Starting your own business is full of exciting decisions: What will you call it? How will your storefront look? What products will you stock?
But there are also essential, less thrilling tasks, like deciding on your business entity and applying for a business license. (Wait to nap, we've got quick info for you.)
While these legal steps might not be as fun as the creative ones, they're crucial. They bring you one step closer to achieving your dream of owning a business!
What Is a Business License?
A business license allows you to conduct business in a specific city or municipality. Each city and town in the U.S. is different, and their requirements vary regarding who must get a business license and how much it costs.
There are also different licensing requirements at all levels of government, including city, state, and federal.
Who Needs a Business License?
If you plan to conduct business, you'll need a license to operate under your local government jurisdiction. The state requires this, and the federal government often mandates licenses for specialized or high-liability industries, such as serving alcohol, selling firearms, or disposing of hazardous materials.
Many cities follow this model, requiring licenses for businesses in regulated sectors like food services or solicitation. Check with your state and municipal offices to learn about the specific requirements for your industry.
Why Do I Need a Business License?
There are two important reasons why you need a business license:
Public Safety: For specialized businesses, like those offering medical services or selling food, licensing helps ensure public safety.
Accountability: Licensing regulations keep businesses accountable for paying government taxes.
What Is the Difference Between a Business License and a Permit?
Business License: A business license is a general authorization from the government that allows you to operate your business. It signifies that your business is recognized and legally allowed to function within a certain jurisdiction.
Permit: A permit is more specific and often relates to particular activities or compliance with specific regulations. For example, you might need a health permit to sell food, a building permit for construction, or a zoning permit to operate in a certain area.
In summary, while both are required for legal operation, a business license is a broader authorization, whereas a permit addresses specific operational aspects and regulatory compliance.
Types of Licenses and Permits that Businesses Need
Here are some common licenses and permits you might need, depending on your location and industry:
Home Occupation Permit
Zoning Permit
Hazardous Material Permits
Building Permit
Health Department Permit
Sales Tax License
Seller's Permit
Building and Civil Engineering Permits
Engineering Services
Plumbing, Mechanical, and Electrical Permits
Check with your local and state government offices to determine the specific licenses and permits required for your business.
Where Do I Find the Cost of Business License and Business License Renewal?
Each state has different fees and requirements for permits and licenses. The U.S. Small Business Administration (SBA) offers a complete listing of states to help you start your search. The SBA also provides federal industry guides that inform you about the necessary permits and licenses for your business and how often you'll need to renew them.
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