How to Get a Business License in 4 Steps

Business ownership is a constant learning process, beginning from the moment you decide to start your business. To ensure success, it’s important to start off on the right foot. From building your business plan, naming your business, registering your business, to figuring out if you need a business license, we’re here to walk you through the process and set you up for success. 

The U.S. Small Business Administration estimates that the majority of small businesses will need one or more business licenses or permits. A business license allows you to stay compliant with local, state, and federal regulations while keeping consumers safe by ensuring you follow industry regulations that apply to your business. 

What type of business license you need will depend upon where your business is located, the type of business you operate, and which local, state, and federal government regulations apply.

Read on to learn more about how to get a business license, the most common types of licenses, and the costs you can expect to incur.

4 steps to get a business license

As with most things you’ll face as an entrepreneur, there’s no single straightforward answer for how to go about getting a business license. The process—and whether or not you need a license—will depend upon the state where you operate and which industry you operate in. 

For most states and small businesses, you’ll follow a fairly standard process, although the details and complexities will vary. If you need any support in getting your business license, our simple business license service can get you from start to finish with ease. 

Here’s the general framework of the business licensing process.

1. Create your business

Before you apply for a business license, you’ll need a business. To create your business, you’ll need to choose a name, product or service, and business structure.

The most common types of business structures include:

• Sole proprietorship: A business owned by a single person. There’s no distinction between the business and the business owner.
• Limited liability company or LLC: A registered business entity that provides distinction and legal protection between an owner and the business. It combines elements of a partnership and a corporation.
• Corporation: A company that has filed articles of incorporation and is a separate entity from the owners. A corporation generally has more annual paperwork than other business entities.

Business formation is the first step in your journey to becoming an entrepreneur. You’ll need your business name and structure while applying for your business licenses, and you may also need a formal business plan.

2. Get an Employer Identification Number (EIN)

If you’re registering your business as an LLC or Corporation, you’ll need to apply for an employer identification number or EIN. This is the number you’ll use to file your taxes as a business.

Sole proprietors can file their taxes as a pass-through entity using their own Social Security number. If you’re planning to operate your business as a sole proprietor, you won’t need to file for an EIN. 

3. Decide which business licenses you need

To figure out which business licenses and permits you need, you’ll need to review the specific regulations for your area and industry. It’s a good idea to get a business lawyer involved at this point. 

You should review these resources:

• The Secretary of State’s website for your state
• Your state’s Department of Revenue
• Local Small Business Administration (SBA) office
• Your city or county Office of Business and Economic Development

4. Apply for your business licenses

Licenses and permits may be granted by your city or county government, state agencies, or federal agencies. Once you've gathered all of the appropriate documentation to get a business license, apply with the appropriate agency or use a verified business licensing service.

The business license application process varies and depends on what types of permits you need, so make sure to check carefully before submitting your application.

Processes for different types of licenses

In general, you’ll follow the following steps for obtaining your required operating permits.

Federal licenses

A federal license is required for businesses regulated by the federal government.

1. Identify your industry (e.g., agriculture, education, hospitality).
2. Identify your product or service (e.g., food, medication, supplements, tutoring, hotels, entertainment).
3. Identify the federal government agency website that regulates your industry.
4. Determine which licenses and permits apply to your industry and product or service.
5. Follow the agency’s instructions to apply and pay any required fees.

State licenses

State agencies regulate certain industries, although this varies by location.

1. Visit the Secretary of State website for your state.
2. Determine if you need a state-level business license.
3. Follow registration requirements to apply and pay any applicable fees.

County, municipal, or local licenses

Pretty much every business will require a locally administered license to operate, including ecommerce businesses.

Contact your local county clerk or check their website and follow the registration process.

The most common types of business licenses

Some industries are more likely to require business licenses than others. Below, you’ll find descriptions of the most common types of licenses and permits and the different business activities to which they pertain.

Seller’s permits

A seller’s permit allows you to collect sales tax from customers. These types of permits are a requirement for most states, whether you’re selling online or in person.

Business operating licenses

A business operating license is required by some states, cities, and counties. This is the basic business license that allows you to operate a business in your state.

Business permits

Some industries or locations may require a special permit to operate your business. For instance, you may need a food handling permit as a restaurant or planning and zoning permits for building or remodeling a brick-and-mortar store.

Industry-specific licenses

A special license may be required to operate your type of business, especially if it affects public health and safety. Industries that may need special licenses include salons, childcare, medicine, law, construction, and others. These industry-specific licenses are available through the state licensing board.

Federal licenses

The U.S. government regulates businesses in certain industries and requires registration for business licenses. Here are some common examples:

• Agriculture
• Aviation
• Broadcasting
• Drilling and mining
• Firearms
• Fish and wildlife
• Liquor license
• Maritime transportation
• Nuclear energy
• Transportation and logistics

DBAs

A DBA (short for “doing business as”) allows you to operate your business under a name that’s different from the one you’ve registered. Many businesses, especially sole proprietorships, choose this so they can use a name other than their own. Sole proprietorships are automatically assigned the name of the owner for the business name.

For example, if your name is John Smith, your business will be called John Smith. Sole proprietors (and other business owners) can file for a DBA so they can operate their business under a different name than the one registered (for example, Smith Designs).

How much does a business license cost?

The cost of a business license depends on a number of different factors.

• Type of business
• Industry
• Location
• Governing agency (federal, state, and local level)

You may need to pay a fee for the license as well as a processing or filing fee. Many industries set the license to expire after a set amount of time, oftentimes one year, after which you will need to pay a renewal fee.

In general, business license fees will vary between $50 and $200. Missing any necessary requirements or licensing could end up costing you more or subject you to lawsuits, so it’s important to carefully consider this process. A business lawyer can make sure you’ve got everything you need to do business and stay protected.

FAQs

How do I renew a business license?

Each local, state, and federal regulating agency will have its own process, but it should be similar to the original application process. Business license renewals may happen annually or every few years.

Can I run a business without getting a license?

Possibly. In some places and in some industries, you are able to operate a business without a business license. Whether or not you can operate without a license depends more on your industry and where your business is registered than other factors. 

LLCs and corporations are slightly more likely to need a license or permit, but sole proprietorships and partnerships might still need DBAs, even if they don’t need any other type of license.

Does my LLC need a business license?

Whether or not your LLC needs a business license will depend upon where your business is registered and what industry you’re in.

Do online businesses need a business license?

Sometimes. If you’re operating an online business that sells taxable products, you’ll need to collect sales tax, which requires a license in most states or local municipalities. You can submit your business license application with your state.