How to Get a Business License and What You Need to Apply

Table Of Contents

• 3 Reasons Why You Need a Business License
• Choose Your Business Structure Before You Apply for a Business License
• The Different Types of Business Licenses
• Gather Necessary Information and Documents
• 5 Steps to Apply for a Business License
• 5 Common Pitfalls to Avoid
• What to Do After You Get Your License
• Start off on the Right Path with Your Business License
• FAQ on How to Get a Business License

So, you're ready to turn that amazing idea into a real business? Congrats!

But before officially opening your doors (or website), you need to take one crucial step: getting your business license. Don't worry — it's not as complicated as it sounds.

Sure, navigating government paperwork isn't exactly thrilling, but it's a crucial part of turning your dream into a legitimate business. The good news? You're not alone in this journey.

In 2023, over 5.5 million people in the United States took the plunge and applied for a business license. And guess what? They made it through, and so will you!

In this guide, we'll break down the process into bite-sized, easy-to-follow steps. By the time you finish reading, you'll feel confident and ready to tackle your business license application.

3 Reasons Why You Need a Business License

1. Legal Compliance

Operating without a business license can lead to serious problems. Depending on where you are and what type of business you run, you could face heavy fines or even have your business shut down by local authorities.

2. Customer Trust

Picture this: You're choosing between two bakeries for your wedding cake. One has a shiny business license displayed proudly on the wall, the other... well, who knows? Which one would you pick?

Customers feel more secure when they know your business is licensed. A business license is like a stamp of approval from your local government, showing that you meet all the required standards and regulations.

3. Access to Opportunities

A business license opens up many opportunities to help your business grow.

Want to open a business bank account or apply for a loan? Most banks often require a license before letting you open a business account or apply for loans. Also, a license is necessary for legal and professional transactions when dealing with other businesses.

Does My Side Hustle Need A Business License?

Regardless of size or type, most businesses need a business license to operate legally. This includes side hustles like selling homemade jewelry or even construction. A business license protects you from expensive legal mistakes and proves your credibility in your side gig.

It tells customers, "Hey, I'm legit!"

Which, let's face it, can be handy when you're trying to convince someone to buy your artisanal pickles or hire you to paint their living room.

Choose Your Business Structure Before You Apply for a Business License

Before applying for a business license, you must establish your business structure. Choosing the proper business structure is a foundational step for any entrepreneur. It affects everything from daily operations to taxation and the protection of personal assets.

4 Common Business Structures to Consider

Here’s a list of the four common business structures to help you select the best one for your new venture:

1. Sole Proprietorship

This is the simplest form of business, owned and operated by one person. It's straightforward to set up and gives the owner complete control over business decisions. The owner is personally liable for all business debts and obligations, which means personal assets like your home or car could be at risk.

Best for: New entrepreneurs with low-risk business ideas or those seeking simplicity without the complexities of formal registration.

2. General Partnership

This structure involves two or more people sharing ownership, including profits, assets, and legal and financial liabilities. All partners are personally liable for business debts and any actions taken by other partners.

Best for: Small teams starting out that want a simple setup with shared responsibilities. A partnership agreement to outline the terms of profit sharing and responsibilities is advisable.

3. Limited Liability Company (LLC)

An LLC is a flexible, hybrid structure that combines a corporation's limited liability protection with a partnership's tax benefits. Members are protected from personal liability for business debts, which safeguards personal assets from lawsuits or business debts.

Best for: Business owners seeking protection from personal liability with minimal formality.

4. Non-Profit Corporation

This structure may qualify for tax-exempt status if it is designed for organizations operating for charitable, educational, religious, or other altruistic purposes. Incorporating as a non-profit provides a shield against personal liability for the directors, officers, and employees.

Best for: Groups aimed at public benefit, seeking tax advantages while maintaining a formal organizational structure.

Why It Matters

Your choice of business structure impacts:

• Legal exposure and tax obligations which differ depending on the structure.
• Filing requirements, with some structures requiring more extensive documentation and record-keeping than others.
• Future growth, as some structures are more adaptable to scaling and changes than others.

Remember, you can always change your business structure later, but getting it right from the start is easier. Choosing the wrong structure can lead to higher taxes, personal liability for business debts, or even legal issues. So, take your time and consider all the factors before making this important decision.

Bonus Tip: Don't be afraid to ask for help! There are lots of free resources out there, such as Small Business Development Centers and SCORE mentors. They can guide you through these decisions and make sure you're on the right track.

The Different Types of Business Licenses

1. Federal Licenses

Good news! Most small businesses don't need a federal license. You only need one if you're in specific industries like agriculture, broadcasting, or transportation.

What to do: Go to the website of the federal agency that oversees your industry.

For example, if you're opening a distillery, check the Alcohol and Tobacco Tax and Trade Bureau website.

