How to get a business license and other must-know info
Small business owners have a laundry list of items to cross off before they can run a fully-functioning business. When you're starting a new business, you'll likely hear that you need a business license.
This suggestion can be deceiving, as there's no single business license that all businesses need. In fact, some municipalities and states don't even require a business license. Adding to the confusion, there are a number of permits and licenses that get lumped in under the term "business license." However, the world of business licensing is pretty clear cut when you make the proper preparations.
So let's take a look at what a business license is, why you may need one depending on the state you’re in, and how to go about applying for one in your area.
What's a business license?
A business license is typically a local license, applying to a single county or jurisdiction. If a business has multiple locations, that business needs multiple licenses — one for each jurisdiction.
In short, a business license is the local government's way of approving your business for operation within the specified jurisdiction. The business license process is generally used to prevent certain business types from being near other businesses or public spaces.
For example, you wouldn't want a type of processing plant next to a recovery center or hospital. By requiring business licenses, cities can look at business types and determine where they can be located.
But depending on your proposed business location, you may not need a business license at all. In Texas, for example, business license requirements are left to the counties. Some counties don't require a license, while others do. Check your state and local guidelines to see if you even need one in the first place.
Once you’ve confirmed you need a business license, let's see how you can go about getting it.
How to get a business license
While the definition of what constitutes a "business license" varies, and some areas don’t even require one at all, the process of actually securing one is generally straightforward, regardless of where you are.
Before trying to get a business license, there are a few questions you need to address:
- Does your state or county require a business license? Check with your state Department of Labor to see if a license is required for your region. If that fails, check the Small Business Administration (SBA) for more information.
- Is there a state tax where you live? If the department of revenue collects a state tax for your business location, you'll need to get an employer identification number, regardless of business license requirements.
- Have you registered your business name? Ensuring your business name is registered before applying for a business license can help things go smoothly and prevent you from having to put your license on hold.
Once you've addressed the above questions, you're set to move on to the actual business license application process. Again, the process is usually straightforward, but it can vary slightly from state to state.
Because this process is state-specific, there are a few resources you should use as your first stop:
- The county clerk: The office of the county clerk is a great first stop, as they'll be knowledgeable about local laws and business license requirements. They'll also be able to point you in the right direction, assuming their office doesn't handle the licensing itself.
- Secretary of State: Similar to the county clerk, the office of the Secretary of State is another great resource when beginning the business license application process. You’re more likely to find high-level info from the Secretary of State office, but it can get you started down the correct path nonetheless.
- U.S. Small Business Administration (SBA): The SBA isn't local, but they do have offices all over the country. They also have a number of resources available on their site, as well as contact information for every person involved in the process of getting a local or state business license.
Once you've contacted your local or state government officials and learned about your state's requirements, you're almost ready to apply for a business license.
Gather necessary information
Armed with information from your local and state officials, you should know which documents you need in order to complete your business license application. As a general rule of thumb, gather the following documents and information to ensure things go smoothly:
- Federal employer identification number (FEIN): Before you set up shop, you need to apply for and receive an FEIN from the Internal Revenue Service (IRS) if you have or will have any employees. The FEIN, also known as a Federal Tax Identification Number, is necessary for any business with employees. Similar to an EIN, it's used for business tax purposes and more.
- Legal address: You'll need a legal address for your business, whether it's your residential address or a building you're renting or purchasing.
- Social Security numbers (SSNs) for all owners: If multiple people are applying for the license with you, you'll need the SSN of each business owner.
- State-specific forms: The county clerk or Secretary of State office will help you determine if there are any state-specific licensing requirements. These forms can likely be found on your state or county's commerce page, and filed online.
- Industry-specific forms: Depending on the type of business activity you're engaged in, you may need additional licenses or permits. For example, if you're selling alcohol, you need a liquor license. When in doubt, ask your local officials.
Once you've taken care of the above items, you should be on your way to securing your small business license. Again, the process can vary depending on where you are, so follow the guidance on the form itself, and don't hesitate to contact the local agency that registers business licenses.
Small business license, big business success
Your small business license is the first step toward big dreams and even bigger success. The process might seem unpredictable at first, but once you find your local requirements, it tends to be streamlined and straightforward no matter where you're located. There's even a chance you won't need a business license at all.
Take things slowly, contact your local resources, and don't get discouraged if there are little speed bumps. Before you know it, you'll have your small business license, and thus your license to succeed. From there, you can craft a vision statement, assemble a team, and start dreaming big.