How to Get a Business License in 7 Simple Steps

Getting a business license is an important step when an entrepreneur starts their own venture, and it doesn’t have to be a daunting process. Whether someone is planning to launch a small business or a larger enterprise, understanding how to obtain a business license is essential for entrepreneurs to ensure they’re operating legally and in compliance with local and state regulations.

How do you get a business license? To start the process, applicants will need to apply for a business license through the local Secretary of State business license office. The specific requirements can vary depending on the location and the nature of the business, so it’s advisable for the applicant to contact the local municipality or county office to determine the exact steps to follow. This may involve filling out an application for a business license and paying a fee. In addition to the local business license, a state business license may be needed, especially if the business will be operating across multiple jurisdictions within the state.

Different types of business licenses are available, each designed to address the unique needs of various industries. Common types include a general business license, small business license, and specific permits for industries such as food service, health care, or construction contractor. The type of business will determine the type of license that’s needed.

In many cases, obtaining a business license may also require a business license ID or registration number, which serves as a unique identifier for the company. This ID is crucial for tax purposes and may be requested by government agencies and financial institutions.

Meeting business license requirements is essential for entrepreneurs to avoid legal issues and fines. It’s important that business owners gather all necessary documentation, such as proof of a policy from one of the best small-business insurance companies, zoning permits, and any applicable health or safety certificates. It’s important for business owners to comply with these requirements to secure the business permit successfully.

The process of getting a business license involves applying for the appropriate permit through the local government and potentially the state government. Applicants will want to be diligent in researching different types of business licenses and their specific requirements. By taking the necessary steps and ensuring compliance, entrepreneurs can operate their business legally and build a solid foundation for their endeavors.

What is a business license, and do you need one?

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A business license is a legal document or permit issued by a local government authority that grants a business or individual the right to operate a specific type of business within a certain jurisdiction. It essentially gives someone permission to engage in commercial activities in that area. Business licenses are typically required for a wide range of business ventures, from small home-based businesses to large corporations. Whether or not someone needs a business license depends on various factors including location, the type of business, and the local regulations that apply, among others.

• Location. Business license requirements vary by city, county, and state. It’s essential for business owners to check with their local government to determine the specific regulations in the area. Some areas may require a license at the city level, while others may require additional permits at the county or state level.

• Type of business. Depending on the business, there may be requirements for specific licenses or permits. For example, a restaurant may need health permits and food service licenses in addition to a general business license, while a home-based consulting business may only need a basic business license. On the other hand, the start-up costs for a lawn care business, for example, may include a local or state license depending on the regulations and requirements.

• Industry regulations. Some industries are heavily regulated, such as health care, finance, and alcohol sales. If the business falls into a highly regulated category, the owner may need to obtain specific licenses to meet additional requirements.

• Business structure. The legal structure of the business, such as sole proprietorship, partnership, LLC, or corporation, can also impact licensing requirements. Some business structures may have more stringent requirements than others.

• Home-based businesses. Even if the business operates from a home, it still may need a business license, especially if customers or clients visit the home or if the business is conducted online and reaches customers in other jurisdictions.

• Zoning regulations. Zoning laws can affect where and how someone operates their business. It’s important for the owner to verify whether the business activities comply with local zoning regulations, since this can impact whether a license is needed and where the business can operate.

While it is possible in some cases to operate a business without formally registering it, it often comes with legal and financial risks. Many jurisdictions require businesses to be registered and obtain the necessary licenses and permits to operate legally. Operating an unregistered business may lead to legal penalties, difficulties in accessing business services, challenges in securing financing or partnerships, and limited legal protections. It’s important for business owners to research and comply with local regulations to ensure their business operates within the boundaries of the law and receives the benefits of formal registration, such as some liability protection (as would come from setting up a business entity to prospect personal assets) and tax advantages. Consulting with a local business adviser or attorney can also be helpful for business owners as they navigate the licensing process.

Tips for Getting a Business License

• Research local licensing requirements

• Accurately complete the required paperwork

• Submit the application along with any required fees

Photo: istockphoto.com

STEP 1: Establish your business’s legal name by forming a business entity, such as a limited liability company (LLC) or a corporation.

