Business Licenses and Permits: What You Need Before You Operate

Why Licenses and Permits Matter

Operating without the right licenses and permits is not a gray area. It exposes your business to fines, forced closures, and legal liability. Many small business owners assume they only need a general business license, but the reality is more layered than that. Federal, state, county, and city governments each have their own requirements, and they vary by industry, location, and business activity.

Before you open your doors or take your first payment, you need to know exactly what paperwork is required. This guide walks you through how to figure that out.

Federal Licenses and Permits

Most small businesses do not need a federal license. However, if your business activity is regulated by a federal agency, you will need one. Industries that typically require federal licensing include:

• Alcohol: Tobacco and Alcohol Tax and Trade Bureau (TTB)
• Aviation: Federal Aviation Administration (FAA)
• Firearms and ammunition: Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)
• Commercial fishing: National Oceanic and Atmospheric Administration (NOAA)
• Transportation and freight: Department of Transportation (DOT)
• Radio or television broadcasting: Federal Communications Commission (FCC)

If your business touches any federally regulated activity, check the SBA's list of federal licenses and permits. Do not assume you are exempt.

State Licenses and Permits

Every state has its own licensing requirements. Some are tied to your business structure, others to your industry. Common state-level requirements include:

• Sales tax permit: If you sell taxable goods or services, most states require you to register for a sales tax permit.
• Professional licenses: Accountants, architects, barbers, electricians, plumbers, real estate agents, and many other professionals need state-issued licenses.
• Health department permits: If you serve food, operate a salon, or work in health care, your state health department likely has requirements.
• Environmental permits: Businesses that produce emissions, handle hazardous waste, or impact natural resources may need state environmental permits.

Start by visiting your state's Secretary of State or business portal website. Most have a search tool or checklist that walks you through what is required.

Local Licenses and Permits

City and county governments add another layer. These requirements differ significantly depending on your location. Common local requirements include:

• General business license or tax registration: Many cities require all businesses operating within city limits to register.
• Zoning permits: Your business location must be zoned for commercial use. If you operate from home, you may need a home occupation permit.
• Building permits: If you are renovating, constructing, or modifying a commercial space, you need building permits.
• Signage permits: Many municipalities regulate the size, placement, and illumination of business signs.
• Fire department permits: Required if your business stores hazardous materials or hosts large gatherings.

Contact your city clerk's office or county business licensing office directly. Online databases exist for many jurisdictions, but calling is often faster and more accurate.

Industry-Specific Requirements

Certain industries carry additional licensing burdens. Here are a few examples:

• Construction: Contractor licenses at the state level, plus local trade permits.
• Food service: Health permits, food handler certifications, and potentially liquor licenses.
• Child care: State licensing for daycare facilities, background checks for staff.
• Transportation: DOT numbers, commercial driver's licenses, vehicle inspections.
• Agriculture: USDA permits, organic certifications, pesticide applicator licenses.

If you are in a regulated industry, talk to your industry association. They almost always maintain a licensing checklist for new entrants.

How to Research What You Need

Follow this process to build your licensing checklist:

1. Start with the SBA: Use the SBA's license and permit lookup tool at sba.gov. Enter your state and business type.
2. Check your state: Visit your state's business portal and search for licensing requirements by profession or industry.
3. Call your city and county: Do not rely solely on websites. Call the clerk's office and ask what a new business in your industry needs.
4. Talk to a local attorney or accountant: They deal with new business filings regularly and know what gets missed.
5. Check with industry associations: Trade groups maintain current lists of requirements and often provide application guides.

Common Mistakes

• Assuming a general business license covers everything. It does not. A general license registers your business with the city but does not replace industry-specific permits.
• Forgetting to renew. Most licenses and permits have annual renewal deadlines. Miss one and you could face penalties or suspension.
• Ignoring home-based business rules. Operating from home does not exempt you from licensing. Many cities require home occupation permits with specific restrictions.
• Skipping the zoning check. Signing a lease before confirming zoning is a costly mistake. Verify zoning before you commit.

Keeping Track of Your Licenses

Create a compliance calendar. List every license and permit you hold, its issuing agency, expiration date, and renewal cost. Set reminders at least 60 days before each renewal deadline. Keep digital copies of all certificates and correspondence in a dedicated folder.

Some states and cities now offer online portals where you can manage renewals electronically. Use them. Paper-based systems are easy to lose track of.

What Happens If You Operate Without Proper Licensing

The consequences range from annoying to devastating:

• Fines that escalate the longer you operate without a license
• Cease-and-desist orders that shut down your business
• Inability to enforce contracts (some courts refuse to enforce contracts with unlicensed businesses)
• Personal liability if your business structure protections are pierced
• Criminal charges in extreme cases, particularly in regulated industries

Do not treat licensing as optional paperwork. It is the legal foundation your business stands on.