Business Licenses and Permits
You've created a business plan, chosen your business name, and secured business financing. Before an entrepreneur swings open the doors to start their new business, they should check to see what business licenses and permits they need. Almost all businesses will need a general business license. A business permit allows the business to open and operate in that city, municipality, or state.
Local governments and state government agencies determine licensing requirements for different business entities.
This article and FindLaw's Small Business section will help point you in the right direction.
Federal Business Licenses
Federal Employer Identification Number (EIN)
Before applying for a federal license, ensure you have an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Sole proprietorships need an EIN in some situations. A Limited Liability Company (LLC) and corporation always do.
Much like a Social Security number for individual taxpayers, this federal tax identification number is how the IRS identifies your company. Business owners use their EINs to conduct activities that would otherwise require a Social Security number. While applying for an EIN, the IRS requires you to disclose the name and taxpayer ID number (SSN, TIN, or EIN) of the person responsible for the business. Even nonprofits must have an EIN.
Types of Federal Business Licenses
If your business is involved in activities supervised and regulated by a federal agency, then you will need a federal license or permit. Here are some common examples:
- Alcohol, tobacco, or firearms sellers' permits and licenses through the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)
- Broadcasting licenses through the Federal Communications Commission (FCC)
- Drug manufacturing or creating food products licenses through the Food and Drug Administration (FDA)
- Investment advising licenses through the Securities and Exchange Commission (SEC)
For instance, if you manufacture, wholesale, import, or sell alcoholic beverages at a retail location, you must register your business and obtain certain federal permits (for tax purposes) with the U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB).
State Business Licenses
State business licenses are often required for occupations that need professional licenses. Businesses with employees must apply with their state's worker's compensation or unemployment insurance department. Each state has its own guidelines.
Some examples of the professions that require state occupation licenses:
- Building contractors
- Cosmetologists and hair stylists in salons
- Funeral directors
- Private investigators
- Private security guards
A state business license tracks and monitors businesses for tax purposes. A company cannot operate lawfully in the state without one. Most states have agencies specifically created to deal with issuing state licenses.
State Sales Tax Permit
If a small-business owner sells goods, the business must have a sales permit and use tax permit from the state it operates in.
Local Business Licenses
Local business licensing and permit requirements vary widely depending on two factors:
- Your Business Location: The city or county/parish where you open may have licenses and permits you need to secure.
- Type of Business You Will Be Operating: If you are a restaurant selling food and alcohol, you may need a liquor license and health permits.
Types of Local Permits
There are quite a few types of local-level permits and local licenses that may apply to a business.
- Zoning and Land Use Permits: Before you close on a real estate deal or sign a lease, make sure you can operate your type of business in that area. This is important for home-based businesses. Other land use permits pertain to parking.
- Sign Permits: Most cities require permission through a permit before you can put business signs on a property. There are usually size limitations.
- Building Permits: Before renovating or constructing a building, apply for a building permit.
- Seller's Permits: These are needed when selling or leasing goods from a physical location.
- Health Permits: Restaurants, food trucks, and food preparation businesses need health permits.
- Fire Marshal and Fire Department Permits and Certificates: This pertains to customer occupancy limits and emergency exit access.
In addition to local licensing and permit requirements, your business must comply with all applicable state and federal licensing and permit requirements.
States like Louisiana offer a checklist of applicable licenses and regulatory permits after you form a new business with the secretary of state.
Hire a Business Attorney
The Small Business Administration (SBA) is another free resource for business development resources, including licenses and permits. The laws and licensing requirements for a business startup or even buying a business are confusing.
It helps to consult with a small-business lawyer in your state. These lawyers can often determine a business's legal needs quickly and efficiently. Investing in a lawyer's time, like a fire code inspection or medical checkup, can help prevent major problems down the road.
Business Licenses and Permits Articles
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