To establish a business’s legal name, one effective step is to form a business entity, such as a limited liability company (LLC) or a corporation. These entities provide distinct legal identities separate from the owner’s personal name and offer various benefits, including liability protection and potential tax advantages. An LLC is a specific type of legal business structure that provides limited liability protection to its owners, who are referred to as “members.” When a business owner forms an LLC, it creates a legal entity that’s separate from its owner, which means that the personal assets of the members are typically shielded from business-related debts and liabilities. An LLC is primarily concerned with the legal structure and liability protection for the business, and not the permits necessary for a business to operate.

When an owner forms an LLC or corporation, they’ll typically need to choose a unique business name that complies with the state’s naming rules and regulations. This name is then registered with the appropriate state agency, often the Secretary of State’s office, which legally establishes the business’s identity. Additionally, the owner may need to include specific identifiers such as “LLC” or “Inc.” in the business name, depending on the chosen entity type.

Registering the business as an LLC or corporation also helps protect the owner’s personal assets from business-related liabilities. In the event a business faces legal issues or debts, the owner’s personal assets are shielded from being used to satisfy business obligations. Setting up a formal business entity can help business owners establish credibility with customers, partners, and financial institutions. It can also make it easier for them to secure financing, enter contracts, and navigate the legal and regulatory aspects of running a business.

It’s important for business owners to note that forming an LLC or corporation involves specific paperwork, filing fees, and ongoing compliance requirements, such as filing annual reports and paying taxes. Consulting with a legal or business professional is advisable for a business owner to ensure they choose the right entity for their business and complete the paperwork correctly.

STEP 2: If your business will have employees, apply for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS).

When a business has employees, it’s crucial for the business owner to apply for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). The unique nine-digit number is also known as a Federal Employer Identification Number (FEIN) and is used to identify the business for tax purposes. Obtaining an EIN is a straightforward process:

• Online application. The easiest and quickest way to apply for an EIN is online through the IRS website. The online application is available 24/7 and provides immediate results. Business owners can simply visit the IRS website and follow the instructions to complete the EIN application.

• By mail or fax. Business owners who prefer to not apply online can download the forms from the IRS website. The processing time for this method will likely be longer than if using the online application.

• Phone application. Business owners can also apply for an EIN by calling the IRS Business and Specialty Tax Line. An IRS representative will assist the business owner with the application process over the phone.

When applying for an EIN, the business owner will need to provide information about the business, such as its legal name, physical address, business structure (sole proprietorship, partnership, LLC, or corporation), and the reason for applying. Having an EIN is important for various reasons.

• It's required for federal tax purposes, including income tax withholding and reporting.

• It's necessary for opening a business bank account and establishing credit for a business.

• It's used when filing employment tax returns.

• It helps ensure accurate record-keeping and compliance with IRS regulations when a business has employees.

STEP 3: Research the types of business licenses and permits you need to operate your business legally in your state, county, and city.

There are several important steps a business owner needs to take to ensure their business operates legally and to avoid potential issues, including researching and obtaining the necessary business licenses and permits.

• Identify the business location. The owner will need to determine the specific locations where the business will operate. This includes the state, county, and city or municipality. Each of these jurisdictions may have its own licensing requirements.

• Contact local government agencies. Business owners will need to reach out to the relevant government agencies in each jurisdiction to inquire about the specific licenses and permits required for their type of business. This information can be found on the official websites of the state, county, and city governments or by contacting the business licensing departments directly.

• Understand the business type. Businesses may have different license and permit requirements based on their industry, activities, and location. Business owners will need to identify the nature of their business and the services or products they intend to offer to determine the specific licenses needed.

• Check zoning regulations. Business owners will need to review local zoning regulations to ensure that the business location is zoned for the specific type of business activity. Zoning rules can impact whether an owner can legally operate a business at a particular address.

• Compile a list. Owners can create a comprehensive list of all the licenses and permits that are needed based on research. It’s essential for them to distinguish between state, county, and city-level requirements.

• Application process. Business owners will want to find out how to apply for each license or permit, including the necessary forms, documentation, and fees. Some applications may be available online, while others require in-person submissions.

• Comply with regulations. Owners will want to ensure that the business meets all the specific requirements associated with each license or permit. This may include background checks, inspections, insurance, or educational qualifications, depending on the business type.

• Stay updated. It’s important for business owners to keep in mind that licensing requirements can change over time, so it’s important for them to stay informed about any updates or changes to local regulations that may affect the business.

