According to the Bureau of Labor Statistics, about 9.6 million people in the United States work for themselves. The bureau predicts that by 2026, that number will increase to 10.3 million people. And if that’s not enough to get you to start thinking about how to get a business license and take the entrepreneurial leap for yourself, listen to this:

People who own incorporated businesses earn about 50 percent more than those who work for someone else. Self-employed wages differ among the types of business, but if you are thinking about opening a business and plan to work hard at it, you could earn more than in your regular job.

What do you say we talk about how to get a business license so you can join the ranks of the self-employed?

What Is a Business License ?

License

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Many state, local, federal, and municipal governments require that people get some type of business license when opening a business. Some types of businesses only need one license, while others require a license from each governmental level.

In fact, the U.S. has more than 40,000 separate licensing jurisdictions, and each comes with its own licensing requirements.

Authorities use these licenses to protect the public or to keep business owners from operating in a place where they’re not allowed. For instance, depending on which type of business you want to open, your city or state may have restrictions that will prevent you from operating it from home, and when you apply for the business license, it will come up.

That sounds complicated, but it doesn’t have to be. Before we talk about how to get a business license, let’s look at why you need one.

Why You Need a Business License

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In addition to ensuring that you can legally operate from the location you want, a business license will prevent you from accidentally setting up an illegal business. For example, if you plan to make your own weed killer or pesticide from your home and apply for a business license, you would quickly learn that it’s not so easy.

The three main reasons for getting a business license (besides the obvious fact that it’s the law) are:

  • Identifying your business and holding you responsible for its actions
  • Keeping track of your finances because you are liable for taxes
  • To ensure your business doesn’t jeopardize the public’s safety and health

If a governmental agency finds you operating without a business license, it can hit you with fines and penalties, and in some cases, even padlock your doors and prevent you from doing business.

Where Do You Go from Here?

Now that you understand what a business license is and why it’s so important to have one, let’s talk about how to find out which type of business license you need.

Here’s a step-by-step plan to help you figure it out.

Visit this website

License

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The Small Business Administration (SBA) has a handy website that will help you determine what types of business licenses you need. Your first step in the process is to visit the site.

Federal licenses vs. state licenses

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On the site, you will find that the business licenses are broken down into federal and state levels. It’s possible that you may need a business license from each governmental authority.

Take a look at the categories for the federal licenses and determine whether or not your business falls into one of them. For simplicity sake, here are the main categories of businesses that need to obtain a federal business license:

  • Agriculture
  • Alcoholic beverages
  • Aviation
  • Firearms, ammunition, and explosives
  • Fish and wildlife
  • Commercial fisheries
  • Maritime transportation
  • Mining and drilling
  • Nuclear energy
  • Radio and television
  • Transportation and logistics

If your business falls into one of these categories, click on the department listed next to it, and it will take you to the agency that issues business licenses.Now, it’s time to move on to and learn how to get a business license for a local municipality. Because each state has different licensing requirements, you will need to visit your state’s website to learn about the rules for your type of business.Fundera offers a state-by-state business license guide that provides links to each state’s licensing and permitting agencies.You can also go to this SBA page and type in your zip code to see a list of all the licenses and permits your state requires.

Types of Business Licenses You May Need

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When learning how to get a business license, it’s easy to become confused about what types of business licenses and permits you need for your business.Here is a list of the most common types of business licenses and permits required by most states, local governments, and municipalities.

How to get a business license on a local level

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You will most likely need a business license or permit from your local government or municipality.

You need a basic license

A business operating license gives you the right to operate your business within your town or city. Your local government will issue this permit if you live in the city, but if you live outside of the city limits, you should call your county’s government office to find out who will issue the permit.Most jurisdictions require this type of business license.

Are you allowed to set up shop there?

Each local government has zoning laws that restrict the types of businesses you can operate in certain areas. For instance, it’s unlikely a city or town will allow you to open a bar next to a school. You will also need to check to see if your local authorities will approve your business in the location you want.

If you plan to open a store in a shopping mall, you probably won’t have any problems. But if you plan to open a business in an area that has never had that type of business, you may.

You will need to have your plans approved by the city zoning department. Their job is to ensure that the zoning laws allow for your type of business and that the parking area around your business is sufficient.

If the area isn’t zoned for your type of business, you can ask for a variance or conditional-use permit. You will have to present your case to authorities and convince them that your business won’t disrupt the safety of the neighborhood.

Don’t start construction yet

If you plan to build a new building for your business or renovate an existing one, you will need to get building permits from your local authorities. These permits ensure that the building stays in compliance with local codes and safety requirements.

The licensed contractor you hire to build your building or complete the renovations will work with the city to get these permits.

(Don’t) heat things up

Every city handles fire department permits differently. Some require that you get a permit from the fire department before you open your doors. Others only require that the fire department does periodic inspections on your business, and then, if it passes, issue you a certificate.

