Starting a business - licenses & permits

Starting a business - licenses & permits

An overview of the licenses and permits needed to start a business.

Virtually all small businesses need some type of small business license or permit to legally operate, and filing the necessary ones is one of the most important steps you can take towards opening your business. But knowing which one you need to operate in your country, state, and city and in your specific industry isn’t always cut-and-dry. Although ultimately you might not need to obtain these small business licenses, it’s worth going through this checklist to make sure you don’t need them.

This article addresses general requirements for U.S. based small businesses. Please reach out to a local attorney for advice specific to your location if you are based outside the U.S.

Online Businesses

Online businesses are generally treated the same as any business with a store front or real-world facilities. You will usually be required to comply with all the permitting and licensing rules that apply to a physical company. However, typically online businesses are only required to abide by the license and permit regulations of their home states don’t have to follow the state licensing rules of states in which the purchasers of their products and/or services are located.

Home Occupation Permit

Many home-based business owners don’t know that operating a business from their home does not exempt them from needing to get the same small business license and permits. Almost all home-based small businesses need a Home Occupation Permit to legally operate. Consultants or freelancers might only need a Home Occupation Permit as a small business license. A Home Occupation Permit essentially just shows that by operating your business out of your home, you aren’t significantly adding traffic, noise, or harmful environmental conditions to your area. The SBA’s list of state-by-state small business licenses can help you find and apply for a Home Occupation Permit specific to your state.

City/County-Level Licenses and Permits

1. Business Operating License

You might need your local or city government to issue you a local small business license to operate within your city limits, which would grants you the right to operate your business. If you don’t know where to start, your best bet is to go to your local city hall or courthouse to find the office where can obtain your business license.

County governments often require essentially the same types of permits and licenses as cities. If your business is outside any city or town's jurisdiction, these permits apply to you. The good news: County regulations are usually not as strict as those of adjoining cities.

2. Zoning and Land Use Permits

You might have fewer zoning restrictions if you base your business out of your home, but zoning ordinances can still apply even to home-based businesses. Residential areas can have strict zoning regulations that might even prevent home-based businesses altogether, but it could be possible to get a variance that lets you operate out of your home. In many areas, attitudes toward home-based businesses are becoming more supportive, making it easier to obtain a variance.

To get a variance, you'll need to present your case before your city's planning commission. In many cases, variances are quite easy to get, as long as you can show that your business won't disrupt the character of the neighborhood where you plan to locate.

Check with your local or city government office to know what the rules and regulations are regarding home-based businesses in your area.

State-Level Licenses and Permits

Once you’ve fully checked in with your local state government for the small business licenses you need, it’s time to move up a level. Small business requirements vary state-by-state. The full list of what you need lives on your state’s government website.

The most important license to consider is the state business operating license. If you’ve already obtained your local business license, then you know the general gist of what a state small business operating license is. Essentially, states require all small businesses to have a business license for tracking purposes. Not only do these small business licenses grant you the right to operate your business in the state, but they help the state government track the business entity and keep a pulse on your revenues so they can issue taxation accordingly.

The licenses and permits you need from the state, county, or city will depend on your business activities and business location. Some licenses and permits expire after a set period of time. Keep close track of when you need to renew them — it's often easier to renew than it is to apply for a new one.

Federal-Level Licenses and Permits

You'll need to get a federal license or permit if your business activities are regulated by a federal agency. In most cases, you won't have to worry about this. The Federal Trade Commission can tell you if your business requires a federal license.

Check to see if any of your business activities are listed here, and then check with the right federal agency to see how to apply.

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