• Consult professionals. If a business owner finds the licensing process confusing or overwhelming, they may want to consider seeking assistance from a local business adviser, attorney, or a professional who specializes in business licensing. Such professionals can provide guidance and ensure that the owner navigates the process correctly.

• Renewals and compliance. Once the necessary licenses and permits have been obtained, the business owner will need to stay up to date by renewing them as required.

Business owners will want to note that the specific licenses and permits they need can vary widely based on their business location and the nature of the business. Taking the time to research and follow the proper procedures for obtaining these licenses and permits is an important step for business owners to take to ensure the legal operation of the business.

Photo: istockphoto.com

STEP 4: Gather the applicable paperwork and fill out the information in full.

To obtain a business license, the owner will need to gather the applicable paperwork and provide the necessary information. While the specific requirements can vary depending on the location and nature of the business, there are common documents and requirements that are needed when an owner applies for a business license.

• Business license application. A business owner will typically need to complete a business license application form provided by the local government. This form will require basic information about the business, such as its name, address, ownership structure, and purpose.

• Proof of identity. The business owner or owners may be required to provide proof of identity for the business owner or owners, such as a driver's license, passport, or other government-issued ID.

• Business structure documentation. Depending on the business structure (sole proprietorship, partnership, LLC, or corporation), the owner may need to submit relevant documents, such as articles of organization or incorporation papers.

• Zoning approval. To ensure that the business location complies with local zoning regulations, the owner might need to provide proof of zoning approval or a letter from the local zoning department.

• Business plan. Some jurisdictions may require a business plan outlining the business's goals, operations, and financial projections.

• Employer Identification Number (EIN). If the business has employees or is a corporation, an EIN from the IRS is needed.

• Professional licenses. If the business is in a regulated industry (such as health care, real estate, or legal services), it may need professional licenses or certifications.

• Health and safety permits. If the business is in food service, health care, or other industries with health and safety considerations, it may need additional permits.

• Sales tax permit. If the business sells tangible goods, it may be required to have a sales tax permit to collect and remit sales tax to the state.

• Business insurance. Some jurisdictions may require proof of liability insurance or bonding.

As for resources to help an owner form their business and obtain the appropriate licenses and permits, they can consider these options:

• Small Business Administration (SBA). The local SBA office can provide guidance and resources on starting and growing a business, including information on required licenses and permits.

• Business registration services. There are online services and companies that specialize in helping businesses with registration and compliance. They can streamline the process and provide guidance to business owners.

• Registered agent services. A registered agent is responsible for receiving legal and tax documents on behalf of a business. Using a registered agent service can help business owners ensure they don't miss important notifications related to licenses and permits. Hiring a registered agent can cost between $50 and $300 per year.

It's essential for the business owner to check with the specific local government and regulatory agencies for precise requirements and to use available resources to navigate the process efficiently. It’s crucial for business owners to stay compliant with licensing and permitting requirements to ensure the legal and smooth operation of their business.

STEP 5: Pay any necessary business license filing fees.

Paying the necessary business license filing fees is an important step in the process to file for a business license. Licenses can cost from $50 to hundreds of dollars, and the fees can vary widely depending on the location, business type, and the specific permits and licenses that are required.

• Determine the costs. The owner will want to start by identifying the total cost of the business license application. This can include fees for the initial application, permits, processing, the cost of small-business insurance, and any additional requirements specific to the business.

• Payment methods. Next, the business owner will need to find out what payment methods are accepted by the local government or licensing authority. Common payment options include credit cards, checks, money orders, and sometimes cash.

• Online payments. Many government agencies offer the convenience of online payments through their official websites. This can be a fast and secure way to pay the fees. Business owners will want to ensure that the website they’re using is the official one for the local government to avoid scams.

• In-person payments. If a business owner prefers to pay in person, they need to visit the relevant government office where they submitted their application.

• Mail-in payments. If the application process involves submitting paperwork by mail, the business owner can typically include a check or money order payable to the appropriate government entity. They’ll want to follow the instructions provided on the application form.

• Keep records. Business owners will want to keep copies of receipts or proof of payment for their records. This documentation can be valuable for tax purposes and as evidence of compliance with licensing requirements.

• Confirmation. After paying the required fees, the owner will want to confirm with the licensing authority that their payment has been received and processed. This ensures that the application is complete and the license is issued promptly.

• Renewal fees. Business owners will want to remember that many business licenses require annual renewal, which often comes with renewal fees. They’ll need to be aware of these ongoing costs to keep the business license current.

