Starting a business requires a few key documents. Entrepreneurs need paperwork stating which entity they chose to incorporate as. They also need a federal tax ID to open a business bank account, registered trademarks associated with their brand, and business licenses for the startup’s operations.
Getting a business license is not the same thing as obtaining other types of licenses, such as a driver’s license. Every business, industry, city, county, and state has different regulations and requirements for obtaining business licenses. These rules differ depending on the activities of the business. You must obtain licenses and permits, and pay a specific fee, from the proper issuing agency to keep your business in compliance with the state.
How do you know which business licenses your startup will need? The types of licenses and permits your business needs will vary depending on your industry and location. However, certain business licenses are common for most startups to obtain to run a business. Let’s take a look at some of the basic business licenses.
Employer Identification Number (EIN)
An EIN is a federal tax ID. While it is not a traditional business license, this tax ID is necessary to open a business bank account. You may use an EIN to hire employees and establish a credit profile. An EIN is also necessary to incorporate or form an LLC as your business entity.
Where does an EIN come from? After incorporating your business, the IRS will issue you an EIN. This tracks the activities of the business. Some of these activities include making sure the business collects payroll taxes.
An EIN is a nine-digit number that also bears a similar appearance to another famous nine-digit number: a social security number (SSN). This federal tax ID may be used in lieu of an SSN on important paperwork. It acts as a safeguard to the SSN, helping secure the privacy of this number.
General Business Operation License
Do you plan on opening a business with a traditional brick and mortar storefront location? You will need to obtain a general business operation license. This license allows your business to legally operate within a specific location.
Obtaining this license means that the state is able to track the activities of your business. This is a requirement for physical storefront locations. It is also highly recommended that eCommerce businesses obtain this license as well. Check in with the local Secretary of State for information about this business license application, filing fee, and whether this license requires renewals.
If you plan to legally sell goods or services online, you will need to apply for a seller’s permit. This is a requirement in nearly every state.
Additional business licenses may also be necessary, depending on the nature of the items you are selling. Establishments that sell liquor or lottery tickets, for example, may require specific licenses to legally sell these items.
Sales Tax License
Is your business in an area that charges sales tax? Does this business sell taxable products and services? If so, you will need to apply for a sales tax license.
A sales tax license is a license for businesses that operate in regions that charge sales tax or sell taxable products and services. As always, check in your local Secretary of State prior to applying for a sales tax license. This is to ensure that you are applying for the proper license, as sales tax laws vary from state to state, and avoid expensive tax penalties associated with not having a sales tax license.
Health Licenses and Permits
Businesses that are opening to the public, especially in service industries, must obtain a health license. This includes establishments such as hair and nail salons, restaurants, bars, and gyms.
A health license relates to the health and wellbeing of the customer. Having this license ensures the safety of customers on the premises. It also serves as a notice that the business is fulfilling all requirements and rules to keep customers safe and healthy.
Are you still unsure about which business licenses your company needs to operate?
Reach out to your local Secretary of State for a full list of licenses and permits your business needs in its specific location. You may also learn more about business licenses and permits available to companies at the federal and state levels through the U.S. Small Business Administration (SBA).
Additionally, our team at MyCorporation may help you determine the licenses, permits, and registrations your business requires. Our business license compliance package lets us research your license requirements. Then, we will provide you with the necessary information to stay in compliance and help prepare your business license applications.
Let’s prep your business license paperwork and get in compliance with the state! Contact us at mycorporation.com or call us at 1-877-692-6772 to begin.