Business licensing ensures businesses are operating in compliance with all relevant laws and regulations, from public safety and professional standards to paying local taxes. Whether you need a business licence depends on what your business does and where it is located. Some professions, like doctors, lawyers, and real estate agents, always need a state-issued licence because they have strict standards to meet. Other businesses, like a small craft store or an online shop, might just need a local business licence for local zoning rules and tax handling.
Businesses operating without the necessary licences can face severe penalties, including fines and legal action. Below, we’ll outline everything you need to know to determine what licences your business needs and how to apply for them.
What's in this article?
- What is a business licence?
- Types of business licences
- How to know which licences you need for your business
- How to apply for a business licence
- How Stripe Atlas can help
- Business licence FAQ
What is a business licence?
A business licence signifies official permission for a company to operate in a particular geographical area, as issued by local, state, or US federal government entities. The scope of a business licence varies depending on the type of business, location, and industry regulations. For instance, a restaurant might need a health permit, an alcohol licence, and a general business licence to operate. A freelance graphic designer might only need a basic business licence to legally offer services from home.
A business licence serves several purposes:
It ensures businesses comply with relevant laws and regulations, ranging from safety standards to environmental practices and tax laws.
It helps governments monitor and regulate businesses for public and workplace safety, gather economic data, and plan for the future.
For business owners, licences legitimise their operations and prevent legal issues or fines down the line.
Types of business licence
Here are the different types of business licences you might encounter. (Note that some licences are issued at either the local or state level depending on a state's rules, so keep in mind that jurisdiction can shift between categories depending on your location.)
Local licences and permits
Local licences and permits are issued by city or county governments and are often specific to the nature of your business and its location. Common examples include:
General business licence: A basic licence required for most businesses to legally operate in a specific city or county.
Zoning permit: A permit ensuring your business complies with zoning laws that govern where certain types of businesses can operate.
Building permit: A permit required for any construction or renovation of your business's space.
Sign permit: A permit regulating the size, type, and placement of signs for your business.
Health permit: A permit required for businesses in food service, healthcare, or other activities that might impact public health. This could be a food service permit, a childcare or daycare health and safety permit, or a pharmacy or pharmaceutical retail permit.
Fire department permit: A necessary permit if your business deals with flammable materials or has certain occupancy levels.
Certificate of occupancy: A document confirming a building is safe and suitable for the type of business operating there, often required before you can open.
Home occupation permit: A permit required if you're running a business out of your home.
Alarm permit: A permit needed in many cities for businesses with a security or fire alarm system, so that authorities have it registered.
Sidewalk or outdoor seating permit: A permit for restaurants or retailers using public sidewalk space, such as café seating or sandwich boards.
Vendor orpeddler permit: A permit for mobile businesses such as food trucks, street vendors, or door-to-door sales.
Alcohol or entertainment permit: A local approval for serving alcohol, hosting live music, or allowing dancing, often separate from the state liquor licence.
DBA (Doing Business As) registration: A filing for a business name, often handled at the county level.
State licences and permits
In the US, these licences are issued by state governments and generally regulate specific industries and professions. Some common examples include:
Sales tax permit: A permit that allows you to collect and remit sales tax on the goods or services you sell.
Professional licence: A necessary licence for occupations that require specialised skills and training, such as doctors, lawyers, accountants, and contractors.
- Legal (attorneys, paralegals in some states)
- Healthcare (doctors, nurses, dentists, pharmacists)
- Accounting (certified public accountants)
- Architecture
- Engineering
- Construction/contracting
- Real estate (agents and brokers)
- Cosmetology and barbering
- Legal (attorneys, paralegals in some states)
Industry-specific licences: A licence for specialised industries, including agriculture, liquor sales, or childcare.
Employer or withholding tax registration: A registration with the state to withhold employee income tax, separate from the sales tax permit.
Unemployment insurance registration: A registration required for businesses with employees to pay into the state unemployment fund.
Workers compensation registration: A mandatory registration in most states if you have employees, to provide coverage for workplace injuries.
Liquor or alcohol licence: A licence generally issued at the state level, in addition to any local permit, and tightly regulated.
