Most small business owners strike out on their own hoping to answer only to themselves. Many, however, fail to remember that they have to answer to someone else, too: their government. Before you open for business, you must get the green light from your local, state and federal governments. The necessary licenses and permits won't just get you the go-ahead, though; they'll also help you:
- Legally identify your business.
- Protect public health and safety.
- Keep track of your finances for tax purposes.
- Protect your business from legal claims against it.
Apply for an EINIf you plan to hire employees to help run your business, you'll need to apply for a Federal Employer Identification Number (EIN).
Internal Revenue Service (IRS) if you need an EIN; if you do, apply for one online with IRS Form SS-4.
Purchase a business licenseA business operation license from your city or county is the fundamental document required of all businesses in all jurisdictions.
state office. Business.gov has a handy "Permit Me" tool to find state permits for many types of businesses.
Register your business nameIf you plan to do business under a name other than your own, you must register your company name — called a DBA (Doing Business As), or fictitious business name — with your county government.
Research local regulationsTown, city and county governments, in cooperation with your local fire, police and public works departments, may require permits to show compliance with safety, environmental and health concerns, as well as building and zoning requirements.
Small Business Development Center (SBDC), which should be versed in city and county regulations.
Get your state occupational licenseYou'll need a professional license issued by your state if your business provides state-regulated services, which generally include medical care, auto repair, real estate sales, tax services, insurance sales, legal counsel or cosmetology services.
Register for a seller's permitA seller's permit, available from your state's board of equalization, allows you to purchase wholesale merchandise for resale in your own store.
department of revenue.
Obtain federal licenses for your regulated businessSmall businesses that need a federal license or permit include those that provide investment advising, manufacture drugs or alcohol, prepare meat, deliver ground transportation or sell firearms.
Business.gov has a list of federally regulated industries, with links to relevant licensing agencies.
- Licensing requirements vary considerably between cities and states, and between industries, as well. Contact your local chamber of commerce to learn about regulations in your area.
- Beware of "grandfathering," whereby a businesses already operating when a new law is passed is exempt from that law; you may need a license or permit, even though your neighbor does not.
- If you plan on selling liquor, lottery tickets, firearms or gasoline, you'll need a special state-issued license to do so.