Let's face it: there's a lot of paperwork to file when it comes to starting your new business. It's not only crucial that you fill out the forms correctly, but that you cover all your bases when it comes to determining which licenses and permits you'll need to avoid expensive fines or penalties. This can get even more complicated when you consider how many industries there are, and realize that each state has different requirements. Here are some tips to help you through this journey.
Do I Need a Federal Business License?
If you are in a business that offers services that are regulated by the federal government, then you will need a federal business license. Some of these industries include:
Manufacture or sales of firearms/explosives
Using over-sized vehicles to transport products
The Small Business Association (SBA) has a list of the types of businesses that will need to obtain a federal business license and which government agency to contact to apply for a license. You can find that list here.
Do I Need a State Business License?
State business licenses and permits can be a bit more complex since they can vary by state, county or city. However, the chances are very likely that you'll need to get a license of some sort to run a business in your state.
One of the main reasons businesses have to get a state license is for tax purposes. For example, to pay for licenses and/or fees in the state of California, you'll need to contact the California Department of Tax and Fee Administration (CDTFA). For just about any business in the state, companies are required to get a Seller's Permit if they intend to:
Engage in business in California
Sell or lease tangible personal property that would ordinarily be subject to sales tax
Run a short-term business for 90 days or less (like a Christmas tree lot or garage sale)
Check your secretary of state's website to find out how to apply for your state business license. A good start is just typing your state plus "business license" into your search engine.
What's the Difference Between a License and a Permit?
A federal and state business license allows you to conduct business and provides accountability that your company is paying its taxes. In certain industries, it also ensures that the company is abiding by government regulations pertaining to the environment, transportation laws or the sales of alcohol or tobacco.
Additionally, professional licensing shows clients or customers that you have completed the education or training needed for working in specialized industries. Doctors, nurses, child care providers, real estate brokers and others must have licenses to prove that they are qualified to work in their specific field.
Permits are usually regulated for safety and are granted after a government official approves the conditions or skills of a business or worker. For example:
Those in the various construction jobs need permits to operate cranes, remove asbestos or work with electrical cables.
Restaurateurs, food truck owners, and others in the food industry need to get health permits from their county health departments.
Nail salons, tattoo parlors and beauty salon owners need health permits.
How Do I Apply for Business Licenses and Permits?
Unless you are planning to serve or sell alcohol, the chances are slim that you're going to need a federal business license. However, as mentioned earlier, check the SBA's list of businesses that are required to get a federal business license to avoid penalties down the road.
While you may NOT need a federal business license, you WILL more than likely need a Federal Tax ID number (also called an "EIN"). You'll need this if you are going to hire employees or want open a business bank account that's separate from your personal one.
Next, check with the state that you're going to do the majority of your business in or where you want to file your business entity to determine how to get a state business license and learn what permits are required for your industry. Each state has different regulations and expiration dates, so it's important to check with your specific state to get all of the correct and updated information.
Is There an Easier Way to Get the Required Licenses and Permits?
Yes! At Incfile, we offer a Business License Research Package for only $99 that can save you time and stress. Our trusted licensing partner will provide you with a comprehensive package of all the licenses, permits and tax registrations required for your business as well as the application forms to file with the appropriate licensing authorities.
The licensing/permitting process can be overwhelming and confusing, but you'll have confidence knowing that you have completed and filed the correct forms required by law to run your company. Contact us today so we can partner with you to get your business off on the right foot.