Two people discussing licenses over legal papers.
When you start a business, one of the first things you’ll need to know is which permits and licenses you need to operate legally. Most cities and states require companies to have a business permit or business license to operate, and ensuring you have the right documentation is the first step to getting your business off the ground.
To figure out which permits you need, you’ll need to work with your state and local officials. Be advised that some companies are required to carry additional federal business licenses and permits. In the U.S. and many other countries, the local Chamber of Commerce is a good source of information and so are economic development organizations in the U.S. and abroad.
Do You Need Any Licenses?
In most cases, the answer to this question will be “yes.” If you neglect to obtain a license you need, you put yourself at risk of operating a business illegally. Regardless of where you live and work, most states and counties require companies to carry licenses or business permits. While these licensure requirements vary depending on the type of business you operate, there are almost always some licensure requirements with which you must comply.
Local Business Licenses and Permits
Local licenses vary depending on where you live and work. Here are a few factors that might influence the types of licensure you’re required to obtain:
Zoning. In some places, you’ll need to obtain a zoning compliance permit to open and operate a business. This helps ensure that your building can legally house the type of business you intend to run.
Ownership of a Home-Based Businesses. Some home-based companies, such as beauty salons and child care operations, require special home-based licenses.
Remodel Permits. If you intend to remodel the space from which your company operates, you may need a business permit to remodel before you begin construction.
You might also be required to carry a special license if your company deals in gasoline, liquor, lottery tickets, firearms, and other such products.
Do You Need Federal Licenses or Permits?
You may. For some companies, a federal license is required. If your company is regulated by the federal government, for example, as is common with companies that specialize in broadcasting, drug manufacturing, preparing meat and other food products, or manufacturing firearms, alcohol, or tobacco, you may be required to carry a federal license.
To figure out which license you need, you’ll need to start by communicating with your city and county government. In the U.S., the first step is to consult with the City Clerk’s office, as he or she can help determine which license you need, based on the type of company you run.
If you run a home-based business, may need to go the extra mile by looking into local zoning ordinances and other regulations that apply to home-based businesses.
Using State License and Permit Lookup Tools
Still not sure which state license or permit you need? Consult a simple lookup tool like the one offered by the U.S. Small Business Administration. This tool allows you to identify the type of business activity you’re pursuing, and locate the issuing agencies that deal with state licenses and permits.
Keep in mind the state licenses and permits you must carry will depend on your business location and business type. These factors will also influence how much you pay for your business license.
Licensure for Home Businesses
Today, more people than ever are working from home. If you’re one of the many people operating a home-based business, be aware that special permit and license regulations likely apply to you. Here are some license types that you may be required to carry:
General Business Licenses. In most cases, home-based businesses are required to carry a general license. This license is an annual piece of paperwork that states you have a right to operate a business in your locality. Obtain one of these through your local government or city website.
Trade Licenses. Trade licenses are required for home-based businesses that specialize in child care and other professional or occupational pursuits. You can access a complete list of the companies that require these licenses on your state’s business website.
Home Occupation Permits. In some cases, you’ll be required to file a home occupation permit with your city planning agency.
Sales Tax Permits. If you’re running a company that sells taxable goods or services, online or offline, you may be required to collect sales tax when consumers buy the products.
More. Home-based businesses may also be affected by health and safety permits, sign permits, construction permits, and HOA issues. To ensure you’re complying which each of these bodies, check with your state and local government agencies. They’ll be able to tell you more about the type of state business licenses and permits you’ll need to carry.
Company Licenses and Permits
Before you start a new business, you need to ensure you’ve obtained the correct licenses and permits. Depending on where you live and what kind of business you’re running, you will be required to obtain certain licenses and permits. To find out which apply to you, contact your local and state government offices for more information.
Another helpful blog to learn how to start a business as an independent contractor is "Independent Contractors Set a Course for Entrepreneurship," written by MOBI Advisory Board member Laura Norris, J.D., and Mary Fuller, J.D., of the Entrepreneurs' Law Clinic at Santa Clara Law.
Please also visit MOBI's Home-Based Business Readiness Checklist for home-based and freelance business preparation suggestions.