For most companies, getting a business license is a mere formality, albeit one that requires sending a check to the state and city. Because of this, I’m often asked whether or not a new business actually needs a license to operate – and the answer is that yes it does! Licensing gives your state and city a good idea of what kind of, and how many, businesses are within its borders, which helps the government target programs to boost small business. But now that you know that your business needs a license, what kinds of business licenses are available, and which ones does your business need?
This is the most basic type of business license, and the one that most businesses are going to have to apply for. Typically, all you have to do to get a general business license is file the right form, answer a few simple questions, and pay a fee. Now every locality is different but, if you have an active city government, you’ll probably have to buy a business license from them. I always recommend new businesses work their way up from their city to the state just to cover their bases.
Specialty Business Licenses
Certain industries are going to require specialty licensing. There are retail licenses, electronic repair licenses, solicitor’s permits, hair-care licenses, auto maintenance licenses – the list goes on and on. Normally the state government handles this sort of licensing, and these licenses will normally require specialized training before they are handed out. Also, if your industry is overseen by a federal agency – firearms, alcohol, aviation, etc. – you also have to apply for a federal permit before opening up shop.
‘Doing Business As’ Name
A Doing Business As, or DBA, name isn’t a business license in the traditional sense, but every business owner selling products or services under a name other than their own needs a DBA name. Even if your name is Jane Smith and the business is called Jane Smith’s Gardening – you still need a DBA name because your business’s name is, technically, different than your own. Businesses normally apply for a DBA name with their state’s Department of Corporations or Secretary of State. The agency you apply to runs a name check and, if there aren’t any conflicts with other DBA names, assigns it to your business.
Employer Identification Number
An Employer Identification Number may not have the word ‘license’ in its name, but every business that wants to open up a bank account or hire employees has to have an EIN. When you’re first starting out as a sole proprietorship, you can technically open up a business with your personal social security and a DBA name, but it’s better to apply for an EIN early on so you can hire people or change the business’s entity whenever you need to. The IRS handles Employee Identification numbers, and you can apply for one online.
Business licensing is simply one of the many regulations new businesses have to abide by. Luckily, the US Small Business Administration has a very handy online tool to help new business owners figure out what licenses and permits they have to apply for – all you have to do is provide your industry and zip code information. Most businesses will only need a general license and some occupancy permits, so send in your applications, pay your fees, and get everything sorted out so nothing stands in the way of the grand opening of your small business.
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