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Business Licences and Permits: An Overview

Before you can start a successful business, you should first understand the different business licenses and permits that you may need to comply with laws and regulations. Read further to learn more about business licenses, business permits, how they differ from one another and examples of the types of licensure and permits you might need to operate your business.

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What is a business license?

A business license is a legal document which states that you have the authorization to own and operate a business in a specific area, state and country. Business licenses are typically issued at the local, state and federal levels.

What is a business permit?

A business permit is a legal document which states that your business complies with laws and regulations within your operating location. Business permits outline your compliance to uphold workplace safety and maintenance to benefit your employees, customers and the structure in which you operate.

What’s the difference between a license and a permit?

According to the U.S. Chamber of Commerce, the difference between business licenses and business permits lies in two distinct factors: the requirements needed to obtain a license or permit and the purpose for obtaining each. Both business licenses and permits are issued by a government agency, but in order to obtain a business license, you most likely need to complete a registration process and, in certain situations, take and pass a professional exam. The purpose of a business license is to claim the right to own and operate a business.

In contrast, business permits are a type of licensure devoted to a certain aspect of public safety. To get a business permit, you will likely need to contact an applicable local departmentand schedule a time for an inspection of your business location. If the inspection is successful, you may be granted a permit to perform one or more aspects of your business. For example, if you plan to open a restaurant, you would need to get an approved inspection from the public health department that enables you to serve food to the public.

Examples of licenses and permits you may need when starting a business

Here are some examples of common business licenses and permits you might need for your business (though you will need to check local, state and federal regulations):

Business licenses

Some common business licenses include:

  • Federal business license:Federal business licenses apply to businesses that are regulated by a government agency. For example, farmers are most likely regulated by the FDA or Department of Agriculture, making a federal license essential.
  • State business license:A state business license allows businesses to legally operate within their state.
  • Local business license:Local business licenses typically occur at the county level and enable businesses to operate within the area.
  • Doing business as (DBA) license:A DBA license allows businesses to operate under another name other than their legal name.
  • Sales tax license:Sales tax licenses are required for a business that sells products in a state with sales tax.
  • Direct sales license:A direct sales license is for any business that visits a customer’s home or workplace to offer their services and receive payment.
  • Profession license:A professional license qualifies one or more individuals to operate a particular business. For example, before opening your own therapy practice you’d need to earn a therapy license.

Business permits

Common business permits include:

  • Seller’s permit:A seller’s permit enables a business to purchase wholesale items and resell them to customers or other merchants.
  • County permit:A county permit allows you to operate your business within a particular area.
  • Fire department permit:A fire department permit is issued by the fire department after an inspection that deems your business’ building safe and void of any flammable materials. This could also include qualifications for how many exit routes your building has or exit signs to let people know where to go in the event of a fire.
  • Health department permit:A health department permit might be required for a business selling food products like a grocer, convenience store or restaurant. Businesses receive this permit after an inspection deems the building void of any pest infestations, harmful chemicals, unsafe food storage conditions and bacteria or mold
  • Pollution control permit:A pollution control permit is typically issued at the local level. It states that a business’ operations act in accordance with pollution regulations like burning chemicals, using paint or spray paint or using specific cleaning materials.
  • Sign permit:A sign permit is typically administered at the local level. Business owners only receive a sign permit if the size, language or placement of their sign aligns with local laws and regulations.
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Business license FAQs

Do you need a business license to operate a business?

According to theSmall Business Administration (SBA), most businesses need one or more business licenses at the state and federal level to operate in compliance with laws and regulations. Be sure that you review your state’s specific requirements for businesses and review your local government website to determine if any local licensure is necessary.

How do you obtain a business license?

You can obtain a business license by following a list of important steps.

At the federal level, do the following:

  1. Identify your business’s industry (agriculture, education, hospitality).
  2. Identify your business’s main offerings (food products, tutoring services, lodgings and entertainment).
  3. Use the SBA’s website to connect to the appropriate government agency website.
  4. Visit the government agency website to determine what licenses and permits you need.
  5. Follow specific agency instructions to register or apply and pay a fee for a license or permit.

At the state level, complete these steps:

  1. Visit your state government website and complete a license search.
  2. Follow the instructions provided to determine if you need a license.
  3. Review state and county licensing databases to determine how to apply.

At the local level, follow these steps:

  1. Search online for specific instructions to file for a business license within your county.
  2. Contact your local county clerk’s office.

What professions require state licenses?

Some professions that may require state licenses include:

  • Lawyers
  • Doctors
  • Nurses
  • Therapists
  • Counselors
  • Land surveyors
  • Building contractors
  • Cosmetologists

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