Business Licenses and Registration: What You Need Before You Open

In a typical month in the United States, there are over 29,000 business formations. As a business owner, submitting your business registration and LLC filing is one of the first things you need to do to start a business. However, these are only the initial steps in setting up your entire operation. Your company’s compliance, liability, and future hinge on whether you get all of the documents you are legally required to obtain. Because requirements can vary by location and industry, it’s essential to research and apply for your business licenses and permits proactively.

Business License, Permit, Registration: What's the Difference?

A business license gives you the legal right to operate, a permit allows you to perform specific activities, and registrations establish your business’s legal identity or tax status. To start generating revenue, you’ll need to register your business and complete the required legal forms. 

What Is a Business License?

A business license is a government-issued legal document that permits you to operate. It can be for a specific purpose or for a local jurisdiction. For example, many states require every company operating within the state’s jurisdiction to obtain a general business license. Similarly, doctors and lawyers have special, profession-specific licenses that they must obtain.

The federal government regulates some industries. Broadcast companies, liquor sellers, and transportation firms must obtain the appropriate federal license before they can officially operate. In many cases, these licenses must be renewed annually.

What Is a Business Permit?

Depending on your industry and location, you may also need to obtain a business permit. Business permits are legal documents that demonstrate your compliance with local and state regulations. For example, you may need a seller’s permit, a fire department permit, or a permit from your local health department. You’ll also need a zoning permit to confirm you’re using your land or building in a way that complies with local zoning laws.

While a business license permits you to operate, a business permit demonstrates your company’s compliance with local rules. Verify any permit requirements in your area before you open your business, as they can vary by jurisdiction and industry.

What Is Business Registration?

Your existing business structure determines how you register with the state. While sole proprietorships do not have to register with their state or local government except in specific cases, the following business structures are required to do so.

• Limited liability companies (LLCs)
• Partnerships
• Corporations
• Nonprofit organizations

Your business is a legal entity in the eyes of the government once it has been registered.

For founders, it’s important to note that registering a business is often just the first step. You can be officially registered as a business and still operate illegally if you don’t have the required licenses and permits.

Why Getting Licensed and Registered Matters

Skipping this step isn’t just a paperwork issue; it can shut your business down. A business operating without the right licenses or registrations can face financial penalties, loss of liability protection, and an inability to access banking or funding.

Legal and Financial Penalties

When you operate without the proper license or registration, you may be liable for back taxes and financial penalties. Your company may even be forced to close. 

The costs involved can vary based on the infraction and location. Failing to renew a license on time in Washington State can cost up to $150. Meanwhile, a travel seller in Florida can be fined up to $5,000 for failing to register their business.

Loss of Liability Protection

When you set up an LLC or corporation, it reduces your liability by creating a metaphorical veil between your personal finances and your business. However, courts have ruled that piercing the corporate veil can occur for several different reasons. If corporate formalities like registration aren’t observed, you may lose your legal protection in a lawsuit.

Inability to Open a Business Bank Account or Get Funding

To open a commercial bank account or apply for a business loan, most banks and investors will expect the business to be properly licensed and registered. During the due diligence phase, they use tools like EntityCheck’s professional license search to verify the applicant’s compliance. Whether you’re a founder or a vendor checking a potential partner, EntityCheck’s professional license search lets you confirm whether a business holds current credentials. For broader due diligence, including Secretary of State filings and bankruptcy records, EntityCheck’s full search suite covers those separately.

Types of Business Licenses and Permits

Most businesses need more than one type of license or permit. Here’s how they break down by level, from federal requirements down to local regulations.

Federal Licenses and Permits

Most industries don’t require a federal license or permit. For the companies that do, it’s a serious obligation they must meet. 

• Alcohol and Tobacco: To sell these products, you must get a permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB).
• Agriculture: The United States Department of Agriculture (USDA) and Food and Drug Administration (FDA) offer a range of different licensing options. For example, the FDA requires registration for food facilities as a part of the FDA Food Safety Modernization Act (FSMA). It’s also worth noting that many aspects of agriculture, such as pesticide application, will require state-level certifications or licenses.
• Aviation: The Federal Aviation Administration (FAA) has different licensing requirements for airports, air carriers, and other parts of the aviation industry.
• Broadcasting: The Federal Communications Commission (FCC) has specific requirements for the broadcasting industry.
• Investment Advising: The Securities and Exchange Commission (SEC) has strict licensing requirements for businesses and individuals engaged in investment advising.
• Firearms: A federal firearms license is required by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) for any business that will deal, manufacture, or import firearms.
• Interstate Transportation: To carry out its operations, an interstate transportation company will need a United States Department of Transportation (USDOT) number, interstate operating authority, and unified carrier registration.

State Business Licenses

Most states require some form of additional license, although the types and rules vary significantly across states. In states like Nevada, you will need to get a general state license. Meanwhile, Delaware requires a state license from companies that do business in the state, but not if your firm isn’t physically conducting business within the state’s borders.

