Do Small Businesses Require Business Licenses?

Starting a small business means navigating a checklist of necessities to get the business up and running. Some of these items include incorporating or forming an LLC, obtaining a federal tax ID to open a business bank account, and registering for trademarks which protect names, slogans, designs, and logos for the business.

Another essential for small businesses is a business license. Do small businesses require business licenses? The answer is yes to legally operate a business. Here’s what this means on a federal and state level, how to determine which licenses your business needs, and what entrepreneurs need to know about renewing licenses.

What is a Business License?

A business license is a permit you obtain through the local or state government. Obtaining this license means your startup may conduct business within this locality. Once you receive this license from the proper issuing agency and pay a small fee, you keep the business in compliance with the state.

Federal and State Licenses

How do you know if you need a federal or a state business license? Federal licenses are a requirement for businesses conducting business activities which are regulated by a federal agency.

State licenses cover a broader range of business activities. Small businesses in the restaurant or retail industry, for example, must obtain state-issued licenses and permits. These licenses and permits are often specific to your industry and business location, including county, city, and state. Check in with your local Secretary of State for a complete list of the licenses and/or permits your business needs to file for and obtain.

Common Business Licenses

There are many types of business licenses. Ultimately, the ones your business applies for will depend on its needs and location. There are, however, a few common business licenses which pertain to many businesses.

General Business Operation License

This license is a requirement for all small businesses which operate brick and mortar storefronts. Having a general business operation license means the company may operate in a specific location. Similarly, eCommerce businesses should obtain this license to legally conduct business in a specific city, county, or state. Remember to pay a small fee with your application and renew the license accordingly.

Sales Tax License

This license is a requirement for companies which sell taxable products or are in a region which charges sales tax.

Seller’s Permit

Businesses which sell goods or services online must apply for a seller’s permit. A seller’s permit is still a requirement for companies which sell digital or other intangible products or services.

Health Licenses

Is your business in the service industry and open to the public? If so, it must obtain a health license. This license ensures the business is fulfilling all requirements to ensure the health and safety of customers that visit the space. Some businesses which may apply for a health license include hair salons, nail salons, restaurants, bars, and gyms.

As you file for these licenses, and any others your business may need, remember to pay the filing fee, and submit the completed application to the appropriate issuing agency.

Do I Need to Renew a Business License?

For the most part, every business license you apply for and receive must be renewed in a timely manner. Renewing a license also means paying a small annual fee.

What happens if you don’t renew your business license? Your business may be hit with a penalty fee. These fees may cost hundreds, or even thousands, of dollars. It’s a good idea to renew any outstanding business licenses by their renewal deadline to keep your business in compliance.

How Do I Apply for a Business License?

The simplest advice is to start from the city, or county, your business is in and work your way up.

Reach out to the local Secretary of State or a local licensing bureau for information on the licenses your business needs. Then, determine if the business activities may require any federal or state licenses. Once you have a thorough understanding of the licensing requirements in your jurisdiction, you may begin applying to obtain these business licenses.

File for your startup’s necessary business licenses today. Reach out to MyCorporation at mycorporation.com or give us a call at 877-692-6772.

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.