Even though some entrepreneurs might dismiss the idea of obtaining a business permit, the government issues these permits to protect the public and consumers.
As an example:
- To ensure that basic food safety standards are met, restaurants must be licensed and inspected.
- Communities can implement zoning laws to prevent toxic waste from being dumped in nearby factories.
- Drug companies can only release untested products with a lengthy approval process.
But public safety is one of many reasons you should obtain the required permits.
What are the risks of failing to obtain a business license?
Most of the time, obtaining a business license costs money. Some entrepreneurs skip the application process because of this expense.
If you don’t apply for and maintain a license, it can cost you a lot more in terms of penalties, fines, and possible business closure.
No matter if your business is big or small, for-profit or nonprofit. For example, many municipalities require churches, charities, and other nonprofit organizations to apply for a business license.
Business licenses: Types
Different types of business permits are administered on a local, state, and federal level.
Local business licenses
Local business licenses are required to run a company at the local level. Municipalities may use these permits for taxation, zoning, or recordkeeping. Many cities also use these licenses to set the hours of operation.
State Business Licenses
These permits vary by state and are usually focused on specific activities. Lawyers, healthcare workers, stylists, and barbers must be certified to work within their state.
A good rule to follow is: If you offer the kind of service you’d typically find on a review website, a business license from your state will likely be required.
Federal Business Licenses
Generally, federal business licenses are required by companies that operate in areas or sectors directly regulated and supervised by the federal government. Day trading is one example of a business that would fall under this category since the Securities and Exchange Commission controls it. The Bureau of Alcohol, Tobacco, Firearms and Explosives regulates alcohol and cigarettes.
Businesses in the following industries may also need to obtain federal licenses:
- Fishing and Wildlife
- Transport maritime
- Mining and drilling
- Radio/TV broadcasting
How to apply for a business license
There are several types of business licenses, each with its requirements and approval process. Knowing where to begin or how to get a business license (or multiples) for your new startup can be difficult.
Small Business Administration is a great place to start if you require federal permits. The Small Business Administration’s dashboard will direct you to the appropriate issuing agency. The process is a bit more complicated if you are applying for a state or local business license. To learn more, contact your local city hall.
It may take some time to complete all the necessary paperwork and get approvals, depending on the type of business. We can also help you with other business aspects, such as managing employees and customers, accepting payments, etc.