What Are the Licenses Needed for a Small Business?

If you are planning on starting a small business you'll need to make sure you have all the licenses and permits required. Exactly which licenses a business needs depends on state and local laws and on the type of business. However, the federal, state and local rules follow a consistent pattern. Once you know the basics, taking care of the details that apply to you is fairly simple.

Business Name

Unless your business is a sole proprietorship or partnership doing business under the owner's name, you must register a business name. You'll need a registered name to start because it's required on other documents you must have. A "Doing Business As" (DBA) or "Fictitious Business" (FBN) name is usually registered through the county clerk's office where the business is located. Most state secretary of state offices maintain an online searchable database so you can make sure the name you want is available. Once you've verified that, submit an application to your county clerk.

Federal EIN

For most small businesses the only federal document you need is an Employer Identification Number (EIN). This is required if you have any employees other than yourself and is used as the reference number for collecting and remitting federal payroll taxes. You can download the EIN application form on the IRS website (link below). If you need assistance you may call the IRS Taxpayer Advocacy Service toll free at [phone] or for TTD/TTY [phone].

State

In most states you'll need a state business license. Actually, this is a state sales tax number and is available from your state department of taxation (or revenue). Most states require this for online businesses as well as traditional operations. You need to get a state tax ID even if you aren't selling directly to the public since you will need it to file an exemption from collecting sales tax.

Business-specific Licenses

Many businesses require one or more specific permits or licenses. These are usually state or local requirements although some regulated industries (like securities dealers) also must comply with federal regulations. There are three categories of business-specific permits. Occupancy or zoning permits are needed to do business in a particular location. Some businesses (such as health care or electrical work) require professional licensure. Finally, many types of business require state and/or local licenses or permits, including restaurants, taxis and many contractors.

Business License

Once you've obtained all the other licenses and permits you need it's time to apply to your city or county tax revenue office for a local tax identification number, popularly called a business license. If you have questions about what is needed for your particular business, the office can help you or you can go to Business.gov for a state-by-state list of requirements. This has to be the final step because as a rule the local tax office won't process an application until you show you have complied with other licensing requirements.

References

• Business.gov
• Tax Information for Businesses