Business Licenses and Permits
One of the first tasks for any new business is to obtain licenses and permits. Yes, even an existing and an ongoing business may make changes that require new licenses or permits. Some licenses and permits are federal, some state, and some local.
In this article, you'll learn about the various types of licenses and permits, which might apply to your specific type of business, and how to obtain these documents.
The simple answer to how to get a license or permit is to apply for it, but the question is who to apply to. Making it even more difficult, each state and locality (city, town, or county) has its own agencies, with different names.
What's the Difference Between a License and a Permit?
The distinction between a license and a permit is subtle but important. If you look up the definitions for both, you'll see the other mentioned as a synonym: A "license" is defined as a "permit," and vice versa.
Licenses are more general, granting permission to do something or use something. For example, a business wanting to sell liquor must get a license.
Licensing often implies competence, and licenses are usually required for people who are in professions that do harm to someone. Sometimes a license requires a test, as for a professional license. For example, cosmetologists must be licensed in a state.
Permits are usually given for safety issues, like health permits, and may require an inspection before they are granted. A permit to carry a gun is another example.
Here's one way to look at the difference:
A nail salon or hairdresser must have a business permit and (usually) a health permit, and the nail technologist or hairdresser must be licensed.
Licenses and Permits for a Business Startup
If you are starting a business, there are several licenses or permits you may need.
Fictitious name/DBA. A fictitious name (sometimes called a "DBA" (doing business as) is a permit to do business in a city or county. This permit is required if your business name is not your name as the owner. For example, if your name is Kerry Carlson and you are doing business as City Building Supplies, you'll need to get the fictitious name permit, usually from your county.
Local business license. Some cities or counties require a business license for new businesses, even if the business is already registered with the state as a corporation, partnership, or LLC.
Special licenses and permits. Depending on what your business does, you may need one of these special licenses or permits before you are allowed to begin selling to customers:
- A health permit, if your business sells or handles food products
- A building permit, if your business is in a new location or you are renovating an existing location
- A fire inspection and permit
- An ATF (alcohol, tobacco, or firearms) permit if you are selling any of these items.
Federal Licenses and Permits
Your business must comply with a variety of federal regulations, some of which require licenses and permits. In addition to local and state requirements, several federal agencies require may require you to have specific licenses, permits or certificates.
The Small Business Administration (SBA) has a list of federal agencies that require registration, permits, or licenses.
State Licenses and Permits
Your state will require you to have several different types of licenses and permits, depending on what kind of business you are starting, whether you have employees and if you are selling products or services.
Here are the three most common licenses and permits are required by states:
Professional licenses. All states license professionals and those who work in personal services, like nail technicians, cosmetologists, and massage therapists.
People in these professions must get a state license before they can begin to practice:
- veterinary medicine
If you need a state license, search for your state's board of professional practice (or similar title).
Registering as an Employer. States require employers to register with them as employers, for state tax purposes. Specifically, you must comply with state regulations for unemployment tax and for worker's compensation.
Use this list of state employment agencies to find your state's agency and get started with registration.
Local Business Permits
Each city and county has specific permits that must be approved. Whether your business must have a permit depends on your business type and location. For example, a home-based business must usually obtain a variance from the municipality to do business in a residential area. Zoning permits are also discussed in this article.
Each town, city, and county also has special kinds of licenses to do business in their domain. Special events where businesses are present (like craft fairs or farmer's markets) usually require a permit, as do certain types of items sold (liquor licenses, for example). Check with your local business office to see what types of licenses or permits might be required.
Here are the specific departments where you can get information about local licenses and permits:
Planning and Development - If you think you might need a zoning variance.
Building Department - If you are planning on doing construction work on your business location that needs a building permit. (Contractors are supposed to do this for you, but you may need to verify.)
Assessor / Controller / Tax Collector - To ask about property taxes and assessments on your business property.
Fire Marshal / Department - Many new businesses need a fire inspection before opening.
Public Health Department - Food-related businesses need health and safety inspections.
Building and Zoning Permits
Whether you are buying an existing building or building your own, you should check on your city's requirements for building and zoning. Zoning regulates the usage of land.
For changes to a building or a new building, you will need a permit that allows construction to begin and an occupancy permit that allows you to take possession of the building. Your contractor should be able to help with these permits.
You may also need to deal with zoning restrictions if you want to change from one type to another. For a home business or a business in an area previously not zoned for your type of business, you may need to request a zoning change, called a zoning variance.
Use the information to start making a list of the general licenses and permits you will need (the ones most businesses need), then add the special licenses and permits that you'll need for your specific business type.