Thinking of doing business in the USA? Well, if you are, then you’ll need to file for a business license to legally do business there. It is a mandatory part of economic activity and you can face fines for operating without a license. The good news is that it is cheap, fast, and straightforward.
Table of Contents
- What is a Business License Anyway?
- Types of Business Licenses
- The 5 Major Business License/Permit to Consider
- How Much Does A Business License Cost?
- How to Get a Business License in 4 Steps
- License Differences State-By-State
- Business License Pros and Cons
- Additional Permits, Registrations, & Obligations
- The Home Business License Explored in Depth
- The Bottom Line
What is a Business License Anyway?
The primary rationale behind the business license is not just to annoy business owners with yet another piece of bureaucratic red tape. It’s there to protect consumers. Otherwise, any business could cause harm and not be held accountable.
The license to operate serves as an additional layer of security and regulation. Different licenses will depend on how to get an on your unique business model and the state that you are doing business in. This also dictates under which regulations your business operates under.
At the state level, registration is usually seen as a kind of license to operate in itself. But there will nearly always be county/city/local business licenses that you have to obtain to proceed. The business license is taken care of at the county level, not the state. Saying this, special occupations such as healthcare and construction will often require state licenses, and there are many nuances.
To make it easier for you, we’ve outlined the different types of business licenses, the cost, how to acquire them, and the different steps to take on a state-by-state basis.
Types of Business Licenses
The phrase ‘business license’ is an umbrella term for all manner of industries. A bar would be fined if it sold liquor and did not have a ‘license’, in the same manner, that a restaurant would be fined for selling food without a license. So the type of business license is usually determined by the industry. Different rules will apply to a barbershop and a restaurant, so they get a different kind of business license to operate.
But two small barbers will be governed by the same agencies, though it is possible to get special permits. An example would be a late-night license for a nightclub. The nightclub would have to have a solid reason for granting this application.
In addition to the general ‘license to operate, you may also be required to get an additional certification, permits, or licensing from specialized bodies of your industry. You will need to apply for a Federal license if you operate in any of the following industries:
- Sale of Alcoholic beverages.
- The Aviation Industry.
- Firearms, ammunition, and explosives.
- Fish and wildlife/Commercial fisheries.
- Maritime transportation.
- Nuclear energy.
- TV Broadcasting.
- Radio Broadcasting.
- Transportation and logistics.
Specific bodies regulate these industries, which is why you will need a state/local license and additional licensing at the Federal level.
The 5 Major Business License/Permit to Consider
Generally, it is possible to classify 5 major kinds of Business licenses/Permits. These are:
#1 – The General License
This is the kind covered above and covers the majority of businesses. When people state the term ‘business license’, they typically refer to this ‘general business license’. It is the license needed to operate your premises in a given geographical area. Barbershops, bars, restaurants, retail outlets, supermarkets, etc, all need a general business license.
If you are applying for a general license, remember to check the local zoning laws, or you could be in for a lot of trouble. Homeowners associations can also have restrictions on business activity within the area. It is, however, possible to obtain a ‘variance’ or ‘exception’.
#2 – The Professional License
Specialized professions will need to get specific licenses to work in an area. In particular, the following areas are tightly regulated.
- Legal Services.
- Financial Services.
This is an additional license you need to get on top of the general license. You need a professional license to practice. Then you need a general license to practice in a specific area.
#3 – The Sales Tax License
In some states, operating a business without a sale tax license is a criminal violation! This means potential jail time for an ignorant error. However, in many states, the sales tax is integrated with the general business license, which could save you some stress. Do your research before opening your business as to whether you need to obtain the Sales Tax License separately. It can be frustrating to have to apply for a separate license to essentially do the same thing.
#4 – The Health and Safety Permit
Technically, these are not licenses but ‘permits’. These tend to be necessary where customers come to your home to conduct affairs. Online businesses will not need to get any health and safety permits, as nobody is going to get injured on the premises for this kind of business model.
Health and Safety are of special importance to distributors/wholesalers in the food industry. It is also important in the restaurant industry, with permits required for food safety and clean kitchen practices. Check with the environmental protection agency or with the local office to see if additional health permits are required for your business.