Environmental permits: Permits for businesses that generate certain emissions, wastewater, or handle hazardous materials.
Weights and measures permit: A permit for businesses using scales or metered devices, such as petrol stations or retailers selling by weight.
Foreign qualification or registration: A registration required if you're operating in a state other than where your business was originally formed, allowing you to register as a "foreign entity" there.
Federal licences and permits
Federal licences and permits are required for businesses involved in activities regulated by the federal government. They’re less common than state or local licences, but some examples include:
Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) licence: A licensing requirement for businesses that manufacture, import, or sell alcohol, tobacco, firearms, or explosives.
Alcohol and Tobacco Tax and Trade Bureau (TTB) permit: Required for businesses that manufacture, distribute, import, or sell alcoholic beverages at wholesale or retail, in addition to any ATF requirements tied to the products themselves.
Federal Communications Commission (FCC) licence: This is required for businesses that broadcast radio or television. (Note: broadcasting via wire, satellite, or cable can also fall under FCC jurisdiction, not just traditional radio and TV signals.)
Agriculture licences: Certain agricultural activities require a licence, including importing or transporting animals. This also extends to bringing animal-derived goods, biological materials, or agricultural biotech products across state lines, which falls under United States Department of Agriculture (USDA) oversight.
Federal Aviation Administration (FAA) certificate: Necessary for businesses that operate aircraft, transport passengers or cargo by air, or perform aircraft maintenance.
US Fish and Wildlife Service permit: Required for any business activity involving wildlife, including importing or exporting wildlife or products derived from wildlife.
National Oceanic and Atmospheric Administration (NOAA) Fisheries permit: Needed for businesses engaged in commercial fishing operations.
Federal Maritime Commission licence: Required for businesses that transport passengers or cargo by sea.
Bureau of Safety and Environmental Enforcement (BSEE) permit: Necessary for businesses drilling for oil, gas, or other mineral resources on federal lands.
US Nuclear Regulatory Commission (NRC) licence: Required for businesses that produce commercial nuclear energy, operate fuel cycle facilities, or handle the distribution and disposal of nuclear materials.
US Department of Transportation (DOT) permit: Needed for operating oversized or overweight vehicles; while these permits are typically issued at the state level, the DOT can direct businesses to the correct office.
Licences for home-based businesses
Even if you operate your business out of your home, you might still need certain licences and permits. In addition to the state and local licences and permits mentioned above, requirements might include:
Home occupation permit: A permit allowing you to run a business from your residence, often with restrictions on the type of business, signage, and noise levels.
Zoning variance: Businesses can apply for a request to deviate from the applicable zoning regulations, which is called a variance. These are granted on a case-by-case basis.
Differences between licences and permits
The terms "licence" and "permit" serve slightly different purposes. A licence is broader permission to operate a certain type of business or practice a certain profession on an ongoing basis – think of it as your general authorisation to legally run the business.
A permit tends to be narrower and tied to a specific activity, location, or point in time, such as approval to renovate a space, install a sign, or serve food safely. Permits often need to be renewed or reapplied for whenever the underlying activity changes, while licences are usually renewed on a set schedule (annually or every few years) as long as the business itself keeps operating.
In practice, many businesses need a combination of both. A restaurant, for example, might hold a general business licence that allows it to operate at all, plus a health permit, a building permit for its kitchen renovation, and a sign permit for its storefront signage.
Missing a permit – even for a business that already holds all its required licences – can still result in fines, forced closures, or delays in opening, so it's worth tracking both separately.
How to find out which licences you need for your business
When assessing which licences and permits you might need, consider consulting with a legal adviser. Here's a basic guide to get you started.
Understand your business activities: Clearly define what your business does, its industry, and its specific activities.
Check local requirements: Visit your local city or county clerk's offices or websites. You can call local officials for the most precise information. Most local governments provide detailed information on the required licences and permits for local business.
Be aware of state regulations: If your business will be located in the US, consult state government websites or business portals, which often list licensing requirements by business type. If your profession is regulated (e.g., healthcare, real estate, legal services), you'll likely need a professional licence. Also, consider state-specific requirements, such as environmental permits or a sales tax licence if you're selling goods.
