The licenses and permits you need to start a business depend on three things: what you sell or do, where you operate, and whether you have employees. Nearly every business needs a local operating license of some kind. Many need a state professional license or sales tax permit. A smaller set, limited to specifically regulated industries, needs federal authorization. The layers stack, and a single business often ends up carrying several at once. A restaurant, for example, might need a local business license, a health department permit, a fire inspection certificate, a sales tax permit, and a liquor license if it serves alcohol.
Work through the layers in order. Skipping one doesn’t just invite a fine; in many states, an unlicensed business can’t enforce its own contracts in court.
Register the Business and Get an EIN First
Before any license application, you need a legal business and a tax ID. LLCs and corporations file formation documents (articles of organization or articles of incorporation) with the secretary of state. Sole proprietors and general partnerships skip formation but may still need a trade name registration.
An Employer Identification Number from the IRS is your business’s tax ID. You need one if you have employees, operate as a corporation or partnership, or file certain tax returns like excise or employment taxes. Sole proprietors with no employees can usually use their Social Security number instead, though many get an EIN to keep the personal number off business paperwork. The application is free through the IRS online tool and takes minutes if your principal place of business is in the United States and you have the responsible party’s SSN or ITIN on hand.1Internal Revenue Service. Get an Employer Identification Number
Local Business License and Zoning
Local government is where licensing gets granular, and it’s the layer almost no business escapes. Most cities and counties require a general business operating license, sometimes called a business tax receipt or business tax certificate. Fees vary by location and business type. A basic license might run $50 to a few hundred dollars.
Before you sign a lease, check that the property is zoned for your type of business. Zoning codes separate areas into residential, commercial, industrial, and mixed-use districts, and each allows only certain activities. If the zoning doesn’t match, a special use permit or a variance may be available, but both take time and neither is guaranteed. Home-based businesses usually need a home occupation permit, which commonly restricts customer traffic, signage, noise, and the number of employees working from the home. Violate those conditions and the permit can be revoked.
If you’ll have a storefront, expect additional local permits: a health department permit for food preparation, body art, or personal care; a fire department inspection covering occupancy, exits, and suppression systems; and a signage permit before you install exterior branding. These typically run through the city clerk’s office or the local planning department.
State Licenses and Sales Tax Permits
States regulate far more business activity than the federal government. Two state-level requirements catch the most new businesses: professional or occupational licenses, and sales tax permits.
Professional and Occupational Licenses
If your work requires specialized training, your state almost certainly requires a license to practice. Accountants, cosmetologists, contractors, real estate agents, electricians, plumbers, and dozens of other occupations fall into this category. The path usually involves an approved education program, a state exam, and a licensing fee, generally from around $50 to $500 or more for an initial application. Architects, engineers, and other high-level professionals can pay more once exam fees and continuing education are included.
States also commonly regulate auctions, construction, dry cleaning, plumbing, restaurants, retail, and vending machines at the state or local level.2U.S. Small Business Administration. Apply for Licenses and Permits Your state’s department of professional regulation (the name varies) maintains a searchable list. Check it before assuming your field is unregulated.
Sales Tax Permit
If you sell tangible goods or certain taxable services, get a sales tax permit (sometimes called a seller’s permit) before your first transaction. It authorizes you to collect sales tax from customers and remit it to the state, and it lets you buy inventory tax-free with a resale certificate. Operating without one can produce back-tax liability plus penalties.
Five states don’t impose a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Everywhere else, register with your department of revenue or taxation. Registration is typically free or carries a small fee. Some states issue the permit permanently; others require periodic renewal.
Federal Licenses: Only for Specific Industries
Most small businesses don’t need a federal license. Federal licensing applies only when your activity falls under a specific federal agency’s jurisdiction. The SBA maintains a list of regulated activities and the agencies that oversee them.2U.S. Small Business Administration. Apply for Licenses and Permits If your business doesn’t appear on it, you can skip this layer.
The common federally regulated activities include:
- Manufacturing, wholesaling, or importing alcohol (Alcohol and Tobacco Tax and Trade Bureau, plus the local alcohol beverage control board).
- Manufacturing, selling, or importing firearms or ammunition (Federal Firearms License from ATF, using Form 7; initial fees from $30 to $3,000 depending on license type).3Bureau of Alcohol, Tobacco, Firearms and Explosives. Firearms Forms
- Radio, television, satellite, and wireless telecommunications (FCC Form 601).4Federal Communications Commission. FCC Application for Radio Service Authorization Main Form 601 Information and Instructions
- Manufacturing, processing, packing, or holding food for human or animal consumption (FDA facility registration, renewed every other year).5U.S. Food and Drug Administration. Registration of Food Facilities and Other Submissions
- Investment advising (Form ADV filed with the SEC, depending on assets under management).6U.S. Securities and Exchange Commission. Information About Registered Investment Advisers and Exempt Reporting Advisers
- Transporting passengers or federally regulated cargo across state lines for compensation (operating authority from the Federal Motor Carrier Safety Administration). Private carriers hauling only their own goods are generally exempt.7Federal Motor Carrier Safety Administration. Get Operating Authority (Docket Number)
- Aircraft operation and transporting goods or people by air (Federal Aviation Administration).
