No small business is the same, but all businesses require some form of license or permit in order to operate within the law – there are no exceptions (even businesses that operate from the home require them).
But what licenses/permits are required and where do you go to get them?
Let’s review the key licenses and permits that apply to small business owners and freelancers, and how to go about obtaining them.
Local Licenses and Permits – A Must Have!
These are the most basic and widespread forms of business licenses. Most businesses, including freelancers and home-based businesses, need a county, city or town license. These are issued by the appropriate revenue or licensing office and are often known as a general business license or privilege license. These are easy to get and fees are low.
To apply, visit your city or county website and complete an application form. You’ll need to include information about your gross receipts, registered business name, and Employer Identification Number or Social Security Number. Once you have your license, display it prominently on your premises. Renewal forms are usually sent out automatically on an annual basis.
Home Occupancy Permit – for Home-Based Businesses
This one catches a lot of businesses out. If you run your business from your home, your local government may require that you obtain a home occupancy permit for a small fee. If you’re not sure if you need one, contact your local city or county office for advice. If you live in a leased building or home owner’s association community, check to see if any special permits or permissions are needed to conduct business on the premises.
Sales Tax License – for Retailers
Most states require that retail businesses have a sales tax license or permit so that they can charge sales tax to customers. Your State Franchise Tax Board Agency can help.
Professional Licenses – for Certain Skill Sets and Professions
These are the licenses that are the most visible as we all go about our everyday life. You see them in hair salons, doctors’ offices, and on the walls at real estate firms. Basically, a professional license is required by individuals who work or run businesses that require specific qualifications. The state government issues these and application processes vary in accordance with the profession. For example, hair stylists must meet standard criteria such as age and completion of a number of hours of recognized training, while medical licenses require a deeper dive into credentials and past practice by your state’s licensing board.
Federal Licenses or Permits – for Trades Regulated by Federal Agencies
These are required for businesses that are involved in any activity regulated by federal law. This includes the sale of alcohol or firearms, tobacco, wildlife-related activity, agriculture and more. Licenses and permits are issued by the appropriate federal agency (find out which here). If you’re involved in the alcohol business, you’ll also need contact your local Alcohol Beverage Control Board for alcohol business permit and licensing information.
It’s worth hiring an attorney to help you navigate the federal licensing process, as you can see you may need more than one license or be required to obtain them in the right order.
General Permits – for Observing Safety, Structural and Appearance Ordinances
These are issued by your state or local government and are required in accordance with local ordinances that regulate the safety, structure and appearance of a business. These include:
- Health permit – For businesses involved in food preparation. Check with your governing health department to check requirements and arrange an inspection.
- Building permit – Required when remodeling a building or commercial space.
- Seller’s permit – For businesses that purchase wholesale merchandise for resale (also known as a sales tax license). These are usually granted by your State Franchise Tax Board agency.
- Zoning permit – Required in some cities for new businesses to ensure the property is properly zoned. Check with your local planning department or zoning board.
If you’re still not sure which licenses apply to your business, contact your local Small Business Development Center, SBA Regional Office or state’s Department of Commerce (they can often connect you with local business resources).
And don’t forget to display your license paperwork and renew them, as necessary, throughout the life of your business.