Starting a small business demands changing many hats and donning roles you'd never thought even existed! While registering your business initially seems daunting, understanding and gathering documents for the different business licenses and permits can feel further intimidating.
If the thought of navigating through business licenses and permits overwhelms you, thankfully, you need not worry much. As long as you are organized and well-researched, you should get your licenses and permits timely!
Most new small business owners often wonder if they at all need a business permit. For example, if you plan to sell handmade crafts at a local gig, you probably don't need a license.
However, if you plan to start a dental health clinic or a restaurant, you will need both permits and licenses. In other words, the exact nature of your business qualifies the kind of permits and licenses you may need to acquire.
In this article, we take a detailed look at what business licenses and permits. With this information, you can decide if you should go ahead and make an application for one.
What are Business Licenses and Permits?
If you've heard people use the terms "license" and "permit" interchangeably, don’t feel confused anymore. Business licenses are more generic and allow you to do something in general. For example, a liquor license may allow you to sell liquor at your restaurant or bar.
Licenses also have an underlying subtext of expertise and competence. For example, psychologists, hairdressers, and others carry special licenses.
Permits allow businesses to run specific operations. Usually, a business permit denotes safety; thus, hospitals may require health permits. A hospital may require a health permit, but a psychologist working there will require a practicing license.
Another example is a gun carry permit, which allows the permit holder to carry a gun concealed (or non-concealed if the permit allows).
How are Business Licenses and Permits Different from Business Registration?
A business license or a permit allows an existing business to carry out its stated business activities. However, licenses and permits themselves do not bring a business into existence. If you have a business idea, you will first need to make sure that you register a company.
- Sole Proprietorship: This entity is for situations where you are your business's sole owner, and no one else is involved in its operations. As only you are responsible for every aspect of the business, any legal problems arising from it will be completed on you.
- Limited Liability Corporation (LLC): An LLC offers you personal protection from various kinds of business liabilities. Your assets will not be affected should any legal problems arise. However, LLCs require a lot of paperwork, and registering one may be time-consuming.
- Limited Liability Partnership (LLP): An LLP is similar to LLC, but in the US, they are often used by professionally licensed individuals such as doctors, architects, and lawyers.
Consulting a tax professional is the first step to deciding which business structure fits your business idea the best. Once your business is registered, you will then need the relevant permits and licenses to carry out your business activities.
Types of Business Licenses and Permits
If you are a business owner or planning to become one, you will need a combination of business permits and licenses. Both permits and licenses are handed out by federal and state agencies, depending on their jurisdiction.
Whether you need a federal permit, license, or something handed out by state agencies, the answer depends on your business activity and location.
Federal Licenses and Permits
Federal Agencies such as the Alcohol and Tobacco Tax and Trade Bureau and the US Department of Agriculture may hand out licenses and permits if any federal agency regulates your business activities.
For a complete list of agencies that provide licenses and permits for these business activities, visit the US Small Business Administration page dedicated to applying for licenses and permits. To ensure that you do not violate any rules and regulations, you may take a good look at the list below.
- Agriculture: You will need an agriculture license if you handle animals, animal-derived products, plants, biotechnology, or biologics across US states.
- Alcohol: If you sell, serve, import, or manufacture alcoholic beverages, you will need an alcoholic license.
- Aviation: Licenses for businesses that deal with aircraft, transporting people and goods via air, and for entities that engage in aircraft maintenance.
- Commercial fisheries: If you plan to engage in commercial fishing in the deep sea, you will need this license.
- Firearms: This includes licenses for dealing and selling firearms, explosives, and ammunition.
- Fish and Wildlife: Permit and licenses for wildlife or fisheries-related activity.
- Maritime transportation: Permits for providing cargo and passenger transportation via the sea.
- Mining and drilling: Licenses for mining for oil, natural gas, mineral resources, etc.
- Nuclear energy: Any sort of nuclear activity, whether fuel production or disposal of nuclear waste, will require licenses.
- Transportation and logistics: This license is necessary if your business handles large vehicles.
- Radio and TV broadcasting: Permits and licenses for mass communication-related activities that involve radio, TV, satellite, cable, etc.
State Licenses and Permits
State licenses and permits are handed out by non-Federal entities such as state authorities, city or county municipalities, and various other state government agencies.
These licenses and permits are given to business owners who intend to operate in certain business activities. States often control a more significant number of business activities than the federal government.
Some examples include:
- Dry cleaning
- Retail sales
- Hospitality (hotels, motels, etc.)
- Vending machines
While some licenses expire after a certain period, it is quite easy to renew them if you timely realize that the expiration date is approaching. As the US consists of 50 states and several territories, it is essential to research the kind of business permits and licenses you will need. An excellent place to start is your own state's official website.
Most county and municipality-level permits and licenses come under state jurisdiction. Nevertheless, there are times when your business activities may come under specific laws.
