Editorial · July 13, 2017
Business License Requirements: Federal, State and Local
Business license requirements depend on three things: what your business does, where it operates, and which agencies regulate it. Almost every business needs at least one license or permit. Most need a mix from the federal, state and local levels. This guide shows how to find out which ones apply to you.
Start with the three levels
The U.S. Small Business Administration (SBA) says virtually every business needs some form of license or permit to operate legally. It also says the rules vary by the type of business, where it is located, and which government rules apply.
Think of it as three layers. The federal layer covers activities a federal agency supervises. The state layer covers most general business and trade licenses. The local layer covers your county or city, and it often includes zoning and health rules.
Work from the top down, but plan to check all three. A business can be fully licensed at one level and still be missing a permit at another.
Federal licenses: only for some activities
Many small businesses never need a federal license. You need one if your work is supervised and regulated by a federal agency. The SBA gives selling alcohol, firearms and commercial fishing as examples.
The SBA page lists the agencies by activity. Businesses that make, wholesale or import alcohol must register with the Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB). Firearms and explosives dealers deal with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Commercial fishing businesses apply to NOAA Fisheries. Broadcasters may need a license from the Federal Communications Commission (FCC). Businesses that handle nuclear materials apply to the Nuclear Regulatory Commission.
Other examples include aviation, which runs through the Federal Aviation Administration, and ocean shipping, which runs through the Federal Maritime Commission. Importing or moving animals, animal products or plants across state lines can require a permit from the U.S. Department of Agriculture.
If your trade is not on the list, a federal license is probably not required. Still, read the list once before you decide.
State licenses: where most owners spend their time
The SBA points owners to a state-by-state list of business license offices. You pick your state and read what it says about licenses and permits in your area. The list includes every state, plus the District of Columbia and several territories.
State rules differ a lot. A state may license a trade, such as contracting or a salon. It may also require you to register for taxes or hold a general business license. Do not assume the rules in one state match those in the next.
A good first step is the website of your state's Secretary of State or the state business license office. Write down each license name, the agency that issues it, the fee and the renewal date.
Local permits: county and city
The SBA also says owners can find the general permits, licenses and registrations their county or city requires. Local offices often handle things a state does not, such as a city business license or a permit tied to your building.
Even in a federally regulated trade, local rules still apply. The SBA notes that an alcohol business must also contact its local Alcohol Beverage Control Board for local permit and licensing information.
Call your city or county clerk. Tell them what you plan to do and where. Ask which licenses, permits and inspections you will need before you open.
A simple checklist before you open
- Write down exactly what your business will do, sell and handle. Licenses follow activities, not names.
- Check the SBA list for any federal agency that regulates those activities. Then read your state's license page. Then call your county or city.
- Keep a simple file with each license, its number, the issuing office, the fee and the renewal date. Many licenses expire and must be renewed.
- Ask each office if another permit is needed for your location.
- If you are unsure, the SBA points owners toward local help. That includes SBA offices, Small Business Development Centers and SCORE business mentors.
Sources
- U.S. Small Business Administration, Federal Licenses & Permits: sba.gov/starting-business/business-licenses-permits/federal-licenses-permits
- U.S. Small Business Administration, State Licenses & Permits: sba.gov/starting-business/business-licenses-permits/state-licenses-permits