What Is a Business License? Guide to Small Business Licenses in Each State

How to Get a Business License: Step by Step Guide

Susan GuilloryUpdated December 30, 2021

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When starting a small business, there’s typically a long list of tasks to deal with. One of those is getting any and all business licenses you need to legally open your doors.Most small businesses will need one or more licenses or permits from local, state, and/or federal agencies. Which ones you’re required to get will depend on the type of business you plan to operate and where it’s located.To help you sort through these often complicated government regulations, we’ve compiled the following license guide for small businesses.

What Is a Business License?

Though “business license” is a broad term, it generally refers to a government-issued license that grants your business permission to operate within your city, state, and industry. The specific type of license you’ll need to launch your business will depend on your small business idea, as well as where your business will be located. In some cases, you may need to obtain separate business licenses at the county, city, and state levels. If a federal agency regulates your business activities, you may also need to get a federal license. One of the common business mistakes new business owners make is not getting a business license, but skipping this important step could lead to fines, penalties, and even cause your business to be shut down. That’s why it’s key to identify what licenses you need well before launching your new small business.Recommended: Best Cities to Start a Business in the U.S.

Types of Small Business Licenses

So, do you need a business license? The answer is most likely, yes. Many states require every small business to get a general business license no matter what type of industry it is in. Depending on the nature of your business, and where you plan to operate it, there may be other local and industry-specific licenses that you will need to get as well.If you’re in the process of starting a small business, here are some common business licenses you may need to obtain before you can legally operate.

General Business License

Some states, as well as cities, require each business to have a general business license. You may need to apply for these separately at the state and city levels, as each jurisdiction has its own requirements and regulations. You can check with your local government and consult the state business license chart below to see what’s required.

Seller's Permit

If you plan on selling goods as part of your business, either from a physical store or online, you may need a seller’s permit to get permission to sell in your area. The process for acquiring a seller's permit varies, but generally you obtain one from the government agency that regulates businesses in your state.

Doing Business As (DBA) License

If you plan to run your business under a name other than your personal name, you are generally required to file a Doing Business As (DBA) license — also known as a trade name, fictitious name, or assumed name. This license allows you to use the name you want for your business and ensures that no one else has registered the same name.

Zoning Permit

Most towns and cities have regulations for which business types can operate, and where. So it’s a good idea to verify that the area your business is located in is zoned for your specific type of business. If it isn't, you will likely need to apply for a zoning variance and prove that your business will not significantly disrupt the community.

Home Occupation Permit

If you plan to operate your business out of your home, you will likely need to get a home occupation permit, which ensures your home is in a zone that allows commerce. You may have to provide details about whether or not clients will visit your home office, since that could impact parking in your neighborhood.

Commercial Sign Permits

If you plan to put signs up on your storefront or outside your office, you will probably need to apply for a local sign permit. Your city may need to approve the size and location of any signage you want to display. Putting up a business sign before you obtain the proper sign permits can lead to hefty fines.

Health Permits

If your business will have an impact on people’s health and safety, such as a childcare facility or a restaurant, you will likely need to get a health permit. To obtain one, your business will need to be assessed by your local county health department to make sure that it complies with safety regulations and health code standards.

Liquor License

If your business will be selling or serving liquor, such as a wine shop or restaurant, you’ll need a liquor license. Obtaining a liquor license can be a long process, and they are sometimes limited in an area based on something known as a quota system. Some liquor licenses cover just wine and beer, while others include all alcoholic beverages.

Occupational or Professional License

In many states, small business owners in certain occupations need to get a specific professional license to legally operate. This includes accountants, electricians, plumbers, contractors, physicians, and many other professions. It can be a good idea to reach out to your state's government offices to find out if you are required to get a business license specific to your industry.

Getting a Business License in Each State

Some states require all businesses to have a general state business license. To find out if your state does or does not, consult the chart below.

How Much It Costs to Get a Small Business License

The cost of obtaining necessary business licenses can vary significantly depending on the type of license and your location. On average, a local business license can run anywhere between $50 and a few hundred dollars, plus renewal fees.If your state requires a general business license, that will be an additional fee. Getting a state business license in Nevada, for example, can run around $500 per year. When you’re budgeting the money to start a business, you may want to do some homework and check the relevant city and state websites to get exact costs so licensing fees don’t throw off your small business’s start-up budget.

Getting a Small Business License

The process of getting the necessary licenses for your business can take multiple steps and weeks to months to complete. Here are some general guidelines to get you started.

1. Finding out the Type Business Licensing You Need

To find out about which city and county business licenses you may need to open your business, you may want to start with your city’s government site, where there’s likely a section dedicated to businesses. There, you should find information about licenses and permits required for different types of businesses.Next, you can take a look at your state’s Secretary of State website, which should provide information about any state-required licenses.To find out if your industry is regulated at the federal level, you can go to the Small Business Administration's (SBA) website, where they list industries that require a federal license or permit and links to the appropriate issuing agency.

2. Preparing All the Required Business Documents

Once you know which permits you need, it’s a good idea to review and start gathering the documents you’ll need to apply for the license. Exactly what you’ll need will depend on the license type. In most cases, you will need your Employer Identification Number (EIN), incorporation documents, and other key details about your business.In some cases, you may also need proof of insurance, proof of operating capital, and the educational or professional qualifications of owners and key staff.

3. Filing an Application in Your State for the Appropriate Business License

Once you know what business licenses you are required to apply for, and have all the documents you need (along with a method of payment), you can begin the application process. You may have a choice of doing this online or by mail. Each application is different, so it's a good idea to follow the instructions carefully. Any mistakes or missing information can delay approval of your license.

4. Getting the License and Keeping up With Renewal Requirements

Once you are approved and receive your business licenses, you will have legal permission to conduct your business. Depending on the type of license, you may be required to display it in your place of business. If not, it can be smart to file it away somewhere safe.You may also want to keep in mind that receiving a business license is not the end of the process. Many business licenses require renewal, so it can be a good idea to mark the date you need to renew your business license on your calendar.

How Long Does It Typically Take to Get a Small Business License?

The timing can range anywhere between a few days and several months, depending on the type of license you’re seeking and the agency you are working with. Getting a state business license generally takes one to four weeks.

The Takeaway

Most small businesses will need at least some form of business license to operate legally. In many cases, you will need a general business license issued by your state or city. And, depending on the industry and location of your business, you may need additional licenses, such as a seller’s license, commercial sign permit, DBA license, or professional license.Obtaining the necessary licenses can take weeks to several months, so it can be a good idea to start the application process well ahead of when you plan to launch your new venture.While you’re waiting for the legal go-ahead to operate your business, you may want to start looking into small business funding options so you’re able to hit the ground running. If you’re interested in exploring small business loan options without making any type of commitment, Lantern by SoFi can help. With our online lending platform, you can compare rates from multiple small business lenders with just one application.

Photo credit: iStock/AzmanLThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC112246

About the Author

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.

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