Look into federal licences: Determine if your business involves any federally regulated activities. For example, if you're selling alcohol or broadcasting to the public, you might need federal licences. Check the relevant agency's website for guidance.
Consider home-based business regulations: If you operate from home, you might need a home occupation permit, especially if customers visit your home. Your local zoning board can tell you if your home-based business complies with local zoning laws, which dictate how properties in certain areas can be used.
Consult industry-specific guidance: Industry-specific associations often provide detailed licensing guides for particular business types. These organisations can also connect you with peers who can offer firsthand advice. The US Chamber of Commerce can also be a resource to guide you on the licences and permits you'll need.
Use online resources and tools: Online tools and services can simplify this process. Websites such as the US Small Business Administration (SBA) offer guides that suggest typical licences required for different types of businesses based on your location.
Business licence requirements by state
State requirements for a general business licence vary widely. Some states require every business to register for one, others leave it entirely to cities and counties, and many fall somewhere in between based on your revenue, industry, or whether you have employees.
Here's a state-by-state snapshot to help you understand where your state falls, though you should always confirm specifics with your state or local government.
Many businesses are still subject to local (city or county) and industry-specific requirements in addition to the state requirements mentioned below.
|
State
|
State-Level Licence Required?
|
Details
|
|---|---|---|
| Alabama | Yes | Nearly all businesses must hold a business privilege licence. |
| Alaska | Yes | A state licence is required across the board. |
| Arizona | No | No statewide licence, but many cities and towns issue their own. |
| Arkansas | No | No blanket state licence, but businesses must register and pay franchise taxes; local licences are common. |
| California | Partial | Most entities besides sole proprietors register with the state; many cities add their own licensing. |
| Colorado | Conditional | No general state licence, but a sales tax licence is required for businesses selling goods. |
| Connecticut | Partial | Corporations, LLCs, partnerships, and non-profits must register and license; sole proprietors are exempt. |
| Delaware | Yes | All businesses need a licence from the state's revenue division. |
| Florida | Partial | Many businesses need a state-level licence, plus local ones in various areas. |
| Georgia | No | Licensing is mostly local, though some professions require state credentials. |
| Hawaii | No | No blanket operating licence, but entities must register with the state; local and industry rules may add requirements. |
| Idaho | No | State registration is required, but licensing is largely local or industry-specific. |
| Illinois | No | No statewide licence; some cities or counties require their own. |
| Indiana | No | No statewide licence, though regulated industries and some localities have requirements. |
| Iowa | No | Registration required, along with certain tax permits; local licensing may apply. |
| Kansas | No | Licensing depends on city, county, or industry rather than a statewide rule. |
| Kentucky | No | No statewide licence; specific business types may have their own rules. |
| Louisiana | Varies | The state's online portal helps identify needed licences; some businesses need several. |
| Maine | No | Handled at the city or town level; corporations separately register with the state. |
| Maryland | Partial | Most businesses, including retailers and wholesalers, need a licence; some local rules apply too. |
| Massachusetts | No | Some professions require state licensing; localities may add their own rules. |
| Michigan | No | Certain industries and professions are licensed at the state level; local requirements vary. |
| Minnesota | No | Only businesses with occupational or environmental impact need state licensing; check local rules. |
| Mississippi | No | State registration is required; most licensing happens at the city or county level. |
| Missouri | Conditional | A sales tax licence is needed for taxable goods or services; general licensing is local. |
| Montana | No | Licences are issued locally except for professional licences. |
| Nebraska | No | State registration is needed if you hire employees, sell retail, lease property, or offer taxable services. |
| Nevada | Yes | All businesses need a state licence, and some areas add local requirements. |
| New Hampshire | No | No general licence, but specific activities (sales tax, tobacco, communications, etc.) need state licensing; local rules vary. |
| New Jersey | Conditional | Registration is needed for sales tax or employee tracking; licensing may depend on industry or locality. |
| New Mexico | No | Entities register with the state; businesses over US$100,000 in annual sales register with the tax department. |
| New York | No | Business name registration is required; local permits and licences are common. |
| North Carolina | No | Hundreds of industry-specific state licences exist; local licensing is also widespread. |
