Licenses and Permits: Overview

Many entrepreneurs don't know they may need several local, state, and federal licenses and permits from government agencies. Home-based businesses, consulting firms, retail stores, and even daycares need local licenses, and permits.

You may need specific local or state permits for certain regulated activities. As a small business owner, you should know these licensing requirements to avoid fines and legal issues.

This FindLaw article explains the answers to small business permits and licensing FAQs (frequently asked questions).

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Who Issues Business-Related Licenses and Permits?

All levels of government issue business licenses and permits. This includes federal agencies and state and local governments.

For example, imagine you are opening a New Orleans restaurant with a bar. You formed your limited liability company already. Now, you must get all the necessary licenses and permits from the city. This will include a general business license and health permit (to prepare and sell food). You also need a Louisiana liquor license to sell alcoholic beverages. You also need a federal tax I.D. number from the U.S. government.

What Types of Licenses and Permits Does a Business Need?

The licenses and permits you need depend on the type of business you operate and where you open.

Below is an overview of some of the most common types of small business licensing and permit requirements.

• Business licenses: If your business is within an incorporated city's limits, you may need a license from the city. If your business is outside the city limits, you will likely need a license from the county. For more information, contact the county or city office in your area. You may need more licenses at the state level, depending on the nature of your business.
• Building permits: You need a local permit to construct or renovate a building for commercial use. Most local governments have a department of planning. You usually need to submit detailed plans for approval. The agency will review your plans before approving the work and issuing the permit. If you hire a general contractor, they will likely be familiar with applying for building permits. This could save you time and money.
• Certificate of occupancy: If you operate in a building for your new business, you need a certificate of occupancy. The issuing authority will probably be your city or county zoning department. This certificate will verify that your building complies with local zoning ordinances and building codes.
• Employer Identification Number: Most businesses need a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). It is like a Social Security number for your company. You may also hear people calling this number a Tax Identification Number.
• Health department permits: Businesses that sell or prepare food need a permit from their local health department, which is usually your county.
• Licenses based on type of product sold: You usually need a special license to sell cannabis, firearms, gasoline, liquor, or lottery tickets. Each state has its own licensing requirements based on what a business sells.
• Professional licenses: If you provide professional services, you will most likely need to get state licenses before practicing. Licensed professions include accounting, architecture, counseling, law, and medicine.
• Property use permits: You may need a land-use permit to start a manufacturing business. A home-based business may also need a land use permit, depending on your local regulations. You should contact your city or county's zoning department for your requirements.
• Sales tax licenses and numbers: Your business may also need a state sales tax license and identification number. Most states have a sales and use tax for physical items. In states with sales taxes, you will need a sales tax number and sales tax permit. A sales tax permit is also known as a seller's permit.

This list is not exhaustive. Regulations are subject to change. Do your research and talk to an attorney if you have concerns about your licensing requirements.

What Are the Types of Government Licenses?

Governments generally issue two types of business licenses: general business licenses and specific licenses.

General Business Licenses

For a general business license, it doesn't matter what the nature of your business is. All businesses must apply for this license.

Many states and local governments require a general business license for all businesses operating in the state or city. There is usually a fee involved. Sometimes, there is a yearly report and an annual fee, too.

These general licenses allow states and local governments to track business activity and collect revenue. Tax registration is also necessary in most states, especially if you hire employees or sell goods.

You may also need to get specific licenses. These depend on the type of business you conduct.

Specific Business Licenses

You will need a license in many states and towns to operate any business. But, some business operations give rise to more specific licensing requirements. What types of business activities require a specific license or permit?

Some common examples include:

• Agriculture
• Auctions
• Alcohol, tobacco, or firearm sales
• Cannabis
• Commercial transportation
• Construction
• Financial services

Your state or local government may require licenses for other business activities. Your state's secretary of state website is usually a good place to learn more about what requires a license or permit.

You may need a federal license if you operate in certain federally regulated industries. These include, among others:

• Aviation
• Broadcasting
• Firearm sales
• Mining
• Trucking

You should visit the U.S. Small Business Administration (SBA) website to view a full list of business categories that federal agencies regulate. Suppose you fall into one of these categories. In that case, you must apply for a business license from the associated federal agency or licensing authority.

Is a Certificate of Occupancy the Same as a Business License?

No. A certificate of occupancy does not take the place of the other business licenses you need to get.

If you build, rent, or buy property for commercial use, you will probably need a certificate of occupancy. Contact your city or county building department to find out how to get one.

If you hire a general contractor, this person will often have experience getting permits and licenses. They will probably know which agency to contact and how long the certificate of occupancy will take.

Do I Need to Register My Business Name?

Yes. When you create a business structure like a corporation or LLC, you give your business name to your state government. This is part of your business formation documents. If you operate a sole proprietorship or general partnership, your official business name is your personal name.

Suppose you plan to conduct business under a name other than your official business name or personal name. In that case, you will need to register the new name. Most counties and states only allow businesses to do business under a name other than their legal name after registering the name first. The new name is a DBA (doing business as). Depending on the county and state, it may also be called a fictitious or assumed business name.

Registration requirements for DBA names are typically straightforward. First, you must choose an original name that no other state business uses. Next, you submit an application and a government fee to your local county, secretary of state, or other city or state agency.

Beware of 'Grandfathering' Issues

Existing businesses are sometimes exempt from new business laws and regulations after the business is already operating. This is "grandfathering."

But, once a business gets sold, the new owner may need to follow all local regulations fully. This includes any regulations from which the prior owner might have had an exemption. In other words, if you buy an existing business, you may need to get permits and licenses that the previous owner didn't.

What Is the Cost of a Business License?

License and permit pricing depends on the license, permit, and business type. They can range from $50 to thousands of dollars.

Need Help With Business License Compliance?

Small business license and permit compliance is challenging. You don't have to figure it out on your own. An experienced business lawyer can help you with your business license applications. With an attorney's help, you can feel confident that you fully follow the laws that apply to your business. A business lawyer can also help answer other legal questions about your business.