State and Local Small Business Licenses for Start-Ups
Regardless of the size of your startup business, you will need to comply with municipal, state, and possibly even federal licensing, permitting, and registration requirements. If this is your first business, or you are starting a business in an unfamiliar industry, research the license requirements for both your industry and your business location.
In every state, there are resources available to help start-up business owners:
- Your state economic development agency or small business development center (SBDC) provides information about legal and regulatory requirements. Minnesota's Licensing site, for example, provides information about more than 750 licenses, permits, registrations, and certifications. That kind of one-stop-shop is helpful for state-required licenses, but you'll still need to research local government licenses and permits. Your town or county clerk's office can advise you about local business licensing, permitting, and registration needs.
- Your local office of the U.S. Small Business Administration (SBA) is an excellent resource for would-be entrepreneurs and small business owners. Whether you're starting as a sole proprietor, a partnership, or a limited liability company, this agency provides a range of small business resources. Through the affiliated Senior Core of Retired Executives (SCORE), you can get mentoring from experienced business people. They may also be able to advise you on federal licensing requirements.
So what types of licenses do you need? A lot of it will depend on the type of business you will be operating and your daily business activities.
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State Business License Requirements
Business licensing requirements differ from state to state. Many require the following types of licenses and permits (depending on the type of business).
A state business license is used by the state to gather information on business entities and for tax purposes. It is required for a business to operate lawfully in its state. This license registration is typically done with the Secretary of State's office.
You'll have to register your business name along with the business address. You'll need to take care to pick a name that isn't being used by another business.
- If the business is an LLC or corporation, the business name will be registered with the state when you submit the articles of incorporation.
- If you're a sole proprietor, the default name will be your name, but you can apply to use a fictitious name (also known as a DBA—"doing business as") with the city or county.
- Partnerships can also apply for a DBA with the city or county.
You will need to register your business with the IRS in order to get an EIN (employer identification number). You will use this tax ID number for many of the forms that you will fill out later, as well as for federal tax purposes.
Occupational licenses are issued in 30 states. Specific types of workers are required to provide proof of education, training, and testing before they can work in their field. Licensing requirements are intended to protect health and safety. Contact your state's licensing authority to confirm whether you or your workers need an occupational license.
Examples of jobs requiring an occupational license include home inspector, funeral service director, massage therapist, real estate appraiser, preschool teacher, EMT, school bus driver, pesticide handler, and many more. Jobs for which occupational licenses are required often do not require a 4-year degree. You can learn more about occupational licensure policies at the Council of State Governments.
A professional license is similar to an occupational license. It is for professionals with extended education, such as doctors, lawyers, accountants, architects, teachers, counselors, etc. Professional licensure ensures license holders have met certain minimum requirements for education, experience, and competency.
Licenses for selling certain products: States require businesses to have licenses to sell liquor, firearms, and gasoline.
Sales and use tax permit: For states with a sales tax, you will have to apply for a sales tax license. When a business charges a tax, it is acting as an agent for the state. It will be sending this business tax income to the state.
Note: Your particular type of business may also require special permits or licenses.
You may need a general business license from your local government (city or county). These local licenses are typically easy to obtain and require paying a fee to the city or county clerk.
If you are selling a product to the public but not from a brick-and-mortar shop, an online shop, or from a home-based business, you may need a peddler's license.
Zoning permits: A zoning permit demonstrates that the location of your business is approved by the city or county for your business' usage. Zoning laws are locale-specific, and can vary even from block to block.
Zoning ordinances regulate things like the type of business that is allowed in an area, waste disposal, the size and placement of signs, and even the appearance of the storefront. If your specific location isn't zoned for your type of business and you've signed a lease, you have trouble on your hands. Before signing a lease, be sure to confirm that the area is zoned for your usage and that the lease accurately reflects the type of business.
Health permits: If you'll be preparing food as part of your business, you'll need to get permits from the county to do so.
Building permits: If you want to remodel or build a new space, you must get building permits from local agencies. Confirm that the remodeling or new space conforms to local ordinances.
Permits are typically required for plumbing, electrical, and heat or A/C work, but are obtained by the company or person doing the work. Consult with a licensed contractor or your city permitting office to determine what types of permits you'll need.
Don't forget your local fire department. They will need to inspect your building.
Environmental permits: Local, state, and federal government units are all concerned about environmental issues, such as air quality, water quality, and waste disposal. A new business may need environmental permits from a county or township office.
Learn More About State and Local Business Licenses From an Attorney
Ready to start a new business? Get legal advice, especially when dealing with important licensing and permitting issues. Contact a local business attorney to find out more about state and local business licenses.
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