How To Get a Business License
If you’re thinking about becoming a home-based small business owner, then you might need a business license.
If you’re thinking about becoming a home-based small business owner, then you might need a business license. If so, you’ll want to thoroughly familiarize yourself with the types of licenses and permits you may need. You will need to know more about the entities that offer you more information about the application process.
Keep in mind that failing to gain all the required licenses and permits can result in costly consequences. These could include fees and citations or losing your good reputation. Or worse you might face criminal charges, lawsuits, and forced closure.
A business license grants you the legal right to operate your business within the issuing city’s jurisdiction. Your first step is contacting the business license department in your jurisdiction to determine if you need one. They will also explain what the fee will be as well as the application process for a business license.
The best place to start when researching your exact process and paperwork for how to get a business license in your state is with the US Small Business Administration (sba.gov). They will have everything you need to know to start your new business. However, to get you started we have pulled the pertinent information here for you to get a high level view of what you will need.
Business location and zoning
When getting a business license, home-based small businesses often run into a lot of red tape with zone ordinances. Most residential neighborhoods are protected by very strict zoning regulations that prevent businesses from mingling with private residences. They also can keep private homes from doubling as both residential and business space.
Either the city zoning or city planning department will need to ensure that your proposed business location is in an area that’s zoned for its intended purpose. They will also ensure that your space is able to meet any applicable codes, such as the number of required parked spaces and OSHA fire laws.
However, if the department finds that your desired area isn’t zoned for your type of business this isn’t necessarily a deal-breaker for your new business. Many localities are becoming increasingly supportive of home-based small business owners. Even if zoning regulations remain rigid, the jurisdiction may offer zoning exceptions via a conditional-use permit or variance.
To receive either of these, you’ll need to make a strong case to the city’s planning commission at your hearing. Be sure to show that your proposed business would not cause a disruption to the residents, local aesthetics, or character of the neighborhood. They’ll use the information you offer to vote to approve or reject your variance or conditional-use permit request.
It is important to determine what permits you will need before you get started to ensure you have everything you need. Here are some more permits and licenses you’ll want to consider:
County Versus City Permits
You will need to know the jurisdiction your business will be in to determine what governing body you will seek permits from for your new business. While the type of permits required of you are usually universal from city to county, county permits tend to be less stringent and involved than city permits. Be sure to know whether or not you are within legal city limits.
A few jurisdictions require small business owners operating outside a town’s legal city limits to get both city and county permits. In most cases, however, such business owners will just seek county permits instead of city permits.
Fire Department Permit
If your business is open to the public, involves large bodies of people congregating, and/or works with any type of flammable materials, then you’ll certainly want to know both your jurisdiction’s fire safety regulations and requirements and OSHA standards.
In most cases, jurisdictions will require a fire department permit before a business is allowed to operate. These may be broken down into specific sub-category permit types based on the business’s operations, life safety needs, equipment, occupancy classification, and so forth.
Some jurisdictions may not issue permits at all; instead, they’ll simply require you to submit to routine inspections to ensure your business meets with national and local fire safety regulations and laws. In other cases, you’ll need both a permit and routine inspections.
It’s important to know what fire safety measures are expected of your business to avoid costly citations and potential legal negligence lawsuits.
Air and Water Pollution Control Permit
In addition to federal and state EPA regulations, most jurisdictions now have a department devoted to air and water pollution control on a local level. You need to know how all three apply to your business’s operations, including any construction phases.
There are a number of actions that may require you to seek local, state, and/or federal permits prior to and during the operation, such as burning waste, discharging anything into public waterways or sewer systems, and use of equipment and products that produce air pollutants.
Health Department Permit
Is your business a mobile food truck, coffee shop, bed and breakfast, bakery, restaurant? Or you might be starting another business that will involve selling food and drink items to either customers or other vendors. If so, you’ll likely need a health department permit to operate.
Your local county health department will inspect your facilities and equipment before issuing the permit, and most will conduct yearly inspections for permit renewals and grading systems. While the specific regulations vary by state, health department permits are mainly concerned with cleanliness and safe food handling and practices.
Also, keep in mind that many states require food safety training and testing for all food service workers.
