Many parts of launching a new business are exciting for entrepreneurs, but the paperwork involved is certainly less exciting. Case in point: Business licenses. Little about obtaining business licenses is as thrilling as actually doing business, but you can’t do the latter without the former. The good news is, obtaining business licenses doesn’t have to be complicated – especially if you follow the below guide on how and where to apply for a business license.
What is a business license?
A business license is an official government document that permits your company to operate. Without a business license, you cannot legally conduct business – governments require businesses in many sectors to acquire a license so they can hold companies accountable, tax companies properly, and ensure that companies are complying with public health regulations.
What are the types of business licenses?
Among the types of licenses you might need to obtain are:
- A business license, a mandatory document that confirms your local government has zoned your desired worksite for your business type
DBA or assumed name paperwork, which enables your company to publicly operate under a name different than its registered business name
- A federal business license, which the Small Business Administration (SBA) may require for certain business types
- A state business license, which your state labor department may require your company to obtain from the relevant state professional board
- A sales tax license, which enables your company to collect sales tax from customers and remit it to the government
- Safety permits, which include health, fire department, and air and water pollution control permits
- Sign permits, which allow your company to install exterior signage or lighting fixtures
To learn more about these types of business licenses and whether they might apply to your company, read the following SmartBiz Loans blog: What Are the Types of Business Licenses?
Types of businesses that require licenses
Companies in many industries must obtain a business license from their local government. Your company may have additional licensing requirements if it meets any of the following descriptions:
- Food service establishments such as restaurants must obtain health permits.
- Nightclubs and other large establishments open to the public must obtain fire department permits.
- Construction companies must obtain air and water pollution control permits.
In professional fields including, but far from limited to, accounting, law, real estate, cosmetology, real estate, hair styling, and medicine, companies must obtain state licenses from the appropriate state professional association. Visit this database of professions requiring state licensure to determine your company’s requirements.
How much does a business license cost?
The cost of a business license varies by location and, if applicable, by profession. A business license often costs hundreds or sometimes thousands of dollars per year. You’ll also pay annual renewal fees, with penalties for late renewal. Consult each of your licensing agencies to determine how much you’ll pay for your license acquisition and renewal.
Seven steps on how and where to apply for a business license
Applying for a business license will be a hassle-free process if you follow these steps:
1. Gather the right documents
You’ll need the following information when you apply for a business license:
- A basic description of your company, operations, and locations
- Articles of incorporation or organization, corporate bylaws, and additional corporate records
- Proof of your personal and company tax status, such as an employer identification number (EIN)
- Details of your business ownership and management structures
2. Register your business with your local government
To get a business license from your local government, contact your jurisdiction’s Department of Business and Professional Regulation (DBPR). If your local government doesn’t have a DBPR, ask your local labor office which steps you must take. You may need to register your business with your county clerk, though procedures vary by location.
3. Obtain other government licenses
While you’re speaking with your local licensure agency, ask about obtaining your sales tax permit and, if applicable, safety, DBA, and sign permits. Officials in your local licensure agency may also know where to apply for these additional business licenses.
4. Obtain professional and federal licensure
While you work toward meeting your local licensure requirements, determine whether your company needs to obtain professional and federal licensure as well. If it does, contact the relevant agencies to discuss the licensure process. Gather all needed federal and professional paperwork and documentation while working toward your local business license – you’ll need all your required licenses to start your company.
5. Register a service mark or trademark with your state secretary
Launching a company means determining your company’s name. That’s why trademarks and service marks exist. A trademark is a word, symbol, phrase, and/or design unique to a company’s goods, and a service mark is the same but for services instead of goods. The United States Patent and Trademark Office (USPTO) runs a list of state trademarking and service marking agencies – contact the appropriate office to get started.
6. Apply for the license
Once you have all your ducks in a row, head to your jurisdiction’s city hall or central government office to apply. When you file your application, ask how long you should expect for approval. You should also ask for a contact who can give you updates or a website that automatically tracks your application’s progress.
7. Keep up with renewals
Once you receive your business license, you’ll likely need to renew it at least annually. For some professional licenses, your company may also need to meet ongoing training or continuing education requirements. In any case, do what you must to keep your licenses intact – without valid licenses, traditional lenders will be less likely to offer you funding.
To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also suggests ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.
*The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.