How do I know if I need a business license?

How do I know if I need a business license? Perhaps one of the most common questions uttered by new business entrepreneurs. The most common answer to the question is: You typically need a business license to legally operate any business in the United States. Simple. The answers to subsequent questions can be less straightforward.

How do I get a business license?

The next question is often How do I get a business license? The answer to that will depend on your industry and your state. Individual state and local business license requirements vary on "the how" and "how many" and from industry to industry. Language and definitions can also differ from state to state, so be sure to familiarize yourself with your state's vocabulary.

Where do I begin business license research?

Ok, so if every state is different, how do you find information for your state and industry? Online, of course. Most states publish specific details about obtaining business licenses on their websites. And some state's sites are more helpful than others. For example, an internet search for "business licenses in Pennsylvania" will yield myriad results, but the commonwealth's Department of State website is nearly a one-stop shop for business registering and licensing processes.

Florida, on the other hand, gives you the Department of Business & Professional Regulation. This site will lead you to license information for a limited number of industries and a link to Open My Florida Business. That page will prompt you to enter your business type in exchange for a brief synopsis of requirements and links for registration and Employer Identification Number (EIN) applications - which you typically must complete in any state before filing for a license.

Many counties and cities also have their own information portals for business license information - and you should certainly investigate as many municipalities and counties as possible to determine which impose licensing requirements.

You can also visit sites such as the U.S. Small Business Administration, Small Business Advice, or Business Licenses. These portals host state and industry-specific business license information and can also take you on a step-by-step guide to determine what and how many licenses you may need.

The internet is a trove of knowledge, but don't rely solely on what you find there. Not all sites, particularly government agencies, maintain up-to-the-minute information. Always check in with a phone call or email to your local town/city clerk for the most current business license information.

And if your business falls under federal jurisdiction, such as alcohol or tobacco, you'll need to search for federal regulations. The U.S. Small Business Administration has a list of business activities with links to corresponding agencies for more information.

Where can I go to find licensing information for my industry?

Many of the links provided above and official government sites will have industry-specific information or details as part of their walk-through guide. You can also look up business licenses for your specific industry - a search for "cleaning business licenses" garners a slew of results, as would a search for almost any other industry. There's no harm in doing general research for your industry, but ultimately, you should narrow your search to industry-specific information only within your state. Again, each state handles different industries in their own way.

How much does a license cost?

This answer is so dependent on location and type of business that it's difficult to find any published quotes, but costs range from $25 to $550 on average. If we look at Florida again, license costs seems to hover around $100. Arkansas licenses start at $25.

How do I transfer a business license for a newly purchased business?

Generally, most states don't allow business licenses to be transferred to new owners. While there are exceptions for some circumstances, most often a company will need to submit a new license application.

Putting it all together

For the most part, four major factors determine your business license requirements. Finer details come into play for each company's unique circumstances, but the following criteria will get you started.

4 primary criteria that determine your business license requirements:

1. Location - state, county, city, and maybe even township

2. Industry - planting and selling broccoli will hold different regulations than serving up broccoli soup as a lunch menu item

3. Related activities - certain factors can dictate license needs, e.g., outdoor seating may call for a sidewalk café permit; selling food by weight may require a weights and measures license

4. Business details - how you register your business (LLC, corporation, etc.); whether you have employees (withholding tax); and type of facility (residential or commercial)

Business license requirements vary significantly between states, counties, cities, and industries. Be sure to consult your local government entities to be sure you acquire all the necessary licenses to operate legally.

Learn how Avalara can help you get the business licenses and related information you need.

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