#5 – The Signage Permit
Believe it or not, you will need to get a permit for any signage you wish to put up outside your establishment. This has been the cause of much controversy in recent years, with massive restrictions on what kind of signs can be placed, and where. All cities and localities now have detailed restrictions on sign usage. Lightning is usually not allowed. Real estate and homeowners associations also have restrictions on signage.
How Much Does A Business License Cost?
Getting a business license is very cheap. The cost generally varies between $10 – $100 per state. But it has to be renewed each year, and all of these costs can add up when you take wages, utilities, inventory, etc into account. Some licenses have to be renewed yearly, and the cost will often depend on the type of industry you are in. but even with all the variances, they work out at between $30 – $60 per year. Licenses can also be one year, two years, three years, etc, and you need to get a renewal when it expires.
How to Get a Business License in 4 Steps
Thankfully, getting a business license can be broken down into 4 easy steps. If it was difficult to get a business license, then it could seriously affect trade. The Four Steps are:
- Do Your Research – The most important step. Determine the business license that you need (will depend on your industry and should be easy to find). Next, find out what government agencies and regulations rule your industry. This is something you should know any way for the successful running of your company. Contact a state agency for assistance.
- Submit Your Application – Download the paperwork, fill out the details, submit the completed form, and pay any associated charges. A processing fee may also apply along with the business license fee.
- Wait! – Don’t do any business until you get your license in the post. It should not take longer than a couple of weeks.
- Double Check – Make sure you are covered with this license and that no additional permits are required. Remember to renew the license when it expires. Operating without a license is illegal, and ignorance of the law is no excuse.
License Differences State-By-State
Each state will have different procedures for obtaining a business license. But the process is still pretty straightforward and you should have your license within a couple of weeks, for a low cost.
The process is usually the same in most of the states – find the local county clerk and get the information necessary for a license, and apply online. You can find more information at the typical ‘.gov’ or ‘Secretary of State‘ portal.
Many licensing requirements are at the local/county level, not the state level. It does get a little more intricate in states with special taxation schemes in place, where specific licenses may be required. The general advice is that you will need to contact your local clerk for licensing details and that special occupations will need special permits.
Below is a brief introduction on how to get a business license in each particular state.
Alabama Business License
In Alabama, you will need to get a license from either the probate commissioner or the probate judge (in the county where you are doing business). You will also need a license in every county where you do business, which can add a degree of complexity. The business license in Alabama is one of the most expensive, at a huge $287 (though renewal is tiny, unlike many others where you pay the same amount each year).
Alaska Business License
You can apply for an Alaska business license online or by mail. The fee is $50 per year and approval is immediate (if done online). To file an online application, go to the Alaska Online Business License Application Page. It should take less than 10 minutes to get your license after filling in some basic details. You can search for a copy of the page online and download it (search by your business name or license number). The license expires on December 31st.
Arizona Business License
Arizona is one of the more confusing states when it comes to business licenses. There is no state requirement to obtain a business license, but each county can have specific requirements. Because there is no standardization, you will have to check with the county clerk office (and the county clerk office of any county you intend to do business in). Arizona also has a special tax known as the Transaction Privilege Tax (‘TPT’). You need to obtain a license for this if your business engages in transactions subject to the TPT.
Arkansas Business License
Like Arizona, most of the business licensing regulations are governed at the city and local level, not the state level. You need to visit your county clerk for further details. The appropriate authorities can be found on the Arkansas.gov page.
California Business License
In California, you have to get your business license in the city/county where you are operating. In California, it is referred to as a ‘Business Tax Certificate’. Keep in mind that if you are running an LLC in California, there is an $800 annual fee along with another ~$60 or so in associated filing expenses.
Connecticut Business License
Businesses in Connecticut must acquire a Sales and Use Tax Permit, from the Department of Revenue Services. However, Connecticut does not mandate general business licenses. What happens is that you apply for licenses that are specific to your business (food, landscape, construction, law, etc)
Colorado Business License
Getting a Colorado business license is quite straightforward in comparison to other states. Just visit this site for more details. You can apply and renew online. Certain industries in Colorado do not need a license to function, in contrast to many other states where all business outlets needed a license to operate.
