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:

1. Legally identify your business.
2. Protect public health and safety.
3. Keep track of your finances for tax purposes.
4. Protect your business from legal claims against it.

Action Steps
The best contacts and resources to help you get it done

Apply for an EIN

If you plan to hire employees to help run your business, you'll need to apply for a Federal Employer Identification Number (EIN).

I recommend: Find out from the Internal Revenue Service (IRS) if you need an EIN; if you do, apply for one online with IRS Form SS-4.

Purchase a business license

A business operation license from your city or county is the fundamental document required of all businesses in all jurisdictions.

I recommend: Apply for a slew of federal, state, county and municipal licenses online courtesy of BusinessLicenses.com, or apply in person at your relevant state office. Business.gov has a handy "Permit Me" tool to find state permits for many types of businesses.

Register your business name

If 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.

I recommend: Consider hiring a filing service, such as BizFilings or Incorporate Time; for a small fee, they'll do the paperwork for you.

Research local regulations

Town, 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.

I recommend: To learn about licensing and permit requirements in your area, approach your local Small Business Development Center (SBDC), which should be versed in city and county regulations.

Get your state occupational license

You'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.

I recommend: To find out about occupational licenses in your state, visit GovSpot, click on your state and scroll down to “Professional and Occupational Licenses.”

Register for a seller's permit

A seller's permit, available from your state's board of equalization, allows you to purchase wholesale merchandise for resale in your own store.

I recommend: In order to sell merchandise, your business must receive a sales tax number, applications for which are available from your state's department of revenue.

Obtain federal licenses for your regulated business

Small 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.

I recommend: Business.gov has a list of federally regulated industries, with links to relevant licensing agencies.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  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.