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Run a Home-Based Business? – Find the Licenses and Permits You Need

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Run a Home-Based Business? – Find the Licenses and Permits You Need

By Caron_Beesley, Contributor
Published: June 13, 2012 Updated: January 9, 2013

Whether you’re starting a business from home or looking to move into a home office, it’s important not to overlook the fact that your business is still subject to license and permit laws.

Why? One of the main reasons any business owner is required to carry a license is so that revenue can be tracked for taxation purposes. Businesses that sell taxable goods or services also need a sales tax license or permit. Licenses and permits are also used to protect the public and are required in federally regulated industries (aviation, firearms, alcohol businesses, etc.).

Other industry licenses signify specific expertise. For example, if you run an in-home hair styling business, you’ll need the same professional license that you’d need if you had a main street salon.

Regulations vary based on industry and location, so it can be intimidating to know where to start.

Use the “Permit Me” Tool to Find Your License and Permit Requirements

To help business owners navigate the process, SBA.gov offers a useful tool called “Permit Me.” Simply enter your zip code and business type to view a list of the licenses or permits you’ll need, together with information and links to the application process.

General Home Business License and Permit Guidelines

In addition to the Permit Me tool, it’s helpful to know more about the general guidelines that apply to home business licensing and permit requirements. While not all of these will apply to every business, some will: 

1. General Business Licenses – Your city or county government website can help you get one of these. Basically it’s an annual license or permit that legally entitles you to operate a business in that locality.  Typically a small fee is associated with this paperwork.

2. Professional and Trade Licenses – State governments require certain businesses or industries to obtain professional/occupational licenses, such as a child care operation or real estate license. You can contact your state's business license office – or check the website – for a complete list of occupations that require licensing. 

3. Home Occupation Permit – Many city and county zoning and planning agencies require all home-based businesses to get a Home Occupation Permit. If a permit is not required in your city, the zoning office can tell you if your neighborhood is zoned for the home business activity you plan to conduct. If your area is not zoned for your type of business, you may need to file for a variance or conditional-use permit. This guide, Zoning Laws for Home-Based Businesses, has more information about zoning laws for home-based businesses. 

4. Sales Tax Permit - If you intend to sell taxable goods or services (online or offline), you may be required to collect state and local sales taxes from your customers. If you sell your products in a state that charges a sales tax or levies a gross receipts or excise tax on businesses, you may have to apply for a tax permit or otherwise register with your state revenue agency. This blog also explains more about the process of getting a permit and collecting sales tax: Sales Tax 101 for Small Business Owners and Online Retailers.

5. Health and Safety Permits – Depending on your location and industry, you may need either a permit or an inspection from your local fire department, especially if your business requires the use of flammable materials or will likely involve the assembly of several people in one location, such as a child care business.

Air and water pollution by businesses is also monitored in some communities. You can check with your state environmental protection agency to see if these regulations are applicable. Health Department permits are typically issued by your county government, pending an inspection of the business premises, if you plan to sell food to the public or to other businesses. Additional permits may be required for food service or food preparation depending on your state. 

6. Sign Permits – Some cities and towns have sign ordinances in effect that restrict the type, size, or location of signs placed on your property. Check with local authorities.

7. Construction Permits – If you need to make structural changes to your property to accommodate your in-home business, environmental and building permits may be required for construction. It’s a good idea to check your local government’s building and planning department before undertaking any construction. 

8. Check with Your Home Owner’s Association (HOA) – While your local HOA won’t specify particular licenses or permits, if you do live in a planned residential neighborhood or complex, the HOA can restrict the type of business activities you conduct in your home. Read “Can a Homeowners' Association Ban Your Home-Based Business?” for the lowdown on the law and your rights.

About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Comments:

I am planning to open an online store. Sole owner, what permits or licenses do I need?
I am planning to open an online store. Sole owner, what permits or licenses do I need?
Hi Caron. In the case of a banned business by the HOA, Is there any alternative to establish a different business address when registering a Sole Proprietorship? Or all I can do now is to go against the Association and wait to see if they are willing to amend the rules?
Thanks for the helpful information. It provides some good tips for freelancers. Keep up the good work!
Good advice here. Another tip for a homebased business would be if possible to have either a separate structure or room with its own separate entrance (from the outside) for the business. This will greatly help you in when you calculate your home office tax deductions. Be sure to document the space with detailed drawings and pictures. Another reason this is good is because it can help separate the business from your home life as well. (This really makes a difference if you have a family living at home)
Where do I find the permit me?
http://www.sba.gov/licenses-and-permits
If you need to build an addition to the home or a new structure you will need building permits from your local city office. If you plan to use an existing room or building that is already permitted you just need a business license. My CPA uses an already existing room in the house with a separate entry adjacent to the front door. (with another opening leading from the room into the house) Also, with a separate structure you may able to register a separate house number. For examble, if your home address is 554 main st you could have the separate building on your property registered as 554 1/2 main st, which will be a unique and separate address for your business. Talk to your local city office about how to go about the permits for this.

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