty modest.

General business license

Nearly every type of small business will need a business license, granted by a local or state government (for licenses at the state level). This gives you legal permission to conduct business in your city and state.

Keep in mind that a business license is not the same thing as a business entity. Don’t assume that having an established entity, like a limited liability company (LLC), for example, means you don’t need a formal business permit or license. The only exception is sole proprietorships, which don’t need a general business license to operate in most states.

How to apply for a small business license

In most cases, your small business license will be issued at the state level (and is sometimes called a state business license). For that reason, the exact steps of the application process will depend on your state and the government agency you’re working through. But in general, it works like this:

  • Visit the website for your state’s Secretary of State office, Department of Revenue, or, in some cases, the county clerk.
  • Look for a page that includes resources for starting a business, particularly business licenses.
  • Ensure you meet all license requirements.
  • Complete the license application, which will include your contact information and other details about your business.
  • Wait for your small business license to be approved and granted.

9 other small business permits to consider

Once you have those fundamentals covered, you can look at more specific permits. Many of the permits your business needs will vary on a case-by-case basis. In general, this hinges on two important factors:

  • The type of business activity
  • The location of the business

Below, we share some other common permit requirements in those two categories.

Permits that depend on your type of business

Some industries are regulated at the federal level, meaning they have strict federal license requirements. The U.S. Small Business Administration (SBA) has a helpful breakdown of those different industries and related federal licenses and permits.

Even if you aren’t in a federally regulated industry, it’s entirely possible that you’ll need other permits to operate your small business. Here are the ones you should be aware of:

  1. Environmental permits. If your business produces pollution and emissions, deals with hazardous waste, or releases water into storm drains, your state might require an environmental permit.
  2. Fire department permits. Businesses that deal with flammable materials or occupy a space where large groups of people gather might need a permit from the local fire department.
  3. Health permits. Certain businesses will also need health permits to ensure they meet safety regulations. For example, businesses that deal with the preparation, packaging, and serving of food, or businesses like salons will need permits from their local health departments.
  4. Occupational licenses. Certain occupations will require the right professional licenses. As the U.S. Department of Labor explains, these licensed occupations include teachers, land surveyors, doctors, lawyers, cosmetologists, nurses, building contractors, counselors, therapists, and electricians.
  5. State permits and licenses. Other types of businesses that engage in special activities—like selling alcoholic beverages or even selling antiques—will also need the appropriate licenses and permits.

Permits that depend on your business location 

Much of your business’s regulation and permit requirements will depend on your location—meaning your local city, county, and state.

However, there are also some permits you might need depending on the actual building or physical location where you’re conducting business. Here are a few of those types of permits:

  1. Building permits. If you plan to build a business location or significantly renovate one, you’ll need to get the right building or construction permits from your local government.
  2. Home occupation permits. Think working from home is the easiest way around permit headaches? Not always. Some cities or counties will require you to have a permit to operate your business out of your own home.
  3. Sign permits. Some places get so nitty-gritty with their regulatory requirements on a local level that they’ll even require you to get a permit to display a sign. Again, you’ll need to check with your city or state agencies to understand what’s required.
  4. Zoning permits. Unfortunately, you can’t just open your business wherever you’d like. Zoning regulations will tell you where you can and can’t do business. Suppose, for example, you want to transform an old farmhouse into a bed and breakfast. You might need to file for a special permit (usually a variance or conditional use permit) if that building is currently zoned as residential.

Federally regulated industries that require licenses to start

Depending on the service or product you’re providing, you may need to seek approval at the federal level. Here are some examples of federally regulated businesses according to the United States EPA:

  • Aviation
  • Alcohol
  • Agriculture
  • Firearms
  • Wildlife and fish
  • Mining, drilling, and nuclear energy
  • Transportation and logistics
  • Television and radio
  • Maritime transportation

Obtaining these licenses looks similar to obtaining any other licenses, and since each varies by state, the best course of action would be to contact the U.S. Small Business Administration. There they can provide access to the information for the federal requirements for small business owners. On the state level, you’ll want to reach out to your Secretary of State office to see what their requirements are.

