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What to Know About Small-Business Licenses and Permits

What to Know About Small-Business Licenses and Permits

By kmurray, Contributor and Moderator
Published: January 9, 2014 Updated: March 14, 2018

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 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!