In March 2019, there were 774,725 new businesses (less than one year old) established in the U.S. Each one of these newly established businesses was more than likely required to obtain one or more business licenses before opening.
A business license gives you the legal right to operate your business in a state, city, or jurisdiction. Specific requirements may vary by state and the type of business license you need depends on your business operations.
It’s important to follow licensing procedures and ensure you’re in compliance with local business licensing laws. With proper licensing, your company will operate legally and you can be confident you’re adhering to all necessary regulations.
Types of Business Licenses
Since there are many types of business licenses available, you may need to do some research to find out which type of license your business needs to obtain and file in your jurisdiction. Learning about the different license types and how they function will also help you determine which business license your company needs and why.
Business Operating License
Your business may be required to obtain a business operating license before you can offer goods or services in your jurisdiction, usually at the state level. Every type of business may be required to obtain a business operating license at a state and/or city level.
Before you begin doing business, check with both your state and city governments to ensure you’ve obtained the proper business operating licenses. You may need to apply for one or both before legally operating in your area.
Doing Business As (DBA) License
You may need to operate your business under a different name than how you registered it with the state, city, or county. This is common for business owners who have multiple locations or several companies operating under the same corporation.
If your business’s name is different from the name you have registered, before you can operate, you may be required to get a DBA license with the state or city, establishing the relationship between your company and its DBA name. Whether this business license is required depends on your specific jurisdiction.
Depending on the field you’re in, you may be required to file a professional or occupational license and ensure you keep this license active. In 2018, over 43 million people throughout the country held professional licenses or certifications, according to the U.S. Bureau of Labor Statistics.
Professional licenses are commonly required in the law, healthcare, and educational fields. Review the requirements in your industry, state, and city to ensure you hold the proper professional licenses to legally operate.
Federal Business License
If your business operations are generally regulated by a federal agency, you’re required to obtain a federal business license. For example, farming activities are overseen by the U.S. Department of Agriculture so agricultural businesses are required to apply for federal business licenses.
The specific federal business license you’re required to obtain depends on your industry and operations. Review your industry’s guidelines and check with the federal agency that issues the license to ensure you’re satisfying these licensing requirements.
Planning and Zoning License
Cities and municipalities are frequently organized into zones that determine where businesses can operate and the types of businesses allowed to operate. Zoning laws ensure one area isn’t inundated with only one type of business and that businesses don’t set up shop in strictly residential areas.
Research the location where you’re planning to open your business to ensure it’s in the proper zone. If not, you may need to apply for a planning and zoning exception with the city. If you can prove your business won’t disrupt other operations and is an asset to the location, you may be granted permission to operate in the area.
How to Get a Business License
The steps you must follow to obtain a business license depend on your location, industry, business operations, and local jurisdiction requirements. In most cases, you’ll need to follow the steps below to successfully get your business licensed in your area.
Determine the Type of Business License You Need
Consider federal, state, and city guidelines as they relate to your specific business type. Research the type of business license you need and consult with local agencies to ensure you’ve identified the licenses you need to apply for.
Gather Necessary Documentation
You must provide specific information when you apply for a business license, including your business name, proof of your tax status, and a description of your operation. Before applying, gather the documentation you’ll need to show, including proof that your company is bonded and insured and other qualifications.
You may be asked to show proof of bond insurance or financial statements. Be prepared to pay for a surety bond, as well as licensing and filing fees before you apply.
Apply for Your Business License
The application process varies based on your type of business, the license you’re applying for, and the agency you’re dealing with. In some cases, you may be able to complete your business license application online but other licenses may require you to notarize and mail in paperwork to the agency.
Receive Your Business License
If you completed the application process online, you may receive instant approval and access to your business license. However, some licenses require the agency to review your application and documentation thoroughly.
In these cases, it may take weeks or months before you receive approval. You may need to contact the government agency that administers the license to provide additional information or check its status.
Follow License Renewal Requirements
To continue legally doing business in your jurisdiction, you must keep your license active. Most business licenses have expiration dates and renewal requirements. Be sure you’re familiar with these regulations to keep your license updated.
You may need to re-apply for a business license, submit updated paperwork, pay another fee, or prove your credentials are still valid before your license is approved for renewal. Give yourself plenty of time before the expiration date to comply with these renewal requirements so there’s no lapse in your business license.
As a business owner, it’s important to learn which business licenses you must hold to operate in your city and state. Obtaining the proper federal, state, and city business licenses ensure your company is following the laws and allows you to focus on growing your client base and earning a profit.