2. State Licenses

Almost all businesses need some kind of state license. The exact type depends on what you do. For example, a construction company needs a license that is different from that of a pet grooming service.

What to do: Visit your state's business licensing website or talk to your local Small Business Development Center. They're there to help you!

For example, in Florida, healthcare professionals need a license from the Florida Department of Health.

3. Local Licenses

Your city or county might have additional requirements. This is especially common for businesses that serve food or alcohol.

What to do: Check your city or county government website or call their office.

For example, if you're opening a restaurant in Chicago, you need a special Food Establishment License from the city.

4. Professional Licenses

Many states often require a professional license to work in a particular field.

Some professions that fall into this category are:

• Doctors
• Electricians
• Hair stylists
• Insurance agents
• Real estate agents

What to do: Look up your industry's association website or give them a call. They usually have great info about what you need.

For example, if you're an electrician, you'll need to pass a state exam to get your license.

5. Sales Tax Licenses

If you sell products (and, in some places, services), you'll probably need a sales tax license. This license allows you to collect and pay sales tax.

What to do: Visit your state's Department of Revenue website. Look for a section about "Sales Tax" or "Business Tax Registration." Complete the online application form with your business information and EIN or SSN.

For example, in California, you'd visit the California Department of Tax and Fee Administration website to apply for a seller's permit.

6. Home-Based Business Licenses

Are you running a business from home? You might need a home occupation permit. This shows that your business won't disrupt your neighborhood with noise or traffic.

What to do: Check your city or county's zoning laws on their website or call the planning department. If required, apply for a home occupation permit by filling out an application form, describing your business activities, and paying any fees.

For example, in Seattle, you'd check the Seattle Department of Construction & Inspections website for home business regulations and apply for a home occupation permit if necessary.

Gather Necessary Information and Documents

Before you apply, you may need some of the following documents:

1. Business name and structure
2. EIN or SSN
3. Personal identification
4. Business address and contact information
5. Description of your business activities
6. Proof of zoning compliance
7. Financial information

Do You Need an EIN?

An EIN is like a Social Security number for your business. You might need one if:

• You're going to have employees
• Your business is a corporation or partnership
• You want extra protection for your personal information

Getting an EIN is free and easy; just visit the IRS website and apply online.

Organize Your Documents and Stay Stress-Free During the Process

Create a Checklist: Before you start gathering your documents, make a checklist of all required items based on your research or consultations.

Use Digital Copies: Where possible, keep digital copies of all documents organized in a secure, easily accessible location.

Review and Update: Ensure all documents are current and update any that have expired or will expire soon.

Organizing and preparing these documents before starting your business license application can significantly streamline the process. This preparation saves you time and helps prevent missing or incorrect information delays.

5 Steps to Apply for a Business License

1. Find the Right Office

Your first step is identifying the local government office responsible for business licensing. This is typically a city or county office, such as the Department of Business Services or a similar regulatory authority.

Tip: Visit your city or county’s official website for guidance on where to go. Some areas may allow you to handle everything online, while others might require an in-person visit.

2. Get the Required Forms

Once you know where to go, the next step is to obtain the necessary application forms. Most jurisdictions offer these forms online, but they can also be picked up in person at the respective office.

Tip: Download forms from the official government website to ensure they are the most current versions. Read the forms before filling them out to understand all the required information.

3. Fill Out the Forms Carefully

Complete the application forms with accurate and current information. Pay special attention to every detail, as errors can cause delays.

Tip: Double-check your entries for accuracy. Have someone else review your application to catch any mistakes you might have missed.

4. Pay the Fees

Application fees for business licenses vary depending on your location and the type of business. Generally, these fees range from $50 to $200.

Tip: Check if there are additional fees for processing or expedited services. Ensure you understand all payment methods accepted by your local office.

5. Submit and Wait

After filling out your forms and paying the fees, submit your application to the designated office. The processing time can vary from a few days to several weeks.

Tip: Ask for a receipt or confirmation number after submission. Keep a copy of all documents for your records. Follow up if you don’t hear back within the expected time frame.

5 Common Pitfalls to Avoid

Applying for a business license is a critical step in setting up your business legally, but it's easy to make mistakes that can delay or even derail the process. Being meticulous and avoiding mistakes can streamline the process of obtaining your business license and avoid unnecessary complications.

Here are five common pitfalls you should avoid:

1. Leaving Blanks on Forms

Every field on the application form is there for a reason. Leaving blanks may cause confusion or delays, as the issuing agency might return the form for completion.

If a section doesn’t apply to you, write “N/A” (not applicable) instead of leaving it blank. This indicates to the reviewer that you acknowledged the section and confirmed it doesn’t apply to your business.

2. Applying for the Wrong Type of License

Different businesses require different types of licenses. Applying for the wrong one can lead to unnecessary expenses and delays.

Carefully review the descriptions and requirements for each license type your local or state government offers. If you need help determining which license applies to your business, contact the licensing office or consult with a business advisor.

