Starting a business is an exciting time, but it can also be somewhat overwhelming if you aren’t familiar with the process.
There are quite a few requirements to keep track of, including the acquisition of business licenses.
Business licensing can be a tricky process, as there’s a wide variety of licenses and permits that your business may need. Some states require a general business license, and there are industry-specific permits and licenses at the federal, state, county, and local levels.
In this guide, we’ll cover the steps you need to complete in order to obtain the appropriate business licenses for your company.
Guru Tip: Most business formation services offer to handle business license and permit research when you hire them to start an LLC or corporation on your behalf.
Select a state below to acquire the proper licenses and permits for your business. We'll outline the important details and how to take care of the paperwork.
Understanding the Different Types of Business Licenses
It’s important to note that, when it comes to the matter of licensing, it doesn’t matter what type of business entity you operate. It could be a sole proprietorship, general partnership, limited liability company (LLC), corporation, or another business structure ― business licenses apply regardless of which entity type you own.
Technically speaking, there are two types of business licenses that you may need to get.
First, there is a general business license, which is a license that must be obtained by all businesses operating in a certain area, regardless of their industry. A general business license is usually issued on the local level (county or city), but a few states have their own statewide license.
Secondly, there are industry-specific business licenses. These aren’t one-size-fits-all licenses, but rather licenses that allow entrepreneurs to operate businesses in certain trades. For example, a restaurant may need to get a food safety license, and a transportation company might have to register with the state Department of Transportation.
These industry-specific business licenses are regulated on several levels: by the federal government, your state government, and your local government.
Research the Types of Licenses
Once you understand this key difference between license types, you’re ready to research the licenses you need.
This is probably the most time-consuming step, but thankfully, you only need to do it once. The unfortunate aspect of the licensing process is that there’s no central hub that helps explain which licenses and permits you need in many states ― you will need to track them down on your own. There are some states that have highly convenient online licensing portals, but unfortunately, these states are in the minority.
First, you should determine if you need a general business license. Your state may require one, but it’s more common for the general business license to be regulated on the city or county level instead. As you research whether or not you need a general business license, be sure to consult your state, county, and municipal governments.
Then there are the industry-specific licenses you’ll need to get for your business, depending on what field your company operates in. Some industries will not need any extra licenses, and others will need several. Your Secretary of State can be a helpful resource for this step. They may have their own licensing board to handle these licenses, or at the very least, they can help you get in contact with the appropriate agencies.
Apply for the Licenses
Once you know which licenses you need, you should apply for them. For federally regulated licenses, you’ll need to apply with the government agency that regulates that industry. You can find these regulated industries and additional information courtesy of the Small Business Administration.
State-level licenses are a little different. If you’re lucky, your state will offer an online portal that helps you find and apply for all the licenses you’ll need, but not all states offer this ― if your state does not offer this resource, you’ll have to do the legwork yourself. Thankfully, you can obtain the necessary applications directly from the board which regulates your industry, at which point all you need to do is fill them out and return them.
For state-level general business licenses, you should keep in mind that not all general business licenses come from the same place. Some states give that task to the Secretary of State, but others issue the general business license through their Department of Revenue once you pay your annual business privilege tax. Meanwhile, some of them require registration with the county clerk’s office instead of a state-level agency. You’ll make your life easier by looking for the application in the right place.
Of course, with all these applications, you’ll need to pay the applicable fees. These fees can add up, so be sure to budget accordingly.
Maintain Your Licenses
Getting your licenses can take a considerable amount of effort. Fortunately, maintaining your licenses once you have them is simpler. First, you’ll need to remain in good standing by following any regulations enforced by your state or licensing agency. Failing to abide by those regulations could cost you your license, which could, in turn, cost you your business.
Finally, you’ll need to renew your business licenses as needed. No two licenses are exactly alike, either ― some expire every year, others are good for three years, and a few last as long as ten years. Regardless of the expiration date, you are responsible for keeping all your licenses up-to-date.
If the licenses expire, you’ll likely have to get an entirely new license, which is an unnecessary hassle. Plus, it’s usually much cheaper to renew your licenses than to apply for them all over again. Set yourself several reminders about your expiration dates, and you’ll be good to go.
What Happens if I Don’t Get the Necessary Licenses?
There are several potential penalties for operating a business without the proper licensing. We took a look at a few states that require a general business license and found some pretty severe penalties. For instance, the state of Washington can order you to stop conducting business transactions entirely until you acquire your license, and it can fine you on top of that as well.
When it comes to industry-specific licenses, there is a wide variety of potential issues for operating an unlicensed business. It shouldn’t surprise you to hear that there are fines for failing to maintain an industry-specific license, but this is just the tip of the iceberg. If you operate an unlicensed business and a customer is unhappy with your company, they could sue you and assert fraudulent activity due to your lack of licensure.
In addition, your business could be ordered to close down if you operate without a license for a long enough period of time. There are even situations where you could be charged with a crime if you operate an unlicensed business in a heavily regulated industry. And none of these penalties factor in the potential for losing your customers’ trust, which could be the most severe consequence of all.
In short, the risk of operating your business without the necessary licenses isn’t even close to being worth it, especially when you consider that most licenses only carry a nominal fee and don’t require much effort to acquire or maintain.
Should You Hire a Business License Service?
If this all sounds like a hassle, don’t worry! There are other options.
Specifically, you could hire a business license service to research your necessary permits and licenses, acquire the applications, and deliver them to you. At that point, all you need to do is fill them out and submit them to the relevant government entities.
Frequently Asked Questions
Which states require general business licenses?
Most states don’t require entrepreneurs to get general business licenses, but there are nine states that do require them: Alabama, Alaska, Delaware, Hawaii, Maine, Maryland, Nevada, Tennessee, and Washington.
How much do business licenses cost?
The answer to this question varies depending on your jurisdiction and industry. However, most business licenses are quite affordable, often less than $100. The government does make some money off of business licensing but for the most part, its priority is ensuring compliance with important legal guidelines and safety regulations.
How often do I need to renew my licenses?
Different licenses have varying renewal schedules. Some licenses and permits must be renewed on an annual basis, while others only require renewal once every few years. Make sure you know how often each of your licenses requires a renewal to prevent any of them lapsing.
Can I reinstate a business license after it expires?
Some licenses provide a grace period between the renewal deadline and the true expiration date. Others will only charge a late fee, allowing you to maintain your license even though you renewed it too late. However, we never advise playing with fire like this, as there are some licenses that will expire if you miss the deadline. For these licenses, you would need to either file a reinstatement or reapply for the license.
Can I transfer a business license from one company to another?
This all depends on what kind of license we’re talking about and where your business is located, as well as questions about the nature of the transfer and the guidelines of the issuing agency. In short, there are some transferable business licenses, but many are non-transferable. If you have questions about whether a specific license can be transferred or not, consult the government agency that issues it.
My business has remote employees in other states. Do I need business licenses in these states?
In most circumstances, you will not need any additional licenses for a remote employee, and you shouldn’t need to foreign qualify your business in that state either. Usually, an employee working remotely is not enough to constitute “doing business” in the state.
Getting your business licenses is an important, time-consuming process. Sometimes, entrepreneurs fail to understand how many different licensing entities there are at different levels of government, and will fail to acquire the appropriate county- or city-level permits.
Keep in mind when tackling this process that you’ll need to check with federal, state, and local government bodies, and also find out if your industry has a regulatory body that governs your region as well.
It’s vitally important to ensure that you obtain all the necessary licenses and permits for your business, or you could find yourself operating a non-compliant entity.