This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!
Everyone has to deal with the nitty-gritty details of starting a business; no matter your industry, getting started safely and legally involves at least a little red tape.
You need to make your business an official legal entity, and take an in-depth look at what permits and licenses you need at the local, state, and federal levels to be able to operate your business without fear of being hit with a fine—or worse, having to close down.
The term “business license” is a bit misleading as it makes it sound as if there is one license you apply for, sort of like a driver’s license, that you obtain and—voila! You’re legally in business. That is not the case.
Generally speaking, a business license is granted at the city level, and is a fee paid to get a tax registration certificate and legally allows you to conduct business in that area. All of the total licenses and permits you’ll need depends on several different factors: the type of business you’re in, where it’s located, and your specific business needs.
For example, say you’re a restaurant that wants to serve alcohol and have an outdoor patio. Depending on your location, you may need a license to open a restaurant in your selected location, a license to serve alcoholic drinks on the premises, and a permit to build a patio area. Most likely, those would be three different applications, possibly involving you going to three different government departments to obtain them.
Don’t forget that these types of licenses and permits are also different from the legality of your business entity; just because you’ve incorporated your business or formed an LLC doesn’t mean you’re done with the fees and paperwork.
The federal government in the United States generally only requires permits and licenses for very specialized industries. If you’re manufacturing alcohol or transporting farm animals across state lines, opening a commercial fishery or a gun shop, for instance, you’ll need to check out their requirements.
If it seems like your industry is very niche or has a high level of liability, the odds are you will need to jump through some hoops. For the complete list with relevant links to resources, look here.
State and local level
As there are fifty different states, you can imagine the level of diversity in laws regarding permits and licenses. You can find a general state-by-state directory here, while local laws will vary even more. There are some consistencies, however; every state has an alcohol control board, and you can be sure that if you need to demolish or build a structure (such as a patio or parking lot) or a building, you will need a local permit.
Permit and license types
Permit types will of course vary by state and local law, but there are a few areas where you can almost always expect to be applying and paying for a permit or license.
Land use and construction
If you are creating a building or structure on a piece of land, you will almost certainly need a construction permit from your municipal government, based off of local zoning laws. You should be able to find the pertinent contact information and applications on your city’s government website, such as this one.
If you’re using or building any kind of a facility, such as a storefront, office, factory, commercial kitchen, or similar, you will need the space to outfitted appropriately for your purposes and up to corresponding legal codes.
Signs and building exterior
Somewhat related to the above, many city or county level governments have rules related to to the size and placement of signage and the look of building exteriors (such as painting murals or bright colors) that are good to look into, and bear in mind as you decide upon branding for your business location.
If you are selling alcohol, your business and in some states your employees will need a liquor license to do so, which you can obtain at the state level. If you are manufacturing alcohol, you will need a federal permit.
If you have an existing parking lot at your facility, this shouldn’t apply to you, though you may need to negotiate use of spaces with your landlord if you have one. If you need street parking in your area, you will need to purchase a parking permit from your city government for each of your company vehicles.
If you are constructing a parking lot, you’ll need a construction and land use permit from your municipal government, and don’t forget that it must be compliant with the Americans with Disabilities Act.
Industry specific licenses and certifications
In your field, there may be industry associations or state boards that you have to apply for, possibly including tests. Most people immediately think of a lawyer having to pass the bar or a doctor being board certified, but did you know that you also need a license to be a hairdresser, and a certification to be a personal trainer? If you sell food, you will need a clean review from the health department and the corresponding permit. Make sure to do your research into your industry so you have all of the licenses you need.
Natural resource licenses
Most counties or municipalities have rules and regulations involving business use and possible pollution of air and water. Look into which laws may apply to your business, particularly if your business must dispose of a lot of waste, as you may need to apply for a specific permit to do so. If you deal with any hazardous materials, this one should be a no-brainer, and you may need to be in compliance with additional regulations regarding pre-disposal storage of those materials as well.
Do I really have to?
The short answer is yes. While it might be tempting to think you can skate through without the necessary business licenses and permits, you’d be leaving yourself wide open to fines and legal liability if something goes wrong. One of the requirements of being a business owner is getting all of your licenses and permits out of the way and keeping them up to date. It can be complicated and time-consuming, but it simply comes with the territory of entrepreneurship.
Have you had a difficult time getting the permits or licenses you need to start your business? Did you have a useful tool or trick that made the process easier? We’d love to hear you story!