Why do proper business licenses and permits matter?

The 5 types of improper license and permit consequences are listed.

If you think that getting the right permits and licenses is a task you can continue to push to the back burner, think again. This is one of the first steps business owners should take before they open up their doors.

Why? Not having the correct small business permits can mean seriously bad news, including:

  • Fees and fines: Not having the permits you need can lead to financial penalties from federal or state agencies.
  • Suspensions or probations: You could potentially be prohibited from doing business until you have the correct permits in place.
  • Inaccessible funding: If you need a business loan, lenders will ask to see your small business license along with any industry-related permits. Failure to provide them can prevent you from getting the funding you need.
  • A damaged reputation: It’s easy for other people—whether they’re customers, vendors, lenders, or other agencies—to look up what licenses and permits you have. It’s often as simple as doing a search through your state’s Secretary of State office. If they discover a lack of the right permits, your business seems illegitimate and untrustworthy.
  • Lawsuit liability: If something goes wrong and it’s discovered that you don’t have the appropriate permits or licenses, you risk the potential of a lawsuit. For example, suppose you’re a general contractor operating without a professional license required by your state. If your construction is found to be faulty, the homeowner could sue you for failing to meet licensing requirements.

The good news? These are all totally avoidable if you do the legwork and confirm that you have the right licenses and permits in place.

How do you acquire the permits your small business needs?

There are quite a few permits that you might need to get your hands on, and that leads to your next question: How do you get them? In general, the process looks similar to what we outlined for obtaining a state business license:

  • Identify a permit that is required for your business.
  • Locate the agency that grants those permits.
  • Complete an application with information about your business, either online or via mail.
  • Submit an application fee if required.
  • Wait for approval and the permit to be granted.

Again, many of the nuances and specifics depend on your business, the type of permit, your location, and more. Beyond the steps required, let’s cover a few other must-know tips.

1. Understand who issues permits 

As we’ve already mentioned, small business permits can be issued from numerous different agencies and governments. The regulatory agencies typically fall into one of three categories

  • Local: your specific city, county, or municipality
  • State: the state where you’re doing business
  • Federal: your industry might be regulated on a federal level

This is important to note because it means that you won’t necessarily get all the permits you need in one convenient place.

2. Do some investigating 

If your permit requirements aren’t all centralized, how can you possibly figure out which ones you need and how to get them? First, start by checking with the U.S. Small Business Administration to see if your industry is federally regulated. If so, pursue the next steps on a federal level. If not, move on to state and local requirements.

To do this, you’ll need to do some independent research:

  1. Start with your state and search online for “[your state] business permits.” That should turn up the site for your state’s Department of Revenue or a similar office where you’ll find information about starting and registering your business.
  2. Many states offer one-stop registration where you can register your business with multiple agencies (like the Departments of Financial Institutions, Workforce Development, or Economic Development) at once.
  3. You can repeat a similar search using the name of your county and city. 

As you dig into different resources and identify permits that seem like they apply to you, jot them down. That will help you get the lay of the land so you can spot duplicates or permits that don’t relate to your business.

3. What you should expect

Through contacting the correct office for your state and implementing the tips we’ve discussed, small business owners should expect a fairly simple application process. It’s just paperwork at that point. Just remember to have these resources readily available:

  • Drivers license
  • Social security numbers
  • Personal address
  • Business information (name, location, type of business)

Licensed to focus on running your business

When you dream of starting your own business, you probably think about all the fulfilling and rewarding tasks—like naming it and finding your first customers.

But, truth be told, not all aspects of entrepreneurship are glamorous. Getting your hands on the small business permits you need is one of those responsibilities that’s crucial but not necessarily fun.

Fortunately, this guide can help you navigate business permits and licenses without the stress and headaches. Plus, with accounting software like QuickBooks to help you navigate your taxes and bookkeeping, you can check a few more things off your list, putting you one step closer to successful business ownership.

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