Business Licenses & Permits: What You Need to Know

Do You Need a Business License?

The short answer: almost certainly yes. While there's no single "universal business license," most businesses need some combination of federal, state, and local licenses and permits to operate legally.

The specific licenses you need depend on your industry, location, and business activities. Let's break down the different levels.

Federal Licenses and Permits

Most businesses don't need a federal license. However, the federal government regulates certain industries and activities. You may need a federal license if your business involves:

• Alcohol — Manufacturing, wholesale, import, or retail sale (TTB — Alcohol and Tobacco Tax and Trade Bureau)
• Aviation — Operating aircraft or providing air transportation (FAA)
• Firearms and ammunition — Manufacturing, dealing, or importing (ATF)
• Broadcasting — Radio and television stations (FCC)
• Transportation — Commercial trucking, freight, and passenger services (FMCSA/DOT)
• Agriculture — Importing or transporting animals, animal products, or certain plants (USDA)

Action item: Visit the SBA.gov website to check whether your business type requires federal licensing.

State Licenses and Permits

State licensing requirements vary significantly. Common state-level licenses include:

Professional and Occupational Licenses

Many professions require state licensure, including:

• Accountants and CPAs
• Architects and engineers
• Attorneys
• Contractors and electricians
• Cosmetologists and barbers
• Healthcare professionals (doctors, nurses, dentists, pharmacists)
• Insurance agents
• Real estate agents and brokers
• Teachers

Sales Tax Permit

If you sell tangible goods (and in some states, certain services), you'll need a sales tax permit (also called a seller's permit or resale license). This authorizes you to collect sales tax from customers and remit it to the state.

Note: Five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

State Business License

Some states require a general state business license or registration. For example:

• Nevada — requires a state business license for most businesses
• Washington — requires a state business license (Master Business License)

Local Licenses and Permits

Cities and counties often have their own licensing requirements:

General Business License

Many cities require a general business license (sometimes called a business tax certificate or business tax receipt) simply to operate within city limits. Fees are usually modest — often under $100 per year.

Zoning Permits

Local zoning laws regulate where businesses can operate. Before leasing space or running a business from home, verify that your location is properly zoned for your type of business.

Home-based businesses: Many cities require a home occupation permit if you operate a business from your residence. Restrictions may include limits on signage, customer visits, noise, and the percentage of your home used for business.

Health and Safety Permits

• Health permits — Required for restaurants, food trucks, food manufacturers, and any business that handles food
• Fire department permits — For businesses that use flammable materials, occupy large spaces, or serve the public
• Building permits — Required for construction, renovation, or significant modifications to commercial spaces
• Sign permits — Many cities regulate business signage (size, type, illumination, placement)

Industry-Specific Local Permits

• Liquor licenses (often issued at both state and local levels)
• Entertainment permits (for live music, events, etc.)
• Alarm permits (for businesses with security alarm systems)
• Taxi and rideshare permits

How to Research Your Requirements

1. Start with the SBA — The U.S. Small Business Administration (sba.gov) provides a guide to federal, state, and local licensing
2. Check your state's Secretary of State website — Most list required licenses by business type
3. Contact your city or county clerk's office — They can tell you about local requirements
4. Talk to an industry association — They often maintain guides specific to your field
5. Consult with a local attorney or accountant — Especially for regulated industries

Common Mistakes to Avoid

• Assuming you don't need a license — Even online businesses and freelancers often need local business licenses
• Starting operations before licensing — Operating without required licenses can result in fines, penalties, or forced closure
• Forgetting renewals — Most licenses must be renewed annually; set reminders
• Ignoring zoning laws — Zoning violations can be costly and disruptive
• Only checking one level — You may need licenses at federal, state, AND local levels simultaneously

FormationHub Can Help

Navigating licensing requirements can be overwhelming, especially for new business owners. FormationHub's Business License Report service identifies the specific licenses and permits your business needs based on your industry, location, and activities — so you can focus on building your business instead of researching regulations.