all·business

Business Licenses and Permits

Licensing in the US is layered: federal regulators license a few specific industries, states issue general business and occupational licenses, and cities and counties add local business licenses and permits. Most small businesses need few federal licenses but multiple state and local registrations. This guide covers what businesses typically need and how to find what applies to your specific situation.

Three layers of licensing

Every US business operates under three layers of licensing requirements simultaneously:

  1. Federal. Required for specific regulated industries (alcohol, firearms, agriculture, aviation, broadcasting, transportation, certain financial services, etc.). Most businesses need few or no federal licenses.
  2. State. Entity registration (Secretary of State), tax registrations (Department of Revenue), occupational licensing for specific professions, and industry-specific licenses for state-regulated activities (insurance, real estate, construction, contracting, food service, etc.).
  3. Local (city/county). General business license or tax certificate, zoning and use permits, sign permits, health permits, fire permits. Requirements vary dramatically by jurisdiction.

An online consulting business based at home might need only an LLC formation, an EIN, a state sales tax permit, and a local business license. A restaurant needs all the layers plus food handler permits, liquor license, occupancy permit, health inspection certificates, and music licensing.

Federal licenses

The SBA maintains a list of federally-regulated industries. Common federal licensing situations:

Most businesses outside these regulated industries do not need federal operating licenses, though they still have federal tax (EIN, federal income tax), employment (I-9, payroll tax), and reporting obligations.

State-level: formation and registration

The state-level requirements that apply to nearly every business with employees or revenue:

DBA / Fictitious business name

A "Doing Business As" (DBA), "fictitious business name", "assumed name", or "trade name" registration is required when a business operates under a name different from its legal entity name. Examples:

DBA filing is typically at the county level (in California, for example) or state level, depending on the state. Many states require publication of the DBA in a local newspaper for a specified period. Filing fees are small ($25–$100 typically) but missing the filing can void contracts entered under the unfiled name and trigger penalties.

Foreign qualification

"Foreign" in this context means out-of-state, not international. An entity formed in one state that "transacts business" in another must register as a foreign entity with the second state's Secretary of State. This is in addition to the home-state formation and applies to every state where the business has sufficient presence.

What triggers "transacting business" varies by state but typically includes:

Activities that typically don't trigger foreign qualification: occasional sales to customers in the state, online sales without physical presence (subject to state-specific rules), isolated transactions, holding board meetings occasionally.

Foreign qualification requirements: appoint a registered agent in the state, file Application for Registration / Statement and Designation, pay state's foreign-entity fees, file ongoing annual reports, pay any state franchise tax. California's $800 minimum franchise tax applies to all entities qualified there regardless of formation state.

Failing to foreign-qualify when required typically: voids the entity's ability to sue in that state's courts, triggers back-payment of fees and franchise tax for all years operating, and can produce penalties. Customers sometimes won't pay invoices from an unqualified entity once they discover the gap.

Sales tax permits

States that impose sales tax require businesses making taxable sales to register for a sales tax permit (also called seller's permit, sales tax license, sales and use tax certificate). Registration is with the state Department of Revenue or equivalent.

After South Dakota v. Wayfair (2018), states can require out-of-state sellers to collect sales tax based on "economic nexus" thresholds — typically a dollar amount of sales or number of transactions into the state. The thresholds vary by state ($100,000 / 200 transactions is the South Dakota standard but many states differ). Online sellers can have collection obligations in dozens of states without ever setting foot there.

Marketplace facilitator laws shift the collection obligation to the marketplace (Amazon, eBay, Etsy) for sales made through their platform — reducing the seller's direct collection obligation for those sales. Sales made through the seller's own website remain the seller's responsibility.

For more on sales tax mechanics and nexus, see business taxes.

Professional and occupational licenses

States license many occupations: lawyers, doctors, dentists, accountants, architects, engineers, real estate agents, insurance agents, financial advisors, contractors, electricians, plumbers, cosmetologists, security guards, private investigators, and many more. Each state has its own licensing board for each profession, with its own examination, education, experience, and continuing education requirements.

For licensed professions:

Practicing a licensed profession without a license is generally a misdemeanor or felony, in addition to civil exposure. Operating a contracting business without state contractor licensing where required typically voids the right to enforce contracts and sue for unpaid work.

