What Is A Business License (Answered: All You Need To Know)

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What Is A Business License 

You’re looking to start a business and wonder if you need a business license.

Although most businesses do not need a general business license to operate their business, you may need to get a business license that is specific to your industry or location where you will do business.

Keep reading as I will tell you exactly what is a business license and how to get one.

A business license is essentially a “permit” issued by the state or government granting you the right to carry out a certain type of business operation or work out of a certain geographic location.

For example, if you’re going to operate a brick-and-mortar business, you may need to get a business license to carry your business operations out of the store or property in which you’ll carry out your business.

You may also need to get permits for putting up signs for your business.

Companies selling goods may require a seller’s permit allowing them to sell goods and collect sales taxes from their customers.

Alternatively, service businesses may need to get specific types of business licenses applicable to their services.

For instance, lawyers, accountants, doctors, and other professionals may need a specific license to operate their business. 

Related article:

• What is a service business
• What is a seller’s permit 

Why Do I Need a Business License

The primary reason why businesses need a “business license” is for the government agencies and state to ensure that the public is safe and protected.

For example, restaurants need a business license to ensure they do not put the health and safety of their clients at risk by serving poor quality food or failing to respect minimum hygiene standards.

There are different state agencies that are tasked to inspect companies to ensure the companies comply with safety standards, do not pose occupational threats, and for the general public to remain safe.

For instance, the Federal Aviation Administration and the Food and Drug Administration are two popular agencies inspecting companies in the aviation and pharmaceutical industries.

Who Needs a Business License

Depending on the type of business you’re looking to operate and the location out of which you will operate your business will determine the type of business license that you will need.

For example, if you’re looking to operate a company in the aviation sector, you will need a business license applicable to the industry.

Alternatively, if you’re going to be operating a company out of your home, you may need to get a city permit.

You should verify with your state, city, county, and municipality to see if you may be required to get a license for your business or not.

Related article:

• Business license requirements by state

What Are The Different Types of Business Licenses

To better understand what is a business permit or license, let’s look at the different types of licenses that a business may need.

City Business Licenses

A city business license is one that is issued by the city.

If you’re looking to start a business out of a shop, in a commercial building, or in your home, you should verify with your city to determine whether or not you must get a city business license for your company.

Typically, the city will issue licenses to ensure that businesses operate within the city’s zoning requirements and plans.

County Business Licenses

In some cases, you may need to get a business license from your county.

It’s best that you verify with your local county to ensure if they have a business license requirement.

Keep in mind that even if your city may not need a business license, it does not mean that you’re exempt from getting one from the county.

State Business Licenses

Your state will have some form of a business license requirement.

Typically, the objective of the state is to ensure that companies operate in such a way that is safe for the residents of the state.

For example, here are some businesses that may require a state business license:

• Automotive business
• Building contractors
• Collection agencies
• Electricians 
• Insurance agencies 
• Real estate brokers
• Clinics 

Federal Business Licenses

Your company may also need a federal business license although the scope of such licenses is much more limited.

If your business operates in one of the following areas, then it may need to get a federal business license:

• Manufacture, import, or sell alcoholic beverages
• Import or transport animals, animal products, or plants
• Businesses operating aircrafts
• Manufacture, trade, or import firearms or ammunition
• Businesses conducting wildlife-related activities
• Commercial fishing businesses
• Ocean transportation businesses
• Companies drilling for natural gas or oil
• Commercial nuclear energy or fuel companies
• Broadcast via radio, television, cable, or satellite businesses
• Companies operating an oversized vehicle

How Do I Get a Business License

Getting a business license consists that you contact your state, city, county, or municipality to get the process started.

The first step is that you contact the authorities to determine if your business will need to get a business license or not.

Once you’ve established that a business license is needed, you can then ask the city officials to provide you with the forms or website links so you can apply.

Many states and large cities have online portals or forms where you can apply for a business license online whereas others still require the filing of paper forms.

It will take you a bit of time to call the different governments and agencies to validate your needs and to get their requirements, but it’s time well spent for your business.

What Is Business License FAQs

Where can I get a business license?

To get a business license, you’ll typically need to get it from the state, city, county, or municipality.

Most businesses do not need a general business license to operate.

However, depending on your nature of business and the location in which you’ll operate, you may need to get a business license.

Related article:

• What is a general business license

What happens if I do not obtain a business license?

If your company is required to have a business license and fails to obtain the proper one, you may be exposed to fines and penalties.

Also, the authorities may temporarily or permanently close your business.

From a liability standpoint, you can be held personally responsible for the fines and penalties as the personal liability protection afforded by business entities may not help you.

What happens after I get my business license?

Generally, once you obtain your business license, you’ll need to make sure that your license remains active.

In some cases, you’ll need to renew your business license annually, biannually, or at other frequencies.

You’ll need to verify with your jurisdiction to ensure that you comply with the local requirements.

Takeaways 

So there you have it folks!

Starting a business is an exciting venture.

Entrepreneurs and company founders should look into the business license requirements for their companies to ensure they start their businesses in compliance with the laws.

The industry and location you operate your business will determine which licenses and permits you need. 

Good luck with your business operations now that you know what a business license is and how it works!

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