If you run a business that serves the public, you will likely need one. Some examples are restaurants, daycare centers, or other customer-centric businesses.

Health is key

If you operate a business that could affect people’s health, you need a health permit. For instance, if you run a restaurant, gym, or daycare center, you will need to obtain a health license or permit.

Every jurisdiction is different. And if you operate a business that could affect people’s health, be sure to check with your local government to find out if you need this type of license or permit.

Let them know you’re there — legally

When opening a business, you can’t just put up any type of sign. Most cities have strict requirements on the size, lighting, location, and visibility of business signage.

Ask your local government for a list of their signage requirements, and then make sure you get a signage license or permit to ensure that yours is legal. That will prevent unnecessary fines or even a removal notice for signs that don’t meet the requirements.

Keeping things green

Most people think that environmental licenses and permits come from the federal government, and while many of them do, local governments are getting in on the action, too.

Local governments are increasingly regulating where businesses can produce and sell your products. Also, they are creating water quality levels, air quality controls, and even requirements for waste removal.

It’s a good idea to check with your local government to find out if you need an environmental license or permit when learning how to get a business license in your local area.

How to get a business license on a state level

Once you have the business licenses and permits you need on the local level, it’s time to find out how to get a business license on the state level.

Here are some types of licenses and permits you may need to fill your state’s requirements.

You need (another) business operating license

You already have a local business license, but most states also require that you have a business operating license on the state level. States issue these licenses so they can track your business and keep track of the revenue you earn. That helps them determine your business’ taxes correctly.

License to sell

If you plan to sell certain types of goods, such as liquor, lottery tickets, gasoline, or firearms, you may need a seller’s license. Your state will likely require you to have a special type of seller’s license in addition to your state business operating license.

Each state has different requirements for what type of product triggers the need for a seller’s license. So, be sure to check with yours to determine whether or not you need one.

It’s so taxing

Although not technically a license, you will need to register for taxes and get tax permits to set up shop and begin operating your business. Unless you operate as a sole proprietor, you will need to obtain an Employer Identification Number (EIN) from the IRS. This number allows you to hire and pay employees.

If you’re unsure about whether your business needs an EIN, the IRS has a handy checklist you can use to determine it.

And the federal government isn’t the only organization that requires you to register and get tax permits. Your local government requires you to get a sales tax license so you can withhold income tax and unemployment tax on your employee paychecks.

Do you run a specialty business?

Accountants

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Most states require that business owners in certain occupations have occupational licenses to practice. These licenses are renewable and to stay in business, you will have to keep yours up to date.

Although every state requires occupational licenses for different professions, here is a list of the most common professions that need this type of license.

  • Accountants
  • Appraisers
  • Collection agents
  • Barbers
  • Contractors
  • Cosmetologists
  • Electricians
  • Insurance agents
  • Mechanics
  • Plumbers
  • Physicians
  • Auctioneers
  • Investigators
  • Security guards
  • Real estate brokers
  • Repossessors

Check with your state’s business license office to determine if it requires an occupational license for your profession.

How to get a business license for a home-based business

Home based

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If you decide to operate your new business from your home, there are a few business licenses that you may need.

Here are the most common ones.

Stay legal at home

A license exclusive to home-based businesses is a home occupation permit license. This license allows you to operate your business from home legally, and most states require them. If you work as a freelancer or consultant, this type of license may take the place of a business operating license in some states. Be sure to check with your local authorities.

The license shows that you aren’t disturbing the neighborhood by operating a business that adds a lot of noise, traffic, or environmental conditions to the neighborhood.

And there’s more

Permits

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As a home-based business owner, you may have to get some of the same business licenses as those who operate in commercial spaces. For instance, you may need to get the following licenses:

  • General business license
  • Sales tax permits
  • Occupational licenses for certain professions
  • Health and safety permits
  • Environmental licenses and permits.
  • Signage permit
  • Building permits

If a governmental agency finds you operating without a business license, it can hit you with fines and penalties, and in some cases, even padlock your doors and prevent you from doing business.

The next Step: Managing and Maintaining Your Business Licenses

Business

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Your first step is to get all the licenses your local, federal, or municipality requires. But your work isn’t over. You will also need to manage and maintain your business licenses.

The SBA has some advice to help you do this better. It suggests that you should:

  • Keep an eye on renewal dates and don’t let your licenses lag
  • Make a copy of all your business licenses and permits and keep them in a safe place
  • When required by your state, display the appropriate licenses so customers can see them
  • Make sure to check for additional license requirements if you decide to expand your business

Did You Learn How to Get a Business License?

At first glance, learning how to get a business license looks complicated. But as you read, did you realize just how easy it really is? You’ll need to determine which type of licenses you need by contacting your local, state, and federal authorities. And then apply for each one. Then take care that you maintain them by keeping records and renewing them when they expire.

What kind of business do you want to start? Do you know what types of licensing you’ll need to acquire? If so, we would love to hear about your experience in the comments below!

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