US Business Licenses and Permits: What You Actually Need

Do You Need a Business License in the U.S.?

Is a business license required?

Whether a business license is required depends on the jurisdiction, the type of activity and local regulatory requirements. This is why the answer to the question Is a business license required cannot be the same for all entrepreneurs. Some companies may only operate after obtaining the relevant license, whilst others need only complete the registration process.

Business licenses vs business registration

Company registration and a business license serve different legal purposes. If you are looking into how to register a company in the US, it is important to bear in mind that registration may create a legal entity, depending on the business structure, but does not by itself grant the right to operate. In many cases, a government-issued right to operate a business is required, which must be obtained separately. 

Types of Business Licenses and Permits

Federal, state, and local business licenses

In the US, the licensing system operates at several levels of government. In addition to state requirements, federal or local regulations may also apply. 

Industry-specific licenses and permits

Before launching a project, it is worth finding out what licenses are needed to start a business and researching the available types of business licenses and permits. Certain sectors require a specific permit and license for business, without which operations would be illegal. 

What Licenses Are Needed to Start a Business?

Licenses by business activity

To determine what licenses are needed to start a business, it is necessary to take into account the sector of activity, the location of the business and the applicable regulatory requirements. For certain sectors, there may be specific types of business licenses and permits issued by various government bodies. 

Common permits for new businesses

Depending on the type of activity, a permit and license for business may be required, confirming the right to carry out certain operations lawfully. These typically include a sales tax permit, a health and safety permit, a zoning permit.

How to Get a Business License

Steps to getting a business license

Although the procedure may vary from state to state, the basic steps to getting a business license remain similar. First, you determine the type of license required, then gather the supporting documents and submit your application. The authority then reviews the application. If approved, the applicable licensing fee is paid (or processed, depending on the jurisdiction), after which the license is issued, usually within a few days to several weeks, and in many cases must be renewed annually.

How to apply for business licenses and permits

The process of how to acquire a business license usually begins with gathering information about the required type of license. The entrepreneur then compiles a set of documents and submits them to the relevant authority. Applications can usually be submitted online through the relevant state or local licensing portal, by mail, or in person, and generally require proof of business registration and a valid form of identification.

Business Registration vs Business Licensing

How to register a company in the U.S.

The procedure for registering a company in the US involves submitting registration documents, paying government fees and complying with the legislation of the specific state.

Once registration is complete, the company officially acquires legal status. However, additional licenses may be required for certain types of business activity. 

Government-issued authorization to operate a business

For certain types of business activity, simply registering a company is not sufficient. In such cases, it is necessary to obtain a government-issued right to operate a business, which confirms the legal right to carry out specific commercial activities. Such authorization may be issued by federal, state or local authorities, depending on the type of business activity and applicable regulations. 

Which States Require a Business License?

States with general business license requirements

In the US, there is no single rule regarding mandatory business licenses that applies across all states. This is why entrepreneurs often check what states require a business license even before registering their company. The final list of documents required depends on the legislation of the specific jurisdiction. For example, states such as Washington, Nevada, Delaware and Alaska generally require a state-level business license or business registration for many businesses, whereas in many other states licensing requirements primarily exist at the city or county level.

State and local licensing differences

Licensing requirements at state and local government levels can vary significantly. Even if a business has already obtained a permit and license for business in accordance with state law, the city or county may require additional documentation. 

Common Mistakes When Applying for Licenses

Missing required permits

If a business has not obtained the necessary permit and license for business, it may face fines, restrictions on its activities or other sanctions. 

Renewals and ongoing compliance

Obtaining a license does not always fulfil all legal requirements. Many companies must regularly confirm their government-issued right to operate a business by renewing the relevant documents. 

Frequently Asked Questions

Can I operate without a business license?

The answer depends on the nature of the business and the legislation of the specific jurisdiction. Before starting operations, you must check whether a business license is required for your particular business. If the law requires a license to be obtained, the company must not commence operations until it has been issued.

How long does it take to obtain a business license?

If you are looking into how to acquire a business license, it is worth bearing in mind that some licenses are issued within a few days, whilst others may take several weeks or even longer. 

Do online businesses need licenses?

If the question arises as to whether a business license is required, the answer depends on the type of activity, the company’s place of registration and the jurisdiction in which it operates. Certain online businesses may require the licenses needed to start a business, depending on the products or services they offer and the jurisdictions in which they operate, just as traditional companies do. For example, an online retailer collecting sales tax will typically need a seller's permit, while businesses operating in regulated sectors such as finance or alcohol sales may require additional federal or state licenses even if all operations take place online.

Final Guide to U.S. Business Licenses & Permits

Before setting up a company, determine what licenses are needed to start a business, check which states require a business license, and familiarise yourself with the current types of business licenses and permits.