Your to-do list may seem never-ending when preparing to launch a business. It’s a lot to handle, but it’s crucial to take all the necessary steps before launching your business if you want to see long-term success. One of the first steps many entrepreneurs take is researching how to get a business license.
Keep reading for a closer look at what a small business needs to know to get started on securing a business license.
What Is a Business License?
A business license is any permit or license required for operating a business. Small businesses need this license to provide services at their location. The good news is that the municipal, county, state, and federal governments typically provide a variety of business licenses to suit different types of business activities.
A business license also allows you to register your business for tax collection and ensures you follow regulations in your industry.
Who Needs A Business License?
Most businesses will need a permit or license in order to operate. The type of licensing you need typically depends on the type of business you run. Holding the correct licenses is important to the legal operation of your business.
Steps to Getting Your Business License
The process of getting your business license depends on the state, but the sections below outline the general steps the process requires.
1. Form Your Entity
It’s often better to get the business name and structure in order before applying for a business license. This will help keep you from reapplying or amending the business license later.
For nonprofit corporations, corporations, and LLCs, you file paperwork and establish your business name. In some cases, you can get your DBA from the state. In other cases, you need to file with the local government.
Here are some legal structures to consider when forming an entity for your business:
- General Partnership
- Sole Proprietorship
- Limited Liability Company or LLC
- Nonprofit Corporation
- Corporation
2. Apply for an EIN
You may need your EIN or employee tax identification number to submit your business license application. Whether you need your EIN to submit the application depends on the state your business operates in.
If you’re a sole proprietor without employees, your Social Security Number will work. All other businesses need a FEIN or Federal Employer ID number.
Applying for your EIN is easy. You can get the number from the IRS online.
3. Research the Specific Business Licenses You Need
What you need to do to get a business license depends on the kind of business you run and where. Here are some common types of business licenses and permits you can apply for:
Sales Tax Permit
If you sell goods online or in person, most states need you to have a sales permit or a sales tax license. This allows you to collect sales tax at your business location.
Business Operating License
This is what most people think of when they hear the term business license. This allows you to operate your business in your area. In some states, you need a license from the state; in others, you need it from your county or city.
Federal Licenses and Permits
Some industries require specific licenses. For instance, the federal government regulates alcohol, tobacco, aviation, and firearms. The Small Business Administration lists the businesses that need a federal license.
Industry Licenses
Industries such as electrical, salons, childcare, law, or medicine may need specialty licenses. You can get these through your state licensing board for the industry.
Special Permits
In some industries, it is necessary to get a special permit for operation. For instance, operating a brick-and-mortar store requires building, zoning, planning, signage, and fire permits. It depends on the county and city where the business is located.
4. Submit Your Business License Application
You may have to file a business license application with several different agencies. You may need city planning permits, state sales tax permits, and health permits from different agencies as well.
The local or state SBA office can help you get all the information for your business license. There are step-by-step guides on your state’s websites, complete with links to get you through the process.
In many areas, you can get your general business licenses online. With licenses for specific industries, the process gets a little more complex. Sales permits and business operating licenses don’t take too long, while others may take longer.
Checklist of Documents Required for Business License Application
It’s best to submit your application with a complete set of required documents, which include the following:
- Proof of Identity
- Proof of Business Ownership
- Applicable corporate records, such as corporate bylaws and articles of incorporation
- A detailed business description
- A list of individuals that can sign on the company’s behalf ,such as owner or managers
- Proof of tax status, such as a sales permit
- Government filing fees range from a few dollars up
Associated Business License Fees and Tips for Paying Them
Fees vary according to the type of license needed and the area the business operates out of. They average between fifty and a few hundred dollars. You may need to budget for fees early on, depending on your business license requirements. Remember to budget for your renewal fees as well.
Dealing with Business Licensing Issues and Delays
Avoid delays and issues in the application process by filing all required documents from the start. Remember that getting a business license takes a few days to a few weeks. The websites you file through may give estimates of how long the process takes.
However, if the process takes longer than a few weeks, you can contact the agency for the next steps or to check your application’s status.
5. Maintain and Renew Your Business Licenses as Needed
Read through the paperwork carefully or have your lawyer do so to see how often you need to renew your business license and how much it costs. It may be yearly or it may be every few years.
Maintaining a valid license is important for the reputation of your business. It helps with avoiding hefty penalties and fines from the local and federal governments. You must also renew business licenses and permits on time since there are penalties associated with late business license renewal.
It’s also a good idea to check if there are other requirements for business license renewal, such as submitting annual reports or proof of completion of continuing education.
The Bottom Line
Start your business activities with all the required licenses and permits in place. This will ensure you conduct business properly and don’t incur unnecessary fees. Since the application process and required documents depend on the licenses and permits needed, we also encourage small business owners to seek guidance from attorneys where necessary.
Need help getting your business off the ground? Lean how to write a business plan that will lead you down the path to success.
Podium does not provide legal advice. Consult a lawyer if you need detailed information or advice on business licensing.