Delaware Business License
To register or renew a Delaware business license, go to the state’s One-Stop Business Registration & Licensing website. Through this online portal, a questionnaire will lead you to the appropriate forms to obtain the licensing you need.
Florida Business License
In practically all counties in Florida, businesses are required to have a license. The specific rules and requirements will be governed at the county level. Visit the Department of Business and Professional Regulation website for additional details. If you are setting up an LLC, remember that you need to have a registered agent in this state to legally operate.
Georgia Business License
Many businesses in Georgia can now apply for business licenses online, so check the state’s online licensure applications list to find out whether your business cuts. Then, you can apply for a new license in Georgia through the online portal. Take a look at Georgia’s business licenses webpage for a simple overview of your business’s licensing needs.
Hawaii Business License
In addition to getting a state tax ID, businesses in Hawaii will need to register for General Excise Tax, and possibly more tax registrations depending on the industry. Business licenses are governed at the county level. Additional information can be found on the official page. The Business Action Center is the entity responsible for providing information on licensing and permits in Hawaii.
Idaho Business License
Take a look at Idaho.gov’s licensing, permitting, and regulations webpage to search for regulation information and apply for licenses online. Note that Idaho doesn’t have a state license (all business licenses are issued locally), so only the businesses that need special licensing can apply through the online portal. You can also search Idaho.gov’s online services by your business type for any related information on how to get a business license through your local institutions.
Illinois Business License
As with most states, you need to contact your county/city for further licensing details. You can visit Illinois.gov for information surrounding licenses and permits. You can apply online using the web portal. The business license is typically governed by the industry as opposed to a general business license. The webpage divides licenses into their industry, such as camping licenses, medical services licenses, shared housing licenses, home services licenses, etc. The fees will be a function of the industry in question.
Indiana Business License
Indiana doesn’t have a single, comprehensive framework for getting a business license, but every business that operates in Indiana will need to fulfill regulatory requirements. Indiana’s Business Owner Guide is a great online business licensing resource to sort out the information you need. As always, the details will depend on your unique industry and what regulations govern it. You can’t expect similar requirements between a lumber yard and a software firm.
Iowa Business License
Iowa does not mandate the general business license. Business licensing requirements are based on the nature of your business or profession. You can search the Iowa Business License Information Center database to determine which licenses are most appropriate for your specific business needs. You can also visit the Iowa Business Information Center’s regulatory subsection for more generic licensing tips.
Kansas Business License
There is no general business license in the state of Kansas. However, you will need a Sales Tax Certificate to conduct your affairs. To get this certificate, file a Kansas Business Tax Application (CR-16) with the Kansas Department of Revenue. You will also need a license to operate in a city, though some cities do not require licensing. Check your local office for more details.
Kentucky Business License
Kentucky does not contain a single, statewide license for all businesses, but certain businesses will need special permits or licenses. Check out the Kentucky One Stop Business Portal for information on starting and running your business, and head to their page on the occupational licenses and permits that apply to your business. You need to create an account on the site first to apply for a business license and take advantage of the site’s online license resources.
Louisiana Business License
In Louisiana, whether or not you need to obtain a business license will depend on your industry. You can check this out by visiting the Louisiana Secretary of State website. It also depends on the city/county/parish that you are doing business in.
While some businesses are exempt, most will require a license at the local level. Various professions/occupations will need to have professional licenses. Visit the Professional and Occupational Licensing section of the Louisiana.gov website to find out if these licenses are applicable.
Maine Business License
To get a general business license in Maine, you will need to consult your local county clerk or city officer. Not all businesses in Maine are required to have a business license. Whether or not you need a license depends on the nature of your business activities.
Maryland Business License
Maryland operates a little differently from other states in the sense that practically all businesses will need to have a license to conduct their affairs. These licenses are issued by the Clerk of the Circuit Court. Construction businesses will also need to apply for a special license from the Clerk of the Circuit Court.
If you have more than one store, you are considered to be a chain store and need to get an additional chain store license. Maryland is one of the more convoluted and difficult licensing jurisdictions.