Federal applications often involve background checks, fingerprinting, and detailed descriptions of planned activity. Processing times run from weeks to several months, so apply well before your target opening date.
DBA Registration If You Use a Trade Name
If you operate under any name other than your legal name (as a sole proprietor) or your entity’s registered name (as an LLC or corporation), you generally need a “Doing Business As” filing, also called a fictitious business name statement. The SBA notes this is typically required at the county or state level, though a few states don’t require it at all.8U.S. Small Business Administration. Register Your Business Even adding “& Associates” to your own name can trigger the requirement.
Filing fees are usually under $100. Some jurisdictions also require publication of the name in a local newspaper, which adds cost. A DBA doesn’t create a separate legal entity and doesn’t provide trademark protection; it only puts the public on notice about who owns the business behind the name.
Hiring Triggers More Registrations
Taking on your first employee adds a layer of state registrations. You’ll register with your state’s unemployment insurance program once you hit a payroll threshold or a set number of weeks with employees. Nearly every state also requires workers’ compensation insurance, and some won’t issue or renew a business license without proof of coverage. You’ll set up state income tax withholding and comply with new-hire reporting rules. These aren’t technically “licenses,” but skipping them can shut operations down just as fast.
Surety Bonds for Certain Industries
Some industries require a surety bond before a license will issue. A surety bond is a financial guarantee that you’ll follow the rules of your industry; if you don’t, the bond provides a fund to compensate people you harm. Contractors, mortgage lenders, auto dealers, freight brokers, and certain financial services businesses commonly need one. Bond amounts range from a few thousand dollars for a small contractor to $150,000 or more for high-volume mortgage lenders. You pay an annual premium, usually a percentage of the bond amount tied to your credit and finances, not the full face value.
Operating in More Than One State
An LLC or corporation formed in one state can’t simply start doing business in another without permission. If your activities in a second state rise to “transacting business,” you file for foreign qualification with that state’s secretary of state. Courts look at factors like physical presence, employees, and whether you accept orders in the state.
The consequences of skipping qualification are serious. States can deny a non-compliant company the right to bring or maintain lawsuits in their courts, meaning you couldn’t sue to enforce a contract or recover damages there. States also assess fines, penalties, and back taxes for the unregistered period, and some hold individual officers personally liable. Having a bank account in another state or simply conducting business in interstate commerce doesn’t typically trigger the requirement on its own.
Costs and Timing to Budget For
Costs stack faster than most new owners expect. A local business license may run $50 to a few hundred dollars. State professional licenses run from under $100 to over $500. Federal fees vary widely: a Type 03 firearms license for curios and relics costs $30, while a destructive device dealer’s license runs $3,000.3Bureau of Alcohol, Tobacco, Firearms and Explosives. Firearms Forms Add surety bond premiums, DBA filing, and state entity formation fees, and startup licensing can easily reach $1,000 to $2,000 even for a straightforward small business.
Processing times run from instant for some online state registrations to several months for complex federal applications. Build the longest likely wait into your launch calendar, not the shortest.
Keeping Licenses Current
Licensing isn’t a one-time event. Most licenses expire on a one- or two-year cycle and must be renewed before the expiration date. Professional licenses almost always require continuing education credits before renewal. Sales tax permits, health permits, and local business licenses each run on their own schedules. Missing a deadline typically brings late fees, and a long enough lapse can end your authorization to operate.
You’re also generally required to notify the relevant agencies when key information changes. A new business address, a change in ownership, a switch from sole proprietorship to LLC: these need to be reported, often within days. Certain ownership transfers must be reported before the change takes effect. Keep a calendar of every license and permit your business holds, with renewal dates, continuing education deadlines, and fees. The task feels trivial until a lapsed license costs you a contract or triggers an enforcement action.
Penalties for Operating Without a License
Operating without a required license isn’t a technical violation. Financial penalties run from a few hundred dollars for a first-time infraction to $50,000 or more per violation in regulated industries like insurance. In many states, unlicensed activity in a licensed profession is a misdemeanor, which carries potential jail time on top of fines. Regulatory agencies can issue cease-and-desist orders forcing you to stop operations immediately.
The most overlooked risk is the one that costs working businesses the most money: in many states, an unlicensed business cannot enforce its contracts in court. A customer who refuses to pay may be under no legal obligation to pay an unlicensed operator at all. People assume the worst case is a fine, when the real exposure is losing the ability to collect money already earned.
If you discover you’ve been operating without a required license, apply immediately. Most agencies would rather bring you into compliance than shut you down, and voluntary correction before an enforcement action typically produces lower penalties. That goodwill thins quickly if you’ve been cited before or caused harm to customers.