Do You Need a Business License? A Quick Guide

Do You Need a Business License? A Quick Guide

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Opening a business is a process that comes adorned with a variety of requirements and to-dos. While many of them are seemingly obvious (i.e., financing your business), some are easily overlooked. To stay up to date on your business credit information, one of these oft-overlooked factors, check your business credit score for free with Nav.  Licenses, though essential to operation, are also frequently one of those items.

In the light of that, the question that quickly follows is typically, “Do I need a business license?” Though every business is different, and therefore subject to various industry and location-based requirements, it’s likely that the answer to that question is “yes.” In most cases, you’ll be required to get some type of license or permit in order to legally operate.

Types of Licenses

There are a variety of licenses and determining which ones you need depends on a variety of factors: the type of business you plan to operate, your business structure (e.g., sole proprietorship, LLC, etc.), location, and even how many employees you plan to have on staff. However, generally speaking, here are a few licenses and permits you may need.

General Business License – Typically, if you’re going to operate a business, you’ll need a general business license, which is supplied by your city or county government, and often comes after your business has been approved for zoning and occupancy. This license enables you to legally operate within your jurisdiction and is typically renewed annually.

Trade & Professional Licenses – Depending on the type of business you plan to operate, you may be required to get additional licensing that is specific to the industry in which your business falls. For example, plumbers, electricians, hair stylists, and real estate brokers are all required to acquire the appropriate state permits and licenses before they can legally operate. Consult your state government’s website for specific information on the licenses and permits you may need.

Sales Tax Permits – If your business will sell products or services that are taxed, then you will need to apply for a sales tax permit, and you will need to do so before you make your first sale. To find out more information on sales tax permits, visit your state government’s website.

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Fire Department Permit –  If you are planning on opening a business that will be open to the public or if your business uses flammable materials, you may need to get a permit from the fire department. Contact your local fire department to find out if you need one.

Health Department Permits – Restaurants, bars, and retailers that plan to sell food will likely need to apply for the appropriate health department permits.  As part of this application process, your business will need to pass an inspection by the city or county health department.

Sign Permit –  Depending on where you are opening up shop, you may need to obtain a permit to legally hang a sign.  In most cases, these permits are to control the size and location of a sign as well as the level/type of light it emits.  Keep this in mind before you place any custom orders for your sign so you don’t order (and pay for) a sign you can’t use.

Additional Tips & Considerations

Don’t wait until the last minute

Though licenses and permits may not be necessary until you are open for business, waiting until then to get them can delay your opening or leave you with citations and fines, both of which are bad for business. Additionally, failure to comply after your doors open can also result in a required closure of your business, and in some cases, it can be hard to bounce back from that type of publicity.

With that said, it’s important to start your efforts sooner rather than later. Identify the permits you need, collect the required information, and make sure that all assets (including your building) are ready to meet the requirements set forth by your local, state, or federal government.

Account for Cost

Though permits and licenses may not be significantly costly on their own, when combined, they can add up.  This is particularly true for businesses that need several local, state and federal licenses in order to operate. Additionally, in some cases, you may find that in order to be compliant and therefore receive a license or permit, you may need to invest in structural or equipment changes, which can also be costly.

Utilize Resources

As you may have noted in the above list, the best way to find concrete information about license and permit requirements is to check with the local, state and federal government websites.  These sites should help you determine what types of licenses you need, when you need them, how to apply and what type of fees is associated with the application – all of which are important things to keep in mind. 

In addition to your government resources, the Small Business Association (SBA) also offers a great list of state and federal licenses that may pertain to your specific business.

Finally, never underestimate the power of your local business development resources, most of which can provide a plethora of valuable services and guidance, including information on permits and licenses you may need.

Regardless of what type of business you run, in order to operate legally, it’s likely you will need to secure a few licenses and permits along the way.  Being aware of these requirements, and staying in compliance, will help you keep your business running smoothly and avoid any costly fees, citations, or closures.

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About the Author — Jennifer is a alum of the University of Denver. While in the graduate program there, she enjoyed spending time identifying ways in which non-profits and small businesses could develop into strong and profitable organizations that while promoting strong community growth. She also enjoys finding unique ways for freelancers and start-up businesses to reach and expand their goals.

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