Massachusetts Business License
Like most other states, Massachusetts does not have a mandatory business license at the state level. Instead, businesses need to visit their local county/city office to see the rules for a license in that area. The Massachusetts Department of Revenue website has more details on the licensing and permit regulations.
Michigan Business License
Not every business in Michigan is required to be licensed by the state. Business licenses are required for certain vocations or occupations that may be conducted within a business, and local governments may also require business licenses. Find out if your new venture could require a state license or permit through the online business licensing search. Also, check out the state’s guidebook and step-by-step outline for how to start a business in Michigan.
Minnesota Business License
Minnesota has a dedicated portal known as ‘Minnesota Elicensing’ to address all licensing concerns. This makes the process a lot more streamlined compared to other states. Use this site to find out what licensing requirements apply to your business.
Like other jurisdictions, you will need to visit your local office to find out the exact licensing requirements. Different cities will have different regulations, and it also varies by industry. There is no mandatory uniform general business license at the state level in Minnesota.
Mississippi Business License
Not every business in Mississippi will need to get a business license. However, some businesses will need to get both a state and a local license, depending on the industry. In general, occupations such as construction, real, estate, and medicine will require state licensing.
You will likely need to get a license at the county/local level also, where your business activities are conducted from. Some cities require all businesses to get a license, while others only require some businesses to get a license.
Missouri Business License
In Missouri, you will need to get a Sales Tax License to do business. This applies to all businesses, not just to specific industries. Registration for this license can be done online. Not every type of business will need to be licensed in this particular state.
Montana Business License
Visit the Montana.gov licensing page to check out the details about licensing/permits in this state. As always, the requirements will be different depending on your city/locality. However, Montana has a one-stop licensing program available to businesses involved in Food Purveying, Tobacco Retail & Wholesale, Off-Premise Beer and Wine, Nursery, Petroleum Dealer (Meters), Weighing Device (Scales), and Underground Storage Tanks. This allows the renewal or application of up to 7 state licenses at the same time.
Nebraska Business License
Visit the Nebraska.gov business licensing page for information surrounding business licenses in this state. Nebraska offers a One-Stop Portal for all licensing and permits requirements in the state. This increases efficiency and makes the entire process run a lot more smoothly.
Nevada Business License
Nevada is one of those rare states that require you to get a business license regardless of industry. Because of this, you will file for the general business license at the Nevada Secretary of State website. The license has to be renewed annually. County and city license rules will still apply, so don’t forget to check these outlets also.
Besides, you need to check if you require a resale permit, an exemption certificate, or are subject to use tax. Nevada is tough in terms of licensing – you need a local license, general license, and quite a likely one of many special licenses to operate successfully.
New Hampshire Business License
In New Hampshire, there is no state-level general business license. Like most states, you will have to contact your local county office. For more information, look at the nh.gov site and investigate the ‘Licenses and Permits’ section. As always, certain occupations will require state licensing.
New Jersey Business License
There is no state-level general business license to operate in New Jersey, though certain occupations such as construction and medical workers will need to have the relevant state licenses. Cities and localities will have further information on the necessary licenses. The New Jersey Business Portal is the place to answer all business-related questions.
New Mexico Business License
Like many other states, New Mexico does not have a general business license. Instead, licensing is governed on a local level. The NewMexico.gov website should be able to answer most of your questions. But you will always get the most direct answers by visiting your local county clerk’s office.
New York Business License
All New York licensing concerns are taken care of by a One-Step Express Portal. All details for New York licensing are contained in this document. From the document: “If you plan on conducting for-profit business through a sole proprietorship or general partnership under any name other than your own, you are required by law to file a Business Certificate (also called a Certificate of Assumed Name) in the office of the County Clerk in the county your business is located.”
North Carolina Business License
Visit the nc.gov licensing page for details on how to get a North Carolina business license. There is no state-level general business license in North Carolina, all concerns being taken care of at the county level. As with all states, the license you require will largely depend on your industry.
North Dakota Business License
Visit the North Dakota Business Licensing page for details on getting a license in this state. The following licenses are issued by the Attorney General: Alcoholic Beverage, Amusement Games, Bingo/Raffles/Professional Sports Pools, Fireworks, Gaming, Manufacture/Distribute Gaming Equipment and Supplies, Polygraph, Tobacco, Transient Merchant. The following licenses are issued by the Secretary of State: Charitable Solicitation, Contractor License, Notary Public, Professional Fundraiser. No state-level general license is required.