• Budget accordingly. Business owners will need to incorporate the cost of obtaining and renewing the business license into the business budget. Failing to pay fees or renew licenses can result in penalties and the suspension of business operations.

Some examples of the cost to get a business license by location are as follows.

STEP 6: Submit your license applications and any required paperwork and wait for approval.

The time it takes to register a business can vary widely depending on several factors, including the location, the type of business, and the efficiency of the local government agencies involved.

• Location. The registration process can be faster or slower depending on where the business is located. Some regions have more streamlined and efficient processes, while others may have more bureaucratic procedures.

• Business structure. The type of business structure can impact the registration timeline. Registering a sole proprietorship may be quicker than forming a corporation, which often involves more paperwork.

• Completeness of paperwork. Ensuring that the application and all required paperwork are complete and accurate is crucial. Any errors or omissions can lead to delays in processing.

• Government processing times. Government agencies responsible for business registration and licensing may have varying processing times. Some jurisdictions offer expedited processing for an additional fee.

• Type of license or permit. The specific licenses and permits needed can also affect the timeline. Some may be issued relatively quickly, while others, such as those requiring health and safety inspections, may take longer.

• Response time. After submitting the application, the owner may need to wait for responses, requests for additional information, or inspections. The time it takes to receive these responses can influence the overall registration timeline.

• Online versus in-person. Some jurisdictions offer online registration options, which can expedite the process compared to in-person submissions, which may require appointments and waiting times.

• Legal structure changes. If a business owner is changing their business structure or converting it to a different type (from a sole proprietorship to an LLC, for example), this can involve additional steps and time.

Overall, registering a business can take anywhere from a few days to several weeks or even months, depending on the factors mentioned above. It’s advisable for business owners to begin the registration process well in advance of their planned business launch date to ensure that all the necessary permits and licenses are in place. To get a more accurate estimate of the timeline for a specific situation, it’s recommended that business owners contact local government agencies or consult with a business adviser who is familiar with the registration process.

Photo: istockphoto.com

STEP 7: Track your business licenses’ expiry dates so you can renew licenses before they expire.

Tracking the expiration dates of business licenses is essential for business owners to ensure that the business remains in compliance with local regulations and operates legally. It’s recommended that business owners consider these steps to help them manage their business licenses.

• Create a license renewal calendar. The business owner may want to establish a dedicated calendar or digital reminder system to track the expiration dates of the business licenses and permits. They’ll want to note the specific renewal deadlines for each license.

• Compile a list of licenses. The owner can make a comprehensive list of all the licenses and permits the business holds. This may include business licenses, professional licenses, health permits, zoning permits, and any other relevant licenses.

• Gather renewal information. For each license, the business owner will want to gather information about the renewal process, including the required documentation, fees, and any changes in regulations or requirements that may have occurred since the initial application.

• Set renewal reminders. Owners can set up recurring reminders well in advance of the license expiration dates. This will give them ample time to prepare the necessary paperwork and funds for renewal.

• Maintain updated contact information. Business owners will want to make sure that the licensing authorities have the business’s current contact information.

• Budget for renewals. Business owners can incorporate the costs of renewing licenses into the business budget. They may want to consider creating a separate budget category specifically for license and permit renewals.

• Monitor regulatory changes. Finally, it’s important for business owners to stay informed about changes in local regulations and licensing requirements that may affect their business. Government agencies often update rules and fees, so ongoing awareness is helpful.

By proactively tracking and renewing the business licenses, a business owner can avoid legal issues, financial penalties, and disruptions to their operations. It's a crucial aspect of responsible business ownership and ensures that the business continues to operate within the boundaries of the law.

There are numerous aspects of obtaining and managing business licenses and permits. The process of getting a business license involves a business owner researching local requirements, gathering the necessary paperwork, and submitting applications, all while paying close attention to fees and timelines. Other important aspects include the significance of business licenses, how they differ from legal structures such as LLCs, the importance of adhering to local regulations, the critical role of an EIN, the significance of tracking license expiration dates, and the importance of staying compliant with licensing requirements. All of this information serves as an inclusive guide for entrepreneurs and business owners, outlining the key steps and considerations in the process of obtaining, managing, and renewing business licenses and permits, which is crucial for legal and successful business operations.

Sources: Forbes, Shopify, NerdWallet