Many states also require seller’s permits or sales tax licenses. If you are operating in specific professions, such as a lawyer, doctor, or electrician, you’ll also likely need to apply for a license at the state level. Similarly, any company that sells alcohol will need to apply for a liquor license with the appropriate state agency.

Local Business Licenses and Permits

Cities and counties may have different rules, so it’s important to check the requirements for both. While this isn’t true in every jurisdiction, some areas require local business licenses. The following are examples of local licenses and permits you may need.

• Zoning Permits: This permit confirms that you are using your company’s premises in a way that complies with local zoning rules.
• Home Occupation Permit: Many jurisdictions require this for remote workers and home-based businesses. It shows that your business won’t affect vehicle or pedestrian traffic.
• Health Permits: If you run a restaurant, you’ll need a full health inspection. Every worker will generally be required to receive their food handler’s permit. There are exceptions and variations between different areas. For example, Pennsylvania doesn’t require workers to get a food handler’s permit. Instead, one worker must have a food manager certification.
• Fire Permits: These permits are typically required from any business that operates public assembly spaces or that deals with flammable materials.
• Building Permits: You’ll need these permits to post signage, create a new building, or carry out a renovation.

Special Industry-Specific Licenses

Certain industries face added requirements, so it’s a good idea to research the norms associated with your industry.

• Food Service and Restaurants: From food handler permits to alcohol licenses, the food service industry has a range of expectations. Most businesses will also need health department permits, commercial kitchen approvals, occupancy permits, and fire safety inspections.
• Childcare and Education: In addition to obtaining state childcare licenses, businesses in this field will need to conduct background checks and fingerprinting. Workers must be trained in CPR and first aid. There will also be facility inspections and student-to-staff ratio requirements that must be maintained on an ongoing basis.
• Healthcare and Medical: This is one of the strictest industries. Businesses must register with the Drug Enforcement Administration (DEA) if they provide controlled substances. They must verify the professional licensure for medical practitioners. Additionally, there are rules about facility licensing, insurance credentialing, and Medicaid/Medicare authorization.
• Financial Services and Insurance: Businesses in this industry face a range of state and federal licensing requirements. Advisors must obtain a surety bond, which legally binds them to act ethically and comply with securities laws.
• Construction and Contracting: From state contractor licenses to professional licenses, businesses must meet several requirements before they can provide construction services. Bonding and trade-specific certifications are generally necessary. For instance, HVAC technicians must obtain an Environmental Protection Agency (EPA) certification for handling refrigerants.
• Real Estate: In the real estate profession, agents must get their own license. If you are a brokerage, you must obtain a brokerage license as well. Any worker who is a real estate appraiser or home inspector must also hold a specific license.

Other Key Registrations Before You Open

Beyond licenses and permits, most businesses also need these registrations before they can legally open.

Employer Identification Number (EIN)

An EIN is essentially your company’s federal tax ID number. With the Internal Revenue Service’s (IRS) online form, you can apply for and receive your EIN in minutes for no cost.

If you are going to hire workers, you’ll need an EIN. You will also need an EIN if you plan to set up a business bank account, although sole proprietors have the option to use their Social Security number instead. Having an EIN helps to protect your personal financial information, file taxes, apply for business licenses, set up pension plans, and prepare your company for future growth.

As part of your due diligence, it’s important to discover the presence or absence of an EIN. With EntityCheck’s EIN lookup tool, you can complete your Know Your Business (KYB) compliance process and determine if you’re dealing with a legitimate company.

Doing Business As (DBA) Registration

While it can vary between different jurisdictions, you’ll generally register your DBA with the county clerk. Your DBA is any name your business operates under that isn’t its registered name. Some states, like California, require your DBA to be published in a newspaper after it is filed.

If you are uncertain whether your DBA is already registered, EntityCheck offers a DBA Search tool that lets you verify your existing DBAs and see whether anyone else currently operates under that name.

Secretary of State Registration

In the vast majority of cases, every LLC, corporation, nonprofit organization, and partnership is legally required to register with the state's Secretary of State. Before you can pursue any other license, you must first register your business. By using our Secretary of State (SOS) Business Search, you can check the status, structure, and filing history of any registered entity. 

Sales Tax Permit and Seller's Permit

Depending on your state, this permit may be called a sales tax permit, sales tax license, seller’s permit, vendor’s license, or something else. It is essentially a permit that allows you to collect and remit taxes for the goods and services you sell. Every state with a state sales tax will have some version of this permit, though the fees may vary. For example, Connecticut charges $100, while Texas, Illinois, and many other states are free.

How to Get Your Business Licenses and Permits: Step by Step

Wondering how to register a company in the USA? Follow these steps to properly set up your company’s business licenses, registrations, and permits. These steps must be carried out in order because applying at the wrong time may mean you have to reapply and pay the same fees twice.

