When starting a new business, you’ll aim your focus on business plans, choosing your business’ structure, and funding—all of which are vital concerns—but before you make your first sale, be sure you’ve obtained the proper licenses and permits.
Different types of business licenses
Each business will require some kind of license to operate, but there are many different levels of licensing that your business may require.
Below, you’ll find the five overall types of licenses and permits you may need:
The local level is where you really need to pay attention. Every municipality/city has its own licenses and permits your business must obtain prior to opening your business. Certain types of businesses like restaurants may have additional requirements like food preparation and fire department licenses.
Where to get your business licenses and permits:
Each city will have a different name for the department that handles business licenses. For example, if you were to open a bike shop in Portland, Ore., you would file for your City of Portland Business License Tax with the Bureau of Revenue and Financial Services. But if you were to open the same business in Spokane, Wash., you’d apply for your business license with the Office of Management and Budget. Fortunately, despite any name differences, if you want to apply in person for your business license and any required permits, the departments are typically located all in the same place: city hall. Most cities, however, will have the forms available for download on their website and you can either apply online or mail/fax the form and save yourself a lot of time. Many cities and states will even prioritize digital applications ahead of paper ones, so be sure to enquire about filing times before driving down to city hall.
Once you form a business entity, one of the first things you’ll want to do is get an Employer Identification Number (EIN), which is for your federal taxes. Although each state’s tax laws vary, you’ll likely need to register your business for a sales tax license.
Where to get your business’ tax permits:
EINs are obtained through the IRS by fax, phone, or online. Online applications have the quickest turnaround times.
Sales tax licenses/permits are obtained through your state’s Department of Revenue (or similar government agency). In most states, you can apply for the tax license by mail or online. Each state’s Department of Revenue will likely have several locations across the state, if you wish to apply in person. However, online filings tend to be filed fastest.
State business licenses aren’t required for all types of businesses; only those specified by the state where your business is located. Use the U.S. Small Business Administration’s state license and permit directory to find out if your business requires a state business license. For example, in Michigan if you’re going to open a bakery, you’ll need to obtain a Food Establishment License through the Department of Agriculture and Rural Development.
Where to get your business license:
Each state has particular requirements for different types of businesses. Your business may not need a license from the state, but first you’ll need to make sure. To find out what state license your business requires, visit your state’s business licensing department’s website.
If your business operates in one of the industries regulated by the federal government (alcohol, agriculture, aviation, etc.), you’ll need to obtain the proper certifications and licenses applicable to your business and profession.
Where to get your business license:
Each federally-regulated industry will have its own agency to which you will need to apply. Start by contacting that agency through their website. For example, if you’re going to be manufacturing alcohol, go to the Alcohol, Tobacco Tax, and Trade Bureau’s website, where you’ll find all the information you need to get started.
In some states, businesses that operate within certain fields (medicine, law, architecture, etc.) are required to not only to use specific types of professional business structures, but need to acquire specific types of professional licenses which indicate their level of expertise.
Where to get your professional license:
Each state will have its own set of requirements for professional entities, and each field of expertise (doctors, lawyers, and similar professions) will typically have its own governing board through which you can obtain licensure.