Business License – Types and Application Process
If you’re about to start your entrepreneurial journey, you need to adhere to certain business laws. Starting a business is a big step to take in your career, and most businesses require a combination of licenses and permits from federal and state agencies to function legally. The requirements and fees for these documents may vary depending on your location, local rules, and business plans. Here are some common types of business licenses you may require:
- Business operating license
A business operating license allows you to do business in your state or locality. Depending on local legislation, business licenses can be obtained from the city, county, or state.
If your business involves selling goods or services, you will also require a seller’s permit. This document allows you to start collecting sales tax from your customers.
A “doing business as” or a fictitious name statement allows you to operate the business under a name different from your legally registered one. Based on local legislation, you may be required to register for the same under your city or state government.
If you are starting a brick-and-mortar business, you may also require special clearances or permits such as planning, zoning, building, signs, and fire.
Some industries also require special licensing that can be obtained from state licensing boards. These include salons, electrical, childcare, health, and law.
Depending on your business and the location, you may also require certain state licenses to ensure you meet local regulations. Some state-governed industries include auctions, construction, dry cleaning, farming, plumbing, restaurants, retail, and vending machines.
Certain industries are governed by the federal government, such as firearms sales, fishing and wildlife, maritime transportation, mining and drilling, nuclear energy, radio and television broadcasting, transportation and logistics, and aviation. These require special approvals from the federal government. A detailed list and how to apply for these licenses can be found on the Small Business Administration webpage.
You will also need to determine the legal structure for your business. Common legal structures include sole proprietorship, general partnership, limited liability company (LLC), Corporations, and Nonprofit organizations. Licenses for these may cost anywhere from $50 to hundreds of dollars, depending on the type of business. You may also be required to renew the license after a certain period.
You can find out what business licenses you need via:
- State’s Secretary of State office, Department of Revenue, or any other government agency that issues business licenses
- Resources available at your local Small Business Administration office or webpage – Visit this page and enter your zip code to find a list of requirements for granting licenses to small businesses in your area. Make a call to your town clerk as well to double-check your licensing requirements.
- Working with a business lawyer
How to apply for a business license?
Once you have determined the licenses you need for your business, it is time to start applying. You may need to send applications to several agencies for different permits. In many localities and states, it is possible to apply for a business license online. Log onto the agency’s webpage to find the application form for a business license and complete the steps as stated.
However, some industry-specific licenses may have more complicated procedures and longer wait times due to the review process. The process for applying for a business license differs from industry to industry and business to business. However, most entities will be required to go through the following steps:
- Research the local and federal rules and regulations to find out which licenses you require. Speak to state agencies for clarification, if any.
- Submit your application (online or in-person) with all the required paperwork, and pay the processing or filing fee as applicable.
Most license applications require the following:
- A description of the business, a list of planned activities, and the physical address
- Copies of corporate records such as corporate bylaws or articles of incorporation
- Evidence of state or local tax status
- List of ownership and individuals allowed to service or sign agreements on behalf of the company
Businesses such as architecture or construction may also be required to submit more paperwork, such as:
- Proof of insurance or surety bonds
- Educational or professional qualifications of owners and key staff
- Audited financial statements or evidence of operating capital
Approval of licenses can take anywhere between a few days to a few weeks. Keep checking with the agency for approval. Once you receive your business license, you are legally allowed to operate in your area. You may be required to renew your license based on state/federal law. Be sure to do so diligently.
Since licensing can be complicated, you can hire a third-party filing service or consult an experienced business lawyer to help you prepare your license applications. This will help you ensure you have the best chance of receiving a business license and performing according to legal standards.
