October 2, 2020 By SmartBiz Team

When you start a new business, there’s an extensive checklist to follow to get up and running. From product or service development, technology operations, hiring, and budgeting, don’t forget the most important – and legally required – steps.

The majority of state, city, and county governments require business owners to obtain a license. The requirements vary by agency. Few businesses operate without a license of some type. Here’s an overview of the licenses you might need and how to apply.

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Basic business operation license

A business license is required to conduct business within a specific geographical jurisdiction. It is the authorization to start a business issued by the local government.

Federal employer identification number (EIN)

Also called a tax identification number, the EIN is required for almost all types of businesses. The EIN is a nine-digit number assigned by the IRS. It is used to identify the tax accounts of employers and certain others who have no employees. The IRS uses the number to identify taxpayers who are required to file various business tax returns.

According to the IRS, you may apply for an EIN online if your principal business is located in the United States or U.S. Territories. The person applying online must have a valid Taxpayer Identification Number.

Fictitious business name permit

This permit is also called a "dba" or "doing business as" permit. A fictitious name is a business name that is different from your personal name, the names of your partners or the officially registered name of your LLC or corporation.

The legal name of your business defaults to the name of the person or entity that owns the business. Or you can choose to rename and register it as a DBA name. According to the SBA, registering your DBA is done through your county clerk’s office or with your state government, depending on business location. Some states that do not require the registering of fictitious business names.

Sales tax license

Before you collect sales tax, you need to register for a sales tax permit with your state. Here’s a handy site that has all of the details for each state: How to Register for a Sales Tax Permit in Every State.

Special state-issued business license or permits
Specialized permits or licenses are required if your business sells the following types of products:

  • Liquor
  • Lottery tickets
  • Gasoline
  • Firearms

Special state-issued occupational / professional licenses

These licenses are required for various services including:

  • Medical care
  • Auto repair
  • Real estate sales
  • Tax services
  • Insurance sales
  • Cosmetology
  • Legal representation

Special federal business license or permits

These licenses are required if your business will involve the following:

  • Investment advising
  • Drug manufacturing
  • Preparation of meat products
  • Broadcasting
  • Ground transportation, i.e. trucking
  • Manufacturing tobacco, alcohol, or firearms; or selling firearms
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Zoning and land use permits

After you’ve correctly filed your local business license application, the city zoning department makes sure that your business’s location and area are zoned for your business type. If you have a bricks and mortar location, your store’s parking area must also meet the local zoning codes.

Note that you can’t operate your business in an area if it’s not zoned for your type of enterprise. If that’s your situation, apply for a variance or conditional-use permit. This involves presenting your case before your city’s planning committee. This is your opportunity to show that running your business in that area won’t disrupt the character and safety of the neighborhood.

Building permits

If you plan to build an entirely new commercial structure, renovate an existing one, or install new utilities or appliances, you likely need to obtain building permits from your local government to make sure you conform to safety codes and other government regulations.

Fire department permit

If you’re open to the public, you need a fire department permit - especially if your business works with flammable materials. Inspections might occur regularly to make sure you’re in compliance.

Health licenses and permits

If you’re starting a restaurant, operating a cafe, or opening a fitness facility—anything that could possibly relate to people’s health, you’ll need to get required health licenses.

Signage licenses and permits

A sign permit may be required by city codes prior to placement of new signage. Rules may be in place regarding signage area, height, placement, lighting, and sign type. There may be prohibited signage – like flashing lights or moving signs - so check with your city before you spend your valuable marketing dollars.

Environmental licenses and permits

One job of local governments is to help protect their residents and land’s health by regulating small businesses in the area. Environmental permits can regulate where you operate and if your business operations impact the air and water quality levels. Waste removal may also have requirements.

The SBA has a very helpful feature to help you identify the specific licenses or permits your business may need. Select a state from the list to learn about specific license and permit requirements in the area where your business is located: Business Licenses and Permits.

Next Steps

The SBA reminds business owners that some licenses and permits expire after a set period of time. Keep close track of when you need to renew them — it's often easier to renew than it is to apply for a new one.

Additionally, you'll have to research your own state, county, and city regulations. Industry requirements often vary by state. Visit your state's website to find out which permits and licenses you need.

When you launch your business, you might need help getting up and running legally. A legal or financial professional can guide you through the process. For additional information to keep you compliant, visit SmartBiz University: Summarizing Regulatory Compliance | SmartBiz University.

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