How to Get a Business License

Just like getting a driver's license before taking your car on the road, you need the appropriate business license before opening your doors to the public. State governments use business licenses to track commercial activity within the state and to protect consumers by making sure regulations are being followed.

What licenses you need to get will depend on where your business is located and the type of goods or services you plan to offer. This article provides a general guide to business licenses. If you'd like in-depth guidance specific to your business location, see our state guide on business license requirements.

What Is a Business License?

The term business license can refer to any number of permits and licenses regulated by federal, state, and local agencies, including licensing boards.

While some states and counties require all businesses to have a license, in other areas, sole proprietors might be able to provide certain types of services without any type of license. Many other licenses are particular to the profession, service, or goods offered to the public.

In some cases, you'll need to apply for a special permit along with a business license. For example, you might need to obtain a business license from the state to do business and then obtain a special permit from the city to conduct that business on a particular piece of land.

Common Business Licenses

You'll find almost as many business license categories as there are business types. Here are some of the more common licenses:

General Business License: This basic license might be required at the city, county, or state level for all businesses that want to operate in a particular area. In some places, sole proprietorships and partnerships can be exempt from this requirement.

Seller's Permit: If you're selling tangible goods, you might need a seller's permit from your state tax department. This permit requirement is common in locations that have sales tax.

Professional License: Certain professional agencies, like those regulating dentists or accountants, require individuals providing those services to first obtain a license from the regulating professional agency. Other professional licensing can be optional, such as licensure for bookkeepers. Some professions require the individual to get a license while other professions require both the individual and business to have a license. For example, your state might require a CPA firm along with all the individual CPAs working for the firm to each have a license.

Agricultural License: There are different licenses depending on the products sold or manufactured, such as milk products, produce, livestock, or meat products. If your business imports or transports animals across state lines, you might also need a license from the U.S. Department of Agriculture.

Licenses to Sell Food or Drinks: If your business sells food or drinks—whether you have a restaurant or you sell packaged goods to retail stores—you likely need licenses such as a food handler's permit or a commercial kitchen permit. If you operate a food truck, you could need a specialized mobile food permit.

Liquor License: If you plan to manufacture or sell alcohol, be sure to research liquor licensing requirements. The particular license can differ depending on whether your business sells directly to consumers in a retail establishment (such as a bar or liquor store), or if you're a brewer or distributor selling to other businesses. If you plan to import or wholesale alcohol, you must also obtain a permit from the federal Alcohol and Tobacco Tax and Trade Bureau.

Marijuana Business License: To sell, manufacture, or cultivate marijuana in a state where recreational or medicinal cannabis is legal, you likely need a specialized license. You could need to apply for both state and city or county licenses. You could also need to obtain a license for each business activity—for example, a cultivation license, a manufacturing license, and a dispensary license.

Music and Entertainment Licenses: If you want to have music, live or recorded, played at a space open to the public, you likely need a license through the American Society of Composers, Authors, and Publishers (ASCAP), a national organization. This license ensures that the copyright owners of the material are paid. In addition, you could need an entertainment license from your state or county agencies if you plan to host live performances.

Are Business Licenses Required?

Unfortunately, the answer is it depends. Specifically, it depends on your location, industry, and business activities. Typically, it's likely that you'll need to obtain at least one license for your business.

It's essential to have your licenses in place before opening your doors to business. Depending on the particular license, you could face serious fines, and in some cases, your business could be shut down. It might even be illegal, such as running an unlicensed cannabis company, which could lead to additional fines and a jail sentence.

Because of these repercussions, and the huge variety of licenses that might be required, be sure to take your time to research the requirements of each agency. Begin by reviewing our state guide to business licenses for information tailored to your state. In some cases, the best way to ensure you're in compliance is to consult with a local business attorney.

How to Apply for Business Licenses

Each business license is regulated by a particular state or federal agency. For a general business license, check with your secretary of state or the department of taxation or revenue. For other licenses, you'll likely file with specialized agencies for the particular business area. For instance, check with the agency that regulates food safety for all food-related permits.

Federal Business Licenses

The federal government oversees various industries. For example, various federal agencies regulate banks, automobiles, food and drink, agriculture, pharmaceuticals, alcohol, tobacco, broadcasting, and more.

For information on federal licenses and permits, you can visit these resources:

• U.S. Small Business Administration (SBA): The SBA has a licenses and permits webpage that provides a list of business activities and their accompanying issuing agency. The SBA also offers a guide to staying legally compliant that includes a section on licenses, permits, and recertification.
• Federal Trade Commission (FTC): The FTC is responsible for regulating trade and protecting consumers from unfair or deceptive trade practices. The FTC's business guidance webpage provides industry-specific information and resources to make sure your small business follows federal regulatory rules and requirements.
• Internal Revenue Service (IRS): Check out the Industries, Professions, and Business Tax Centers webpage for information related to your tax obligations.

State and Local Business Licenses

Regardless of whether you need a federal license, you'll probably end up needing a state or local business license or permit. Many of these licenses and permits are regulatory, covering matters like sales tax, the environment, and health and safety.

Applying for these business licenses often involves more than filing paperwork. Many businesses are highly regulated, and the permitting process is how you demonstrate to the state that you're in compliance with all the rules.

The application process can involve:

• submitting to inspections
• acquiring zoning approval letters, and
• attending hearings.

The cost differs drastically depending on the permit. While a basic business license could be as low as $50 in some states, permits for a marijuana business could run into the tens of thousands of dollars. Once you have the license, many of these licenses have ongoing requirements, such as annual filings and fees.

Additional Help With Getting a Business License

Many states have great guides and information on department and agency websites that help new business owners with local and industrial regulatory requirements. Specifically, you should check the websites for your secretary of state's office and department of revenue (or a similar department or agency).

In addition, the U.S. Small Business Administration (SBA) has district offices in every state. These SBA offices offer counseling and provide events, resources, and news for small businesses. You can also check out the national network of Small Business Development Centers (SBDC). SBDCs offer guidance, training, and workshops on how to start and grow your business, including how to get the business licenses you need to legally operate in your location and industry. Many of these SBDC locations are in colleges and universities.

In addition to these government resources, you can find more information and guidance in the small business section of our website. If you're interested in more detailed information, you can also check out Legal Guide for Starting & Running a Small Business, by Fred S. Steingold (Nolo), and The Small Business Start-Up Kit, by Peri Pakroo (Nolo).