Ohio Business License
There is no state-level general business license in Ohio, the licenses being governed at the county level. Registering with the state is regarded as a ‘license to operate’ in Ohio and other states. The Ohio.gov web page should be able to provide you with further details, as should your local county clerk’s office.
Oklahoma Business License
No state-level general license exists in Oklahoma, each city/county taking care of licensing. Licensing requirements will, therefore, vary by city/county. For instance, the city of Oklahoma requires people to purchase a garage sale permit for $7. Special licenses apply to construction companies and professional occupations. However, there are no state licenses for construction contractors, which is different from many other states.
Oregon Business License
In the state of Oregon, you need to get a license for each county that you operate, though there is no state-level general license. As always, check with your local county clerk for details. Special licenses apply to certain professions.
Pennsylvania Business License
Not every business in Pennsylvania needs to get a license, though it varies by county/city. For example, a ‘Business Privilege License’ is required in Philadelphia and Harrisburg, an item not seen in Pittsburgh and other locales. When you are registering your business using the ‘Form PA-100’ Pennsylvania Enterprise Registration, it will contain relevant licensing information.
Rhode Island Business License
No state-level general business license exists in the state of Rhode Island. It does, however, have the Sales Tax Permit, which essentially amounts to the same thing as practically every business will need to obtain this from the state.
This is obtained from the Rhode Island Division of Taxation. Of course, you will also need to obtain a business license at the local/county level. The Rhode Island Secretary of State website should also have more information on licensing and permits.
South Carolina Business License
There is not one standardized South Carolina state license requirement. Nearly every city and town require its type of business license. Navigate to the South Carolina state’s official webpage to find the link that’ll instruct you how to get a license, according to your legal business type.
South Dakota Business License
Visit sd.gov for more information on getting a South Dakota business license. South Dakota has many different bodies that issue various kinds of licenses and permits, so be careful. It does not have a one-stop portal. Check your local county clerk’s office for further details and be sure to check out additional requirements.
Tennessee Business License
Businesses that are subject to the Tennessee business tax quill need to obtain a business license from your county clerk (according to the Tennessee Department of Revenue) And if you operate an in-state business that generates more than $3,000 in sales, you must obtain either a “minimal activity license” or a “standard business license” from your county or municipal clerk. There are many caveats within those requirements, so be sure to carefully read the Tennessee business registration and licensing web page.
Texas Business License
To get a business license in Texas, visit the texas.gov website, and hit the ‘Work’ tab. This tab directs you right to a portal to apply for or renew a professional license, plus additional resources for starting and maintaining a business in the state of Texas.
Utah Business License
To get a business license in the state of Utah, visit the Utah government requirements website, then scroll down to the Business Registration and Licensing Regulations section. For an overview, consult the Utah business licensing and registration guide.
Vermont Business License
The Vermont Secretary of State webpage on starting a business in Vermont directs you to the SBA’s portal on applying for licenses and permits. You can also go to the Vermont professional regulations page. It tells you the professions that require Vermont licenses and how to access the state’s online licensing portal for application and renewal.
Virginia Business License
To launch a business in Virginia, check out the step-by-step guide for business commencement. Step 4 shows you how to obtain a business license in Virginia, which begins with consulting an informational page on applying for a Virginia business license. You will need to use Virginia’s One-Stop portal to complete the application or renewal.
Washington Business License
Washing makes it very easy to apply for a business license with its ‘Business Licensing Wizard’. It is one of the few states with a state-level business license. If you pay tax to the Department of Revenue and earn over $12,000 in sales, you can apply for this. Thankfully, it is one of the smoother and easier systems in terms of licensing requirements. However, you will still need to check local licensing duties.
Wisconsin Business License
Visit wisconsin.gov to access all the necessary resources you’ll need to start and operate a business in this locale. For specific licensing and permit details, scroll down to the Licenses and Permits link under the page’s Government Resources section.
