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Business licenseDo I Need a Business License?

3rd February 20190

As a new business, you have three obligations: registering your business, paying taxes, and acquiringthe proper permits.Finding the right permits is one of the most complicated of these three. Registering an LLC orpartnership often requires little more than a few one-page forms. Taxes aren’t easy, but accountantssimplify the process. Permitting, however, usually means a wild goose chase between local and stateagencies.

There are very few circumstances in which you do not need a business license. The type of permitsrequired often depends on what kind of business you run and where you set up shop. Location playsone of the most significant roles. Working in one zip code could mean the city subjects to you todifferent zoning laws, regulations, and even taxes.For example, zoning laws are local regulations that often designate a neighborhood for residential orcommercial use. These restrictions might limit or ban certain businesses from operating in an area.Business licensing and permitting isn’t simple, but it is essential. You shouldn’t be running a businesswithout a license. If you do, you might be violating local ordinances or even state criminal law.Do you have questions about business licenses? If you’re still wondering “Do I need a businesslicense?” then read our guide for everything you need to get started.

Do I Need Business License?


The following types of businesses almost always need a business license:

  • Sole proprietorships
  • Partnerships
  • Limited Liability Companies
  • Corporations
  • Non-profits/NGOs

In effect, it doesn’t matter whether you are a home-based social media consultant, a franchise, or afledgling corporation, there’s a high likelihood that you need a business license to operate.If you’re unsure, consult a business lawyer or another legal resource to learn whether and what kindof permits you need to run your business.

Why Do I Need a Business Licence?

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You may run a simple, low-maintenance business, but you still need a license. Licenses are thegovernment’s way of keeping track of your income and activities. Your license will identify yourunique business to ensure you:

  • Uphold local, state, and federal law
  • Protect the public
  • Protect the public
  • Report your income
  • Pay the correct taxes

Where Do I Get a Business License?

business permit

Forty-thousand licensing jurisdictions across the United States issue business licenses. They maycome from every level of government from the federal government right down to your municipalgovernment.Depending on your business type, you may need to get a license at each level of governmentincluding:

  • Federal
  • State
  • County
  • Municipal

What Happens If I Don’t Get a License?

You might think that your business is small enough to fly under the government’s radar. But thegovernment takes licensing, permits, and registration legally.If you fail to get the appropriate license from the state and you get caught, you may face expensivefines and penalties. It may also leave you legally vulnerable. For example, if you don’t have theproper licenses and someone makes a liability claim against your business, your insurance companymay deny the request.

Do You Work at Home? You Still Need a License

If you operate your business out of your own home, you still need a license. Home businesses areparticularly susceptible to violations because they don’t realize they need a permit, even as a soleproprietor.Your state or municipal government may ask you to apply for a Home Occupation Permit.Fortunately, if you run a business like a consultancy or freelancing business, then you may not needany other permits bar this one. If you run a shop or production shop out of your home, then you willlikely require additional licensing that varies according to your business type.Make sure to check with your community association if you live in building managed by a homeowner’s association (HOA). HOAs may bar residents from running any operating out of their home.For more on the kind of permits you need to run a home business, use the U.S. Small BusinessAssociations’ interactive guide.

What Kind of Business Licenses Might You Need?


The kind of licenses and permits you need depend on the kind of business you run and the city inwhich you register. Requirements vary by municipality and state, but they may include licenses like:

  • Business license
  • Health Department permits
  • Sales tax license
  • Zoning permits
  • Building permits
  • Sellers permits
  • Police permits
  • Tax registration
  • Professional licenses

Who Should I Ask About Business Licenses and Permits?

Your first port of call should be your local city government to start with necessary permits foroperation such as a zoning permit, a home occupation permit, or a sellers’ permit.Many new businesses find their local chamber of commerce is an invaluable resource for learningmore about licenses and permits and connecting with other companies who can provide friendlyalbeit non-legal advice.One of the difficulties new businesses face is that you’ll need to visit multiple departments to get thepermits you need. For example, you’ll find yourself visiting the state’s department of commerce,health, and likely several other agencies to get the help you need.

Where to Get a General Business License

You’ll find your city or county government issues general business licenses. Expect to renew itannually with the local government. It typically requires completing a short form and paying anannual fee.

Where to Look for Zoning Permits

Zoning is a local affair, so before setting up a business, you’ll need to get in touch with your city. Youshould find preliminary information on your city’s website, but you’ll learn the most once you startthe application.If you’re opening a business, then zoning permits are the first place you should stop after forming anLLC. You should never sign a lease to rent any commercial real estate without first checking thezoning requirements. Don’t expect the city to allow your business to replace a previous similarbusiness. The previous owner’s zoning designation may not carry over to your business.You might find available business locations are in short supply as a result of your city’s zoningrequirements. Be warned. Local politics may mean that these requirements may not make anysense.For example, the City of Chicago features distinct zoning districts used to promote and reflect thediversity of the city’s neighborhoods. The city manages the business activities allowed in eachdistrict. When you apply for zoning in Chicago, the city considers whether:

  • You properly classified your business activity
  • Your activity is allowed in the district you apply for
  • You comply with zoning requirements (building, landscape, parking, etc.)
  • You provide a valid driveway permit

Where to Look for Tax Permits and Registration

ballpen and coins

You might be most familiar with the IRS as the premier tax agency in the country. As a business,you’ll also pay state and local taxes including:

  • Income tax
  • Sales tax
  • Corporate tax
  • Property tax

You’ll need to speak to both your city and your state government to get the relevant tax permits.Some cities or counties collect local sales tax through the general business license fee.Whatever you do, make sure you don’t neglect your tax permit. Some cities or states considerrunning a business without a sales tax license to be a criminal offense.While you are in the process of getting your tax permits, ask your local U.S. Small BusinessAdministration office about tax incentives for small and new businesses. Some local and stategovernments use tax breaks as an incentive to attract commerce to the area.

Where to Look for Health and Safety Permits


Your county health department will require you to get a health permit any time you sell food orbeverage products to the public. Health permits aren’t just for restaurants. You’ll also need a healthpermit if you:

  • Sell packaged food
  • Run a wholesale or distribution business
  • Run a street vendor business (including flea markets, farmers markets, and food trucks)
  • Sell and service vending machines
  • Own a beauty salon, nail salon, or tattoo parlor
  • Distill or brew alcohol
  • Haul waste

Regulations for health permits vary widely by county and state. Find your local health departmenthere.

What Do I Do After I Get All the Right Permits?

Once you have all the licenses and permits you need to run your business lawfully, your workcontinues.You’ll need to keep both the originals and copies of all your documents in a safe but accessible placein case you get audited or inspected. Your state or municipality may also demand that you displaysome licenses. If so, be sure to follow the guidelines. Often, you must place the permits somewherewhere customers can readily see them.All your licenses will likely come with expiry and renewal dates. Keep track of these dates and addthem to your calendar to ensure you renew in time. Failure to renew your license when requiredcould lead to penalties or even temporary shutdowns for your operation.Have more questions? Visit our archive of business resources.

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