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What to Know About Small-Business Licenses and Permits

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What to Know About Small-Business Licenses and Permits

By kmurray, Contributor and Moderator
Published: January 9, 2014

So, you’re starting a business – congratulations! You already know that there’s a lot to take care of, from choosing your business structure to registering your business. You’ll probably also need a business license or permit – virtually every business does in order to operate legally. It depends on the kind of business you run, where it’s located and what state and federal rules apply. Here’s what you should know to make sure you’ll be running your business within the law.

Why Does My Businesses Need a License or Permit?

Licenses and permits serve two major purposes: They allow the government to track your business’s revenue for tax purposes, and they also protect the public.

For example, if your business is involved in activities supervised and regulated by a federal agency – such as selling alcohol, firearms, radio broadcasting, commercial fishing, etc. – then you’ll likely need to obtain a federal license or permit.

Other special state licenses, known as professional licenses, are required for dentists, hairdressers, veterinarians, realtors, physicians and more. These licenses indicate the level of expertise of an employee or business owner and that they’ve met a certain requirements when it comes to training or education.

State licenses are also required of businesses, such as restaurants and those that serve alcohol, to demonstrate that they meet certain state standards or codes. Particular regulations may vary by state.

Defined by local and/or state laws, permits generally regulate the safety, structure and appearance of a community and its establishments. There are a number of different kinds of permits to be aware of, including:

  • Seller’s Permits – if you’re purchasing wholesale merchandise for resale
  • Building Permits – if you’re remodeling or building commercial space
  • Health Permits – if you’re preparing food
  • Home Occupation Permits – if you’re running a home-based business

What About Tax Permits?

The IRS doesn't license your business, but it does require that certain businesses register to receive a federal tax identification number. You’ll also need to register with state and local government agencies for applicable tax permits such as a sales tax license, income tax withholding and unemployment insurance tax.

Managing and Maintaining Your License or Permit

Once you have your license or permit, you’ll need to manage and maintain it. Keep these tips in mind to help make sure you don’t lose sight of your obligations:

  • Keep track of renewal dates.
  • Keep a copy of all licensing applications and forms in your business records.
  • Display your licenses or permits correctly. Most states and localities require businesses to prominently display their business licenses so customers can see them.
  • If you expand your business – whether it’s physical building expansion or launching a new product or service – you may need additional business licenses.

Additional Resources

About the Author:

Katie Murray

Contributor and Moderator

I am an author and moderator for the the SBA.gov Community. I'll share useful information for your entrepreneurial endeavors and help point you in the right direction to find other resources for your small business needs. Thanks for joining our online community here at SBA.gov!

Comments:

virtually just about every company does to be able to operate legally. It depends on the kind of organization you run, exactly where it’s located and what state and federal guidelines apply. Business Licenses and Permits the government to track your business’s revenue for tax purposes, and in addition they guard the public.
License is a legal document for the work of the company, any company should be licensed before being accepted.
In my state you must be licensed with the state and each city in which you conduct business.
A very useful bit of information for somebody looking to set up a small business. Since most small businesses cannot afford to hire an attorney, these type of articles really help since it educates the prospective entrepreuners about the basic licenses and need for it. Better to have an exhaustive list of licenses required for your business and run it through the relevant bodies so that you are not caught on the wrong foot.
Seller’s Permits – if you’re purchasing wholesale merchandise for resale
Over the years I have seen so many people trying to conduct real estate transactions without a license. Your article drives the point home. I have bookmarked it for future reference.
Hi, Larry! I'm glad you found the article useful and will reference it in the future!
A friend of mine has been running a jewellery business for the last nine years, but now is planning to have her own website to run her business from home. My question is this, she has a tax ID but does she need another type of license to run an online business? Thanks
Very informative post. One that everyone should read BEFORE they go looking to get their business licenses. It would save a lot of people time and other business owners as well to not have to stand in lines waiting for the unprepared. Anyway this wasn't meant to be a rant just a quick "thanks for the post".
Very interesting post, it is very true that not every business has documents and license, I feel it every day in my business in second hand products. (This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you.)

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