Health department permits also often pertain to products and services that touch or alter the human skin, such as tattoo parlors, nail salons, and certain beauty services.
Business structure and licensing
Once you know you have the correct permits, you will also want to decide which business structure you will be operating under. The type of business you form will determine the type of federal taxes you will file. Will you choose to stay a sole proprietorship to keep your taxes simple? Or will you prefer to start an LLC (limited liability company) to protect your personal assets?
With an LLC, corporation, or partnership you will likely need to apply for a Federal Employer Identification Number (EIN). This will also allow you to use this number on all of your forms and licenses instead of your social security number. Establishing your business entity, or structure, now will help you determine your licensing and taxes down the road.
Occupational Licenses Issued By The State
Depending on what type of business you’re operating, you may need a special state occupational license to operate your business. Will you be doing business in a field that requires special training such as a doctor or accountant?
State licenses or occupational permits are issued at the state level to people in certain high-risk, high-skill occupations that provide personal services. Some examples of occupations that commonly require state occupational licenses include cosmetologists, nurses, doctors, therapists, real estate agents, contractors, inspectors, and mechanics. Your state licensing board can offer you a comprehensive list of occupations that require this license.
Having this license shows that you’ve completed any required training, education, and state board examination for your occupational field in that state. If you move, you’ll likely need to apply for a new license in your new state. This is because most licenses are generally only valid in the state they are issued in. Certain occupations, such as nursing, might issue you a multi-state license that covers several specified states.
Unlicensed operators are subject to a number of legal fines and penalties. Under some state laws, practicing certain occupations without a license can even result in misdemeanor or felony criminal charges.
Federal Licenses And Permits
Most business operators aren’t subject to federal business licensing and permits. The Federal Trade Commission offers a comprehensive list of the types of businesses that require a federal license or permit, including operating a TV station, radio station, investment advisory firm, meat preparation, drug manufacturing, alcohol and tobacco sales, and firearm sales.
Sales Tax License
Also called a certificate of resale or certificate of authority, a seller’s permit enables you to legally collect sales tax on your retail revenue. Doing so in some states without the proper business licensing is a criminal offense.
Even if your business is home-based, you’re legally required to pay sales tax on all sales of taxable goods and services. Keep in mind that many states consider both the parts and labor portions of a bill taxable. You’ll need to check your individual state rulings on taxable services and goods to gather a precise definition.
Sales taxes can vary by both state and municipality at the retail level. Your state will offer a minimum sales tax, but your municipality may have a sales tax that exceeds the state-mandated amount, particularly for ‘tourist’ area food, lodging, and entertainment offerings. So, it’s very important to understand and collect the appropriate amount of sales tax required of you.
Hanging your business sign is an exciting achievement for any small business owner. However, you’ll often need to consider your local ordinances and permit needs during the design process.
Many jurisdictions have very strict regulations on the size, location, and lighting of outdoor business signs. It could be a costly mistake to have a sign made and then not be able to use it. Don't install it first and then get a fine.
Check first to ensure you are creating a sign you can actually use. Plus, don’t forget to check if you need installation approval from your landlord first. Finally, be sure to find out if there are any city ordinances on what hours lighted signs can be turned on.
To wrap everything up, there are many different facets included in getting your business license for your new business. Be sure to know exactly what you will need before you get started to save you from costly mistakes, or worse, fines.
From city zoning to fire permits, you will want to ensure that your business is legally in line and up to code. Do you need a special occupational license to operate your business? Find out now so that you can be sure to have everything you need when it comes time to launch your new business.
Checklist: How to get a business license
1. Determine your business location and zoning
2. Determine what permits you will need
3. Determine your business structure and necessary licensing
4. Determine the forms you will need to fill out
5. Fill out all the forms you will need based on the above decisions
6. File your forms with your correct zoning; city, county or state
7. Pay your fees
Starting your own business can be an exciting new adventure. You don't want to see everything ruined because you didn't do your homework. There are plenty of resources available online for you to be sure that you have the correct licensing requirements.
The chamber of commerce is here to help you to start your new business. We want to see you succeed and have worked hard to gather all the information you will need. Hopefully, this article has helped you learn how to get a business license and start down the path to business ownership.