| North Dakota | No | Some state licences apply (gambling, tobacco, charities, contractors); local rules vary. |
| Ohio | Yes | All businesses register with the Secretary of State; other licensing may also apply. |
| Oklahoma | No | Occupational licences may apply to certain business types; local rules vary. |
| Oregon | No | No general licence, but the state maintains a directory of more than 1,100 specific licences; local rules vary. |
| Pennsylvania | Yes | All businesses register with the state; professional and local requirements may also apply. |
| Rhode Island | Conditional | Registration for a sales permit or withholding account is typically required; other licences and local rules may apply. |
| South Carolina | No | All general licensing is handled at the city or county level. |
| South Dakota | Yes | All businesses register with the state; a detailed guide covers further industry requirements, and local rules may apply. |
| Tennessee | Conditional | Generally required if gross receipts are US$10,000+ a year; reduced fee between US$3,000–US$10,000; exempt below US$3,000. |
| Texas | Yes | All businesses register with the state or a county clerk; some local licensing may apply. |
| Utah | Yes | All businesses register with the state; local rules may add further requirements. |
| Vermont | Yes | All businesses register through the state's online portal. |
| Virginia | No | Some professions need licensing; local rules may apply. |
| Washington | Conditional | Required if income exceeds US$12,000/year, you sell taxable goods or services, or you have employees. |
| West Virginia | Yes | All businesses need a registration certificate from the state tax department. |
| Wisconsin | Yes | Various entity types register with the Department of Revenue or through the state's One Stop portal. |
| Wyoming | No | No general licence, but a sales tax licence is often required; other licensing is handled locally. |
How to apply for a business licence
Here’s a general step-by-step guide on how to apply for a business licence.
1: Determine specific requirements
Identify the specific licences and permits your business needs to operate.
2: Collect documentation
Gather all necessary documentation, which might include:
Personal identification, such as a driver’s licence or passport
Proof of business name registration (DBA)
A detailed business plan and description of operations
Lease agreements or proof of property ownership
Articles of incorporation or similar documents for LLCs or corporations
Financial statements or proof of capital
These documents often need to be notarised or certified, so plan for extra time to complete these steps. Some applications might also require supporting statements or letters, such as a letter of intent or a professional recommendation, especially in regulated industries.
3: Complete applications
Fill in the application forms. Mistakes can cause delays, so double-check all entries. If you’re applying for multiple licences (e.g. local, state, federal), organise your paperwork to ensure each application is complete.
4: Pay licensing fees
Pay all fees associated with your licences. Costs vary widely depending on your state, city, and business type—many business licences fall somewhere between US$25 and US$500, with many owners paying around US$200 on average once you factor in state and local fees together.
States and cities with lighter licensing structures, such as Missouri, often charge on the lower end, sometimes as little as US$50 for a basic registration. On the higher end, states with more complex or revenue-based systems—such as California, New York, or Illinois—can push costs well past US$1,000, particularly in major cities such as Chicago or San Francisco, or for regulated industries like food service.
Some agencies charge a flat fee while others scale based on your business's size, location, or projected revenue. Payment methods differ, too: some accept online payments or cheques, while others require a money order.
5: Submit applications
Submit applications to each licensing body. For local licences, you might need to submit in person and could benefit from discussing your application with a clerk for any immediate corrections. For federal licences, online submissions are more common, but certain parts of the application might need to be posted.
6: Follow up on application status
Processing times can vary widely, from a few days to several months. During this time, be proactive: regularly follow up via phone or email to check on the status of your application and be prepared to submit any additional information that the licensing agency requests.
7: Schedule inspections as required
Certain types of businesses might require an inspection before the licence is granted. This is common for restaurants, daycare facilities, and manufacturing plants. Schedule inspections promptly and prepare your premises to meet all specified standards.
8: Display licences as needed
Once approved, you’ll receive your licence either through the mail or online. Some licences need to be publicly displayed in your place of business; make sure you comply with these requirements to avoid penalties.
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Business licence FAQs
Here are quick answers to common questions about business licensing.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.