Do I need a business license? How to find every license and permit your business needs

There's no single license that lets a business operate anywhere in the United States. Instead, licenses and permits come in layers. Your city or county may want a general business license. Your state may want a sales tax permit, an employer registration or a license for your profession. And a handful of industries need a federal license as well.

Most small businesses need at least one of these, and many need two or three. The good news is that finding out takes an afternoon, and many of the most common permits are cheap or free.

Forming an LLC is not a license

People often assume that once the state approves their LLC, the business is legal to run. It isn't, necessarily. Forming the LLC creates the legal entity. Licenses and permits authorize particular activities in particular places, and they're issued by different offices.

So a newly formed LLC running a coffee cart still needs whatever permits its city requires for food sales, health inspections and street vending. A consulting LLC may need nothing beyond a local business registration. The entity is the same kind. The licenses depend on the work. If you haven't formed the LLC yet, our guide to starting an LLC covers that side.

Layer one: federal licenses

Most businesses don't need a federal license. The SBA lists the activities that do:

• agriculture, when importing or transporting animals, plants or related products,
• alcoholic beverages, when manufacturing, wholesaling, importing or selling them at retail,
• aviation, including operating aircraft and air transport,
• firearms, ammunition and explosives,
• fish and wildlife activities, and commercial fishing,
• maritime transportation of people or cargo,
• mining and drilling on federal land,
• nuclear energy,
• radio and television broadcasting, and
• transportation and logistics using oversize or overweight vehicles.

If your business touches one of these, the relevant federal agency's license usually comes first, and state and local approvals follow.

Layer two: state licenses, permits and registrations

States regulate a much broader range of activities than the federal government, and the requirements vary from state to state. Three kinds come up most often.

Sales tax permits

If you sell taxable goods, most states require a sales tax permit before you make your first sale. California calls it a seller's permit and requires one for anyone engaged in business in the state who sells or leases tangible goods that would normally be taxed at retail, including LLCs, wholesalers and retailers. Texas requires a sales and use tax permit for businesses engaged in business there that sell, lease or rent taxable goods or provide taxable services.

Both are free. California says there's no fee for a seller's permit, though it may ask for a security deposit, and Texas says the same of its permit, which may require a security bond. Many states work the same way. Our guide to sales tax for small businesses covers when you need to collect it, including in other states.

Professional and occupational licenses

Many professions need a state license, regardless of how the business is structured: accountants, attorneys, architects, engineers, contractors, electricians, plumbers, cosmetologists, real estate agents, insurance agents, doctors and other health professionals, among others. The license is usually held by the person, and some states also require the business itself to register or to be formed as a professional LLC.

Employer and industry registrations

Once you hire, you'll register with your state for income tax withholding and unemployment insurance. Industries such as food service, childcare, alcohol, cannabis, firearms and construction often need state-level licenses or inspections too.

Layer three: local licenses and permits

This is the layer most owners forget, and the one most likely to apply to a small business. The SBA notes that activities commonly regulated locally include auctions, construction, dry cleaning, farming, plumbing, restaurants, retail and vending machines.

• General business licenses or registrations. Many cities and counties require every business operating there to register, sometimes with a fee based on revenue. Some call it a business tax certificate.
• Zoning and land use. Zoning decides what kinds of business can operate at an address. Before you sign a lease, confirm the use is allowed.
• Home occupation permits. The SBA notes that zoning ordinances can apply even to home-based businesses. Many cities limit customer visits, signs, employees working at the home, or storage of inventory.
• Building, fire and health permits. Restaurants, salons, childcare and any business open to the public may need inspections before they open, and renovations need building permits.
• Signage permits. Even a sign on your own storefront often needs approval.

The registration people confuse with a license: your DBA

If your business operates under a name other than its legal name, for example "Northside Coffee" for "JKL Ventures LLC," most states require you to register that name as a DBA ("doing business as"), also called an assumed or fictitious name. Depending on the state, you file it with the state, the county or both.

A DBA isn't a license, and it doesn't create a separate entity. But banks usually won't accept checks in that name without one, and in some states operating under an unregistered name carries penalties.

What five common businesses usually need

Requirements differ by state and city, so treat these as a starting point for your own checklist, not a complete answer.

• A freelance designer or consultant working from home. Often just a city or county business registration, and a check of home occupation rules. No sales tax permit unless the state taxes the services or the business sells products.
• An online store selling physical products. A sales tax permit in the home state, a local business license where the business is based, and possibly sales tax registrations in other states once sales there pass their thresholds.
• A food truck or coffee cart. A local business license, a health permit and inspection, a mobile vending or street vending permit, a fire safety inspection if cooking with gas, and a sales tax permit. Often more than one city's permits if it moves around.
• A home daycare. A state childcare license with inspections and background checks, local zoning approval, and a business license. Few businesses have more paperwork before opening day.
• A general contractor. A state or local contractor license in many places, a business license, building permits for each job, and proof of insurance and bonding that clients and permits often require.

The pattern holds across industries: the closer the work gets to public health, safety or other people's property, the more licenses it needs.

How to find every license you need

Work through this in order. It usually takes an afternoon.

1. Write down exactly what the business does and where. Activities and locations decide everything, so be specific: "selling coffee from a cart in two downtown parks" is better than "food business."
2. Check the federal list above. If you're on it, start with that agency.
3. Visit your state's business portal. Most states have a one-stop page that lists registrations and licenses by industry, often linked from the Secretary of State or the state's economic development site.
4. Register for state taxes that apply: sales tax, withholding, unemployment insurance.
5. Check professional licensing with your state's licensing board for your occupation.
6. Call or visit your city and county. Ask the clerk or business licensing office for every license, registration and permit for your activity at your address, including zoning and home occupation rules.
7. Make a renewal calendar. Many licenses renew every year, and some renew on the anniversary of issue rather than a fixed date.

What happens if you skip it

Operating without a required license can lead to fines, being ordered to stop operating until you're licensed, back fees, and trouble enforcing contracts in some cases. A lapsed professional license can also void your insurance cover for that work. For most small businesses, the license itself costs far less than any of these.

If you sell or work in other states

Licenses are local, so expanding changes the picture. Working in clients' offices in another state, opening a second location, or making enough sales to customers in another state can trigger that state's registrations, from foreign LLC registration to sales tax collection. Our guide to the best state to form an LLC explains when an LLC must register in another state, and our sales tax guide covers the thresholds that apply to online sellers.

The checklist

1. Confirm whether your activity is on the federal list.
2. Register for every state tax that applies, especially sales tax.
3. Get any state license your profession requires.
4. Get your city or county business license, and check zoning or home occupation rules.
5. Register a DBA if you use a name other than your legal name.
6. Put every renewal date on your calendar.

Once the business is licensed, the next ongoing obligation is keeping the LLC itself in good standing. Our guide to LLC annual reports and fees covers what each state requires every year.