A business licence is the formal registration of your firm that enables you to conduct business in your industry and jurisdiction. It gives you permission to carry out commercial operations by demonstrating that your company complies with all applicable local laws and regulations. You can face severe penalties or your state could cease your business operations if you run a business without the required licences. In this write-up, we will discuss how to get a business license and different types of it.
How to Get A Business License?
1. Select the Type of Business.
Selecting the type of business to start is one of your first tasks. Company, LLC, partnership, and sole proprietorship are common forms of an organisation. Each type has pros and cons with liability protection, taxes, and documentation.
2. Register Business name
You must choose a name for your company and confirm that it is accessible for usage. Verify the state and municipal laws pertaining to the registration of business names. Obtaining a copy or certificate of registration and registering your business name are requirements in several states.
3. Get Your EIN
If you are wondering how to get a business license, getting EIN number is an essential step. Except for sole proprietors, you’ll need to get an Employer Identification Number (EIN) from the IRS for your business. This number will be used for important tax and banking tasks. You can easily apply online for free directly through the IRS website.
4. Check Zoning and Other Local Requirements
Contact your local county, city, or town government to find out if there are any zoning or other regulations you’ll need to comply with to operate your business. Common requirements may include permits, inspections, parking, signage rules, and occupancy limits.
5. Apply for State Tax IDs
You’ll need to register with your state’s tax agency and get any required tax IDs or certificates. Depending on the state and business, this may include sales tax IDs, employment/withholding tax IDs, and other specialty tax registration certificates.
6. Get Any Needed Licences or Permits
Many businesses require special licensing or permits related to health codes, food service, alcohol sales, professional services, retailing, transportation, and more. Research if your business needs any state or local licenses or permits and complete the steps to apply for and obtain them.
7. Check Insurance Requirements
You may need certain types or amounts of business insurance coverage to operate legally in your state or locality. Common requirements include worker’s compensation, liability, property damage, and liquor liability.
8. Understand Employment and Labor Laws
To hire employees, you’ll need to be familiar with state and federal labour laws related to taxes, minimum wage, health and safety, anti discrimination statutes, family leave, overtime pay, and more.
9. Setup Accounting and Bookkeeping
Proper financial accounting is a must know when you are looking for how to get a business license. Decide if you will handle bookkeeping internally or outsource to an accountant. Choose an accounting system, setup payroll if needed, and outline practices.
10. Draft Business Documents
Create useful documents that establish policies, procedures, operations, and guidelines for your business. Important ones may include business plans, organisational charts, employment agreements, accessibility policies, safety procedures, and emergency plans.
11. Choose a Business Bank Account
To keep business and personal finances separate, set up a dedicated business bank account. Explore options like credit unions, community banks, and online banks to find one that fits your needs.
Different types of Business License
Now that you know how to get a business license, let’s have a look at the different types of business licence.
- Business Operating License: To lawfully conduct business in a city or county, a general licence is needed. An operating license guarantees adherence to local laws, building codes, and other requirements.
- Seller’s Permit: Most states require a seller’s permit in order to collect sales tax on retail transactions. To obtain a sales tax ID number and permit, you must register with the revenue or taxes agency of your state.
- DBA (Doing Business As): A DBA registration is required if you’ll be operating your business under a name different from your personal legal name. You’ll need to register your DBA name at the state or local government level.
- Special Permits: Certain industries require special permits like food handlers permits for restaurants, liquor licences for businesses selling alcohol, and professional licences like contractor’s licence.
- Industry Licences: Some industries have state or local licence requirements like transportation, cannabis, childcare, tourism, etc. Requirements vary but help ensure legal and safe operations.
Conclusion
Knowing how to get a business license is important to start a legal, compliant business. While the process involves some upfront legwork with various applications and fees, you’ll rest easy knowing you checked all the boxes. Taking the time to do it right gives your business the best possible foundation for success and smooth operations. The journey may seem daunting, but the long-term payoff of operating legally is well worth the effort.
Frequently asked questions
Q: Where do I apply for a business license?
A: Licenses are issued at various jurisdictional levels. You can start with your city or county clerk’s office and then check state-level requirements with your Secretary of State or Department of Revenue.
Q: What does a business license cost?
A: Costs vary greatly by industry, size, location, and type. Basic permits may start at $50 while heavily regulated industries can cost hundreds initially with annual renewal fees.
Q: How long will I have to wait to get the license?
A: If you know how to get a business license and follow the steps properly, you can expect to get it within a few weeks.
Q: Do I need a new licence for each location?
A: In most cases, yes. You’ll generally need licences and permits for each physical business location you operate in a given jurisdiction.
Q: Do I need a new licence if I change my business name?
A: Yes, you’ll have to update your business name registration and licences if you change your official business name.