3. Forgetting to Sign Forms

Unsigned application forms need to be completed and will be returned or rejected, delaying your licensing.

Double-check all forms before submitting them to ensure you have signed in all the required places. Keep a checklist if necessary.

4. Omitting Required Documents

Most business license applications require supporting documents. These include proof of business address, identification, zoning approval, or other certifications.

Before you start completing the application, gather all necessary documents. Then, check each document against the application requirements to ensure completeness.

5. Incorrect Application Fee Payment

Licensing fees vary, and submitting the wrong amount can cause delays. Overpayments may take time to refund, and underpayments can delay processing.

Verify the exact amount required for your application. Always use a check or credit card rather than cash for traceable transactions and possible refunds.

Additional Tips to Help You on Your Application Process

Check and Double-check: Always review your application package several times or have someone else review it. A fresh pair of eyes may catch errors you've overlooked.

Follow-Up: After submitting your application, don’t hesitate to contact the office if you don’t receive an acknowledgment or update within the expected time frame.

Stay Informed: Stay updated about any changes in licensing requirements or fees by regularly checking the relevant government websites or subscribing to their updates.

What to Do After You Get Your License

Once you've successfully obtained your business license, there are a few crucial steps you should take to ensure continued compliance and to make the most of your newly official status:

Display Your License Properly

Many local jurisdictions require displaying your business license so customers can easily see it. This complies with regulations and enhances your business’s credibility with clients.

Tip: Post your license in a visible area, like the entrance or at the reception desk. If you operate online, consider including information about your license in the footer of your website or on the 'About Us' page.

Mark Your Calendar for License Renewal

Business licenses have expiration dates, and missing a renewal deadline can lead to fines or even a suspension of your ability to operate legally.

Tip: Set reminders in your calendar for renewal deadlines well in advance. Consider setting multiple alerts: one month before, one week before, and on the deadline day to ensure you remember.

Stay Up to Date with Business Information

If any critical information about your business changes (such as address, business name, or the nature of the business), you must inform the licensing authority. Keeping your license updated ensures that all your business documentation remains legal and valid.

Tip: Create a checklist of all the places and authorities you need to inform when changes occur. This might include the IRS, your state’s Secretary of State, and local business agencies.

Keep Records Organized

Maintaining organized records of your license and renewal documentation can save you a lot of trouble in the future, especially when proving compliance during inspections or audits.

Tip: Use a digital filing system to store copies of your business license, renewal receipts, and related correspondence. Back up these documents in a secure cloud storage service to ensure they are safe from physical damage, such as fires or floods.

Review Legal Requirements Regularly

Laws and regulations can change, and it is crucial to stay informed about any updates that might affect your license or how you conduct your business.

Tip: Subscribe to newsletters from your local business bureau or industry-specific organizations. These resources often provide updates and insights on regulatory changes that could impact your business operations.

Start off on the Right Path with Your Business License

While the process might seem daunting at first, remember that millions of entrepreneurs just like you have successfully obtained their business licenses. By following the steps outlined – from choosing your business structure to avoiding common pitfalls – you're well on your way to making your business dream a reality. Remember, a business license is more than just a piece of paper; it's your ticket to legitimacy, customer trust, and exciting growth opportunities.

With your business license in hand, you'll be ready to open your doors (or website) with confidence, knowing you're starting your entrepreneurial adventure on the right foot.

Here's to your success in the exciting world of business ownership!

FAQ on How to Get a Business License

Q: Do all businesses need a license?

A: Most businesses require a license or permit to operate legally. The requirements vary based on location, industry, and business size. Always check with your local and state government agencies to understand what you need for your specific business.

Q: What documents are needed to apply?

A: You typically need the following documents:

• A government-issued ID, such as a driver's license or passport.
• Business name registration or a DBA (Doing Business As) certificate.
• Your Employer Identification Number (EIN) or Social Security Number if you're a sole proprietor.
• A detailed description of your business activities.
• Financial information, which might include estimated sales or proof of capital.
• Proof that your business location complies with zoning laws, if applicable.

Q: How much does it cost?

A: The cost of a business license varies widely, depending on your business type, location, and the specific fees set by your local government. The fee can range from $50 to $200, although licenses requiring health and safety inspections might cost more.

Q: When should I get a license?

A: Get a license before you start operating to avoid legal issues. A license ensures you comply with all legal requirements.

Q: What if my application is denied?

A: If your application is denied, the licensing authority will explain why. Common reasons include zoning conflicts, failure to meet local regulations or incomplete application forms. Address the issues noted, then resubmit your application. Contacting the licensing office directly can help clarify and resolve any problems.

Q: Do I need a new license if I move my business?

A: Yes, moving your business usually requires a new license, especially if you’re moving to a new city or county. Different areas have different rules, so check with the local licensing authority in your new location to ensure you comply with their requirements.