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Step 1: Choose and Register Your Business Structure

Before you can learn how to register a business name, you first need to determine the appropriate business structure.

Once you decide on your business structure, you can file your Articles of Incorporation or Articles of Organization with your state. To see if your business name already exists before you file, check out EntityCheck’s SOS Business Search.

Step 2: Get Your EIN from the IRS

If you plan to have employees or withhold income taxes, you need to obtain an employer identification number (EIN). You’ll also need an EIN if your company must pay alcohol, excise, tobacco, or firearms taxes. Any type of corporation, partnership, or LLC needs an EIN. 

Even if your business structure doesn’t have to get an EIN, it’s often a good idea to have one anyway. The IRS application is free and takes about 15 minutes to complete. Once you obtain your EIN, you can use it to open bank accounts, hire workers, and protect your personally identifiable information. Tip: If you’re vetting a vendor or business partner, use EntityCheck’s EIN lookup tool to verify whether they have a registered EIN. This is a key step in Know Your Business (KYB) due diligence. 

Step 3: Identify Which Licenses You Need

Next, you’ll need to research the licenses you need. The Small Business Administration (SBA) maintains a list of industries, such as agriculture and mining, that may require federal permits. Your state and local area may also require specific permits, so check with your state, city, and county to find out what types of licenses or permits you may need. Some common options include:

• General business licenses 
• Sales tax permits 
• Certificate of occupancy (CO) permits
• Health permits
• Occupational licenses
• Alcohol permits
• DBA registration

If you’re uncertain about the right license for your business type, EntityCheck can help. Our SOS search and professional license search allow you to see which licenses your competitors hold.

Step 4: Apply for Each License and Permit

Once you’ve figured out which licenses and permits you need, the next step is applying for them. In most cases, you’ll need a few key pieces of information.

• Business name
• Address
• EIN
• Owner details
• Proof of insurance 
• Professional qualifications

After you’ve gathered together the appropriate data, you can apply on the agency’s website. Depending on the permit or license, the cost can range from $15 to several hundred dollars.

Some licenses may require an in-person visit. For example, fire, zoning, and health departments often have to come to your site for an inspection.

Step 5: Track Renewals and Stay Compliant

Unfortunately, applying for permits isn’t a set-it-and-forget-it task. While the deadlines vary, most permits and licenses must be renewed on a set basis. Although some jurisdictions and departments send automatic reminders, many don’t. Because of this, it’s a good idea to set calendar reminders before the renewal deadline. Many vendors and partners verify license status before signing a contract, making timely renewals especially important to your credibility.

Licenses You Need by Business Type

Besides registering a business name, you’ll also need to get the appropriate licenses. Most businesses will require more than one of the following license types.

Restaurant or Food Business

If you operate in the restaurant or food industry, you may need several of the following licenses or permits. In most cases, these permits will need to be reviewed annually.

• Fire permit
• Liquor license
• Food handler’s permit
• Health department permit
• Zoning permit 
• Business license

Because of the nature of the industry, you will need to conduct a health inspection before you can start producing or serving food.

Retail Store

At a retail store, you’ll often need a general business license and a seller’s permit or sales tax license. Additionally, retail stores normally must obtain zoning and signage permits. 

While these are the basic retail-related permits you may need, they are likely not the only requirements. If you are selling age-restricted products, such as tobacco or alcohol, you will have to obtain specific permits. Similarly, any home-based business may be required to get a home occupation permit. 

Construction and Contracting

Construction and contracting work is unique because each project requires its own set of permits. Before you can even open up a shop, you’ll need to register your business, get an EIN, and set up general liability insurance. Many states require a bond as well.

Professional licensure requirements are based on your field. For example, electricians, plumbers, and HVAC technicians often need specific licenses. However, this can vary by location. While a roofing contractor in California must obtain a C-39 license, roofers in Texas face no statewide professional licensing requirements.

Healthcare and Medical Practices

Healthcare businesses are obligated to complete their business registration. In addition to basic requirements, they must ensure that each medical practitioner holds the correct professional license. If the company prescribes controlled substances, it must register with the DEA.

Because of the risks associated with subpar care, the healthcare field is among the most closely regulated professions. After your licenses and permits are complete, you still have to maintain your HIPAA compliance and FDA device registration and listing requirements. Similarly, a National Provider Identifier (NPI) is required to bill insurers.

Online or Home-Based Business

Home-based or online businesses might not have a brick-and-mortar storefront, but they still have permit requirements. Many counties require a home occupation permit, which basically demonstrates that your business won’t affect the vehicle or foot traffic in your area.

You will also likely need a general business license and a seller’s permit if you’re selling taxable goods. If you have an economic nexus in other states because you sell to multiple states, you may have to register your business there as well. Each state has different rules about what constitutes an economic or physical nexus, so research nexus rules for any state you sell to or have a physical presence in.