Local business licenses

Most cities and counties require a local business license, business tax certificate, or business registration for any business operating in the jurisdiction — including home-based businesses, online businesses with no storefront, and businesses operating exclusively to local customers.

Local business licensing typically involves:

Specific examples of additional local requirements:

Some metropolitan areas combine multiple jurisdictions; a business may need separate licenses from a city and from the county. Some states preempt certain local licensing; others don't.

Industry-specific permits

Common industries with multi-layer permit requirements:

Food service. State and local food safety permits, food handler certifications, mobile food vendor permits if applicable, retail food license, alcohol license (state and local), commissary registration, etc.

Construction and contracting. State contractor license, specialty trade licenses (electrical, plumbing, HVAC), local contractor registration, building permits for specific projects, prevailing wage compliance for government work.

Retail. Sales tax permit, weights and measures registration for scales, second-hand dealer license (used goods), pawnbroker license, tobacco retailer license, lottery retailer license.

Health and personal services. Spa/salon license, cosmetology permits, body art/tattoo permits, massage establishment license.

Childcare. State licensing of childcare facilities and family childcare homes; background check requirements; ratios and physical standards.

Lodging. Hotel/lodging licenses, short-term rental permits (increasingly required), occupancy taxes.

Transportation. Commercial driver requirements, motor carrier authority for trucking, taxi/livery medallions or permits.

Zoning and use permits

Zoning regulates what activities can occur in what locations. Before signing a lease or buying property, verify that the business's intended use is permitted under the property's zoning. Zoning categories vary by jurisdiction but typically include residential, commercial, industrial, mixed-use, and agricultural, with subcategories.

Permitted uses fall in three buckets:

If the use isn't permitted, options include variance applications, conditional use permits, zoning change requests, or finding a different property. Each takes time (often months) and incurs fees.

For home-based businesses, home occupation permits regulate what activities are allowed in residential zones — typically with restrictions on customer visits, employee presence, exterior signs, traffic, parking, and noise.

Health, safety, and environmental

Renewals and ongoing compliance

Most licenses and permits require periodic renewal. Common renewal patterns:

Missing renewals typically results in: late fees, lapse of good standing (preventing legal actions), eventual administrative dissolution or revocation. Reinstatement is generally available with back-payment of fees and penalties, but operating during the lapse period is often considered operating without a license.

Track renewals in a single system — spreadsheet, calendar, or compliance management tool. Multi-jurisdiction operations benefit from professional services that monitor and file renewals across many entities and states.

How to research what you need

  1. SBA's License and Permit Finder. The Small Business Administration provides a basic searchable directory at sba.gov.
  2. State business portals. Most states have a "starting a business" portal listing common requirements. Search "[state name] new business checklist".
  3. State Secretary of State. Entity formation and registration.
  4. State Department of Revenue. Tax registrations.
  5. State Department of Labor. Employment-related registrations.
  6. State licensing boards. For professional and occupational licenses.
  7. City/county business license division. Local business license requirements.
  8. Industry associations. Often maintain regulatory checklists specific to the industry.
  9. SCORE and SBDCs. Free or low-cost business counseling, often with local knowledge of licensing requirements.

For multi-state operations or unusual industries, a compliance services firm can compile a customized requirements matrix.

Common mistakes

FAQ

How do I know what licenses my business needs? Start with the SBA's license finder and your state's business startup portal. Industry, location, and activities determine the specifics. For complex situations, a local CPA, attorney, or business counselor can provide a tailored checklist.

How much do licenses cost? From under $50 for basic local business licenses to thousands for state liquor licenses, contractor licenses, or professional licenses. Annual costs across all required licenses for a typical small business run from a few hundred to a few thousand dollars.

Do I need a license for an online-only business? Yes, typically: entity formation, EIN, state tax registrations, possibly sales tax permit, local business license at the operating location.

Do I need a license if I'm operating as a sole proprietor? Yes for most things — tax registrations, sales tax permit, local business license, occupational licenses if applicable, DBA if operating under a name other than your own.

Can I get all my licenses from one source? No single source — each agency has its own process. Some compliance service providers will handle multiple filings for a fee.

What happens if I operate without a required license? Penalties, inability to enforce contracts, potential closure orders, voided liability protection in some cases, professional licensing-board discipline, and reputational harm in customer due diligence.

Do I need a permit to work from home? Many municipalities require a home occupation permit. Check with your city or county.