A business license is a local business registration that is issued to all businesses in a city or municipality. A business license does not usually require an inspection. In comparison with a business permit, a business license is issued by a city or municipality.
Business permits are more about public safety (like a building permit), and that's why permits typically require an inspection. For example, a health department permit requires an inspection of the facility (like a restaurant), while a business license for a restaurant would not typically require an inspection.
The terms "business license," "dba or d/b/a," "fictitious name," and "trade name," are often used interchangeably. But there are differences, depending on the government agency using the term.
Business licenses are issued by cities and municipalities, and every city and town in the U.S. is different in what they require, who must get a business license, and how much the license costs. Contact your city's licensing department directly to find out. To find the address of city and county offices, see this listing in Business.USA.Gov.
Who Needs a Business License?
The term "business license" usually means an entity that needs a specific license to operate, depending on the type of business activity. These licenses are usually given out by a locality, like a city or county.
The City of Chicago, for example, issues business licenses for various industries, including retail, food, liquor, entertainment venues and theaters, day care centers, manufacturing facilities, repair shops, and many others. Some licenses, like restaurants, require an inspection before the license is issued.
Business License vs. State Registration
Most businesses must have a formal organization and must be registered with a state because they must follow state business laws. Corporations, partnerships, limited liability companies (LLCs) and variations must have a state registration.
Sole proprietorships don't register with a state because they are considered the same as the owner for tax and legal purposes. If you are operating a sole proprietorship, from your home or another location in your city, you will need a business permit from the city. You may also need additional permits, such as zoning permits or health permits. If you are an independent contractor working at another company's location, you probably don't need a business license, but cities differ in what they require, so it's better to call and find out.
Businesses that have registered with their state may not need a local city business license, but it's good to check with the city anyway. If you are starting a limited liability company, partnership, or corporation, you probably will not need this license. You may still need a trader's license or seller's permit.
Talk to the city when you get your business license and explain what kind of business you are running and where you are located. There are a number of other permits that might be required, based on your type of business and location, and every city is different.
Licenses vs. Permits
Licenses and permits are similar types of requirements, but not quite the same thing. A permit is a permission, like a permit to build or modify a home. A license implies competence to engage in some activity that can be harmful, including giving legal or financial advice. Getting a license often includes the requirement of passing a competency exam.
Most types of licensing is carried out by states. Professions have state licensing boards that establish education requirements, minimum competencies and examinations. Drivers must be licensed because an unlicensed driver can cause harm, gun owners must be licensed, and getting a dog license requires certifying that the animals has had all its vaccines.
Some municipalities use the term "fictitious name" or "d/b/a (doing business as)." Registering a fictitious name or d/b/a (the exact term varies, depending on your locality) means giving a statement that your business is operating under a different name from the official name of the business. Most localities require that the fictitious name/DBA be published in a newspaper, so that everyone knows who owns the business.
A sole proprietorship that is operating under the owner's name doesn't have to file a fictitious name/dba statement because it's clear who owns the business. But if the business name is different from the sole proprietor's name, the fictitious name statement is required. For example, if Briona Bevins's business is "Bevins Beauty Salon," no fictitious name is needed, but if the business is "Caring Cosmetology," the statement is needed.