As a result, you will probably need to visit your county and city offices, including the county clerk's and state tax offices. This information may not always be available online, and you may physically have to visit the offices concerned.
Alongside business licenses and permits, your profession may require an additional license to practice. These licenses are often handed down by specific professional bodies such as state-specific mental health boards, certified public accountant (CPA) licenses, the license to practice as an attorney, etc.
Doing ample research before calling yourself a professional and starting a business is important. The penalties can be rather harsh if you practice a regulated profession without a valid license.
Here are some examples:
- Accounting: The National Association of State Boards of Accountancy hands out licenses for accounting firms.
- Architecture: National Council of Architectural Registration Boards gives away permits for practicing architects.
- Cosmetology and Hairstyling: National Interstate Council of State Boards of Cosmetology is responsible for the licensure of hairstylists and cosmetologists.
- Dental Care and Medical Services: American Dental Hygienists Association licenses dental hygienists, whereas the American Dental Association gives away licenses to dentists.
- Engineering: National Council of Examiners for Engineering and Land Surveying hands out licenses to land surveyors and engineers.
- Law: The American Bar Association is responsible for licensing attorneys.
- Pharmaceuticals: Sellers and makers of pharmaceutical products should apply for licenses at the National Association of Boards of Pharmacy.
Additional licenses and permits
There can be several non-professional licenses as well. These may be related to health, building, zoning, and the environment. For example, if you start a business next to a protected park, you may have to get additional clearance that your business activities will not cause ecological damage.
We know it can get mighty complex and cumbersome, but thorough research will save guard you from unforeseen penalties later.
Permits and Licenses for Home-Based Businesses
Working from home can seem easiest and hassle-free until you realize you may need additional permits. If you plan to work from home or start an office in your house, you may need the following licenses and permits:
- Home occupation permit
- Zoning permit
- Fire permit
- Sign permit
- Special use permit
What is the Cost of a Business License?
The cost can vary from just $50 to several hundred dollars, depending on whether it is a federal license or a state permit. It also depends on the industry in which your business operates. Some states like Nevada have general business license requirements. That may cost about $500.
Hence, the short answer is that it depends on what permit or license you need, and where you will use it.
Where To Get a Business License?
As mentioned before, you need to visit the US Small Business Administration page to check if you need a federal license or permit. If you don't, you may contact your state government's website or offline offices to apply for the necessary licenses.
How Long Does It Take To Acquire A Business License?
Unfortunately, there are no clear answers to this question. It truly depends on how complex your business activity is and where you are making the application.
Some states process licenses and permits quickly, and you may get your documents in days. However, if you operate in a high-risk area such as nuclear technology, the federal government may take weeks to months to give you the licenses and permits you’re applying for.
Should You Get Your Licenses Before Registering Your Business?
You could, in theory. However, it makes more sense to start a business and then make an application for licenses and permits around the same time.
Will I Need Permits And Licenses If I Want To Expand My Business Abroad?
Most definitely. You will need not only American licenses and permits but also the licenses and permits valid in the countries where you plan to engage in business activities.
What Are The Steps To Getting A Business License?
Make a list of licenses you need
This is one of the most complex steps. You need to assess your business activities and the location where you plan to operate. Conduct research or seek external help. Make connections and telephone calls if the information is not available online. Finally, make a list of the licenses and permits you need.
Gather all the necessary documents
Every permit and license requires a little paperwork. This means documentation, evidence, and more paperwork. As a result, getting your hands dirty and keeping all the documents necessary in designated files and folders is essential. Keep digital copies of all your records too if needed.
Apply for all the licenses
Start making applications for your licenses one by one. The first step should be to register your business. However, if you are a professional, you may need to have a professional license even before you think of starting a business. Nevertheless, start applying for those permits and licenses.
Put your licenses to use
Getting a license is not enough to get business traction. Use your licenses to market yourself. Proudly state that you are a licensed business owner with all the permits necessary. This gives customers and clients the confidence they want to do business with you.
Renew your licenses on time
Business owners often overlook license expiry dates and hence forget to renew their licenses and end up paying penalties. Late renewals may cost more, and you may also have to make fresh applications. To avoid these cumbersome scenarios, it’s best to set reminders and renew your licenses before they expire.
Act Quickly And Get Your Licenses And Permits
If you are a small business owner or are planning to be one soon, you probably are one of the most brilliant individuals to walk this planet. Running a business can be an incredibly satisfactory and enriching experience. Besides, it helps you generate revenue for yourself and income sources for your staff and their families. In short, running a business is a highly fulfilling experience.
However, for this experience to remain fulfilling and satisfactory, and to operate peacefully, you must gather all the required business permits and licenses. You will also need to renew them before they expire. Make sure to get your documents in order and gather all the permits and licenses required to be a successful business owner.