Do I Need a Local and State Business License?

Starting a business can be a daunting task, especially when it comes to understanding the different types of licenses and permits you may need. Depending on the type of business you run and where you are located, you may need to apply for one or more business licenses. Here's everything you need to know about what licenses you need and how to get a business license in your area. Any business, including home-based businesses, must obtain a local business license from the city or county.

This is a basic license that allows the holder to participate in commercial activities within local jurisdiction. If your city or county doesn't have a specific business licensing department, you can get information on how to get a basic business license from your local tax office. When starting a business, it can be difficult to determine what steps to take to get started and comply with confusing government regulations. These local licenses are usually very easy to obtain and require a fee. Nearly every business will need one or more licenses to legally start and operate their businesses, whether at the local, state, or federal level.

As you review the different types of business licenses we've discussed to determine which ones you'll need, don't forget that you can always consult the SBA or your local government agency for help with the licenses needed to start a business. Most states don't require a general business license, also known as an operating license, only to do business in that state. However, you may still need a business license from your city or county. You may also need a license from a corresponding state or federal regulatory agency to conduct certain business activities, such as agriculture or medicine. The process for obtaining a business license varies by state and is not required in all states for each type of business. Follow these steps to determine if you need a license and to apply for it in your state if you need one:

  • You will need a business license in the name of your company.

    It is best to establish a business structure and business name before applying for a business license. This way, you don't have to reapply for or modify your business license later on.

  • If you establish an LLC, corporation, or non-profit corporation, you will establish a name for your company when you file incorporation documentation with your state. Depending on your state, you may be able to get a DBA from the state or you may need to file your DBA with the local government.
  • Depending on how your state processes business licenses, you may need to include your federal tax identification number in your business license application. Sole proprietors who don't have employees can use their social security numbers instead of a tax identification number, but all other businesses need a federal or FEIN employer identification number.

    You can get an EIN through the IRS online. The process is simple and you will receive your number immediately.

The types of business licenses you need depend on federal, state, and local requirements and the type of business you run. You may need to apply for licenses and permits from state, county, and municipal agencies, such as a state sales tax permit, health permits through a health department, and planning permits through the city. Look for resources from your state or local SBA office that gather all the information you need in one place, so you don't have to spend hours researching each relevant agency.

Step-by-step guides in your state could guide you through the process and include links to needed requests on various websites. In most states and many localities, you can obtain a general business license online through the appropriate agency's website. Industry-specific licenses can have a more complicated application process. You probably won't have to wait long for a business operating license or sales tax permit to be approved.

Other types of licenses and permits may have a longer and more complex review process. Talk to your lawyer or pay attention to the fine print of your business license and permits to find out how often you have to apply or pay to renew them. You may need to renew annually or every five years, for example. An LLC (limited liability company) is a business entity that determines how your business is structured for legal and tax purposes.

A business license is a permit that allows your business to operate in your state or locality. A business license can also refer to specialized licenses and permits that allow your company to provide certain services or operate in certain locations. It is not mandatory to have an employee identification number or EIN to run a business. However, if you want to open a business bank account or hire employees, you'll need to get one.

Learn more about the legal requirements for starting a small business. In several jurisdictions, look for the local business and professional regulation department, also known as the state licensing office. If you have already obtained your local business license, then you know the general gist of what a state operating license for small businesses is. To help you classify what licenses are required to start a business, let's look at the possibilities for each level of government - local, state and federal - so that you can better determine what types of business licenses and permits can apply to you.