From there, you’ll be directed to the Wisconsin Department of Agriculture, Trade, and Consumer Protection license list, which lists industries alphabetically and provides the phone number you can contact to apply for or renew your license.
Wyoming Business License
All businesses in Wyoming must file for a Use and Sales Tax License, which effectively amounts to a state-level business license. Licensing laws are straightforward in this state. Use this resource to investigate what state and local licensing requirements apply to your business. Special occupations require state-level licenses, though some special occupations require licenses that are not issued by state bodies.
Business License Pros and Cons
There are no real disadvantages to getting a business license, aside from the fees and the short time for the license to arrive. This is not negotiable and is not something to compare. You cannot operate a business in the USA without a license.
Failure to comply will result in fines, the closing down of your business, and potential jail time (in certain instances). For $50 and a week-long wait, it’s a no-brainer!
Additional Permits, Registrations, & Obligations
- Occupational Licenses – Occupational licenses required lots of additional permits. Prime examples would be finance, legal, daycare, healthcare, and insurance. You need to be qualified in your area to practice. These permits and registrations tend to change a lot depending on state laws, so make sure to double-check everything if you are planning on working in a different state. If you hire employees, make sure all of their credentials add up or you could end up on the wrong side of a court case.
- Sales Tax Permit – This applies only if you are selling tangible goods. But with the increase in online technology and accounting software, you can collect this from customers online. You can also submit online. Even when customers pay at the point of sale, the transaction is recorded in your software for easy analysis. The Sale Tax Permit often amounts to a kind of general state license, issued by state bodies.
- Zoning Permit/Waiver – Many residential areas are not allowed to be made available for commercial use. But you will be able to get a waiver as long as your business does not interrupt the neighborhood or disrupt traffic in any way. If you don’t have a zoning permit or waiver and the county clerk finds out, you will have to shut down.
- Doing Business As – The Doing Business As (‘DBA’ or ‘D.B.A.’) is sometimes called a trading name. It is often used for companies doing business in a different state. But you can use it in the same state. A sole proprietorship (the most common business model) will invariably get a DBA for branding purposes. Otherwise, their legal name will default as their business name for tax and regulatory purposes.
- EIN Number – The Employer Identification Number is required for businesses that hire employees. It is used for tax and is needed for many important documents. The EIN can be applied for and received within 10 minutes by visiting the IRS website and filling in some minor details.
- Business Bank Account – It’s always a good idea to separate personal from business affairs. While a small sole proprietorship might have less of a need to do this, it is still best practice to do so. Never mix work and pleasure, and it can get very complicated, very quickly. The business bank account will make it easier to apply for loans, looks more professional, and will help you with your business finances in comparison to mingling it with a personal account.
- Insurance – It is mandatory to provide insurance for all employees on your site. This is known as employer liability insurance. But you should not stop there. Business Interruption Insurance, as well as public liability insurance, is also necessary. If you work in professional services, then you need professional indemnity insurance (jobs such as doctors are known for huge levels of litigation). If you are selling products, then you need to get product liability insurance.
The Home Business License Explored in Depth
It’s no great secret that many people are working their little businesses from home without getting the proper licenses. However, this does entail certain risks. If your business grows beyond a certain size, then you might need to get a license or face fines. If you run a little restaurant or a salon from your home, you must get a business.
Otherwise, you could easily get reported (this happens more often than you would imagine). Another reason is that you might need your business license if you are applying for a business bank account for other accounts. But the most obvious reason to get a business license is for peace of mind. It’s cheap and easy to apply for, instead of looking over your shoulder all of the time.
In truth, there is no such thing as a ‘home’ business license. You will merely apply for a business license in the manner outlined above. And you then have a license to do business in your location (the fact that it is your home is irrelevant, as long as the premise is fit for customers and meets the regulations).
The license is only about $50 anyway – it makes sense to cover yourself and just take the time to fill in an online form.
There is no hassle in terms of getting a business license. The cost is low and the delivery is fast, practically any business can apply for one. The only thing you need to be made aware of is that different rules apply for the various states and counties and that some industries require additional licenses and permits.
Your secretary of state website and your local county clerk’s office will, together, have all the information that you need for business licensing in your area of operation.