Everyone has to deal with the nitty-gritty details of starting a business; no matter your industry, getting started safely and legally involves at least a little red tape.
You need to make your business an official legal entity, and take an in-depth look at what business licenses and permits you need at the local, state, and federal levels to be able to operate without fear of being hit with a fine—or worse, having to close down.
What is a business license?
Business licenses are permits issued by federal, state, and local government agencies that allow individuals or companies to conduct business within the government’s geographical jurisdiction. You might need to get multiple licenses to be in compliance.
The term “business license” is a bit misleading as it makes it sound as if there is one license you apply for, sort of like a driver’s license, that you obtain and—voila! You’re legally in business. That is not the case.
Is getting a business license the same as declaring my business entity?
Getting business licenses or permits goes beyond simply registering or declaring your business entity—like an LLC or corporation; just because you’ve incorporated your business or formed an LLC doesn’t mean you’re done with the fees and paperwork.
Can you be denied a business license?
You can be denied a business license if your application is incomplete, unsigned, or if you haven’t had it signed by the right people. You can also be rejected if you fail to follow the instructions on the form. It’s a good idea to reach out to the licensing agency and make sure you have the right form (that’s not outdated) and ask them about anything on the form that’s unclear.
What types of local business licenses and permits do I need?
Often, a business license is granted at the city level and is a fee paid to get a tax registration certificate that then allows you to legally conduct business in that area. The number and type of licenses and permits you’ll need depends on several different factors: the type of business you’re in, where it’s located, and your specific business needs.
For example, say you’re a restaurant that wants to serve alcohol and have an outdoor patio. Depending on your location, you may need a license to open a restaurant in your selected location, a license to serve alcoholic drinks on the premises, and a permit to build a patio area. Most likely, those would be three different applications, possibly involving you going to three different government departments to obtain them.
Keep in mind that if you’re running a home-based business, you might need to get permits and licenses that differ from those necessary to run a small business with a dedicated location outside of your home.