What is a Business License, and How is it Used?

Starting a new business can be daunting, with so many things to cross off the list. An often-overlooked step is obtaining the proper licenses to operate within a particular state, town, or county. Business licenses are legally required for many different types of businesses. If a company does not obtain one, the government can shut it down or sanction it with fines or other penalties. Not all businesses require a business license.
Knowing who to trust these days is difficult. Before buying your products or services from a company, you can actually perform a business license lookup to see if it's in good standing with the government and if its license is up to date or suspended. Some companies don't even bother getting the proper permits. Try a business background check report with EntityCheck to learn all you can to stay safe.
What is a Business License?
A business license is a permit the government issues to allow the company to operate in the local area. The country, state, county, or city issues these business licenses. Some permits are determined by the location of the business (commercial space vs. home-based business). Some licenses or permits require the business owner or managers to attend training and become certified by passing an exam. Some types of businesses require specific skill sets, and the license certifies that the business personnel is knowledgeable and trained in their chosen field and well-versed in the business's rules and regulations.
Some permits are for selling particular products (firearms, alcohol, tobacco). The health or fire department issues specific types of permits. Sometimes, the city or county will issue the business license. There are three main types of licenses:
What Types of Businesses are Required to Have a Business License?
Although not all businesses require licenses, many do. It's based on risk factors. Anything that could risk the health and well-being of the public is subject to a business license. The type of license you need depends on your business activity or the products or services you sell. Some businesses that are required by law to obtain necessary business licenses include:
- Barber Shops/Hair Salons:
Cutting hair and shaving people exposes the business to risk. Coloring hair and applying chemicals to people's heads and faces could also result in injury or illness. Therefore, these types of personal care businesses must have the proper training and licensing to operate.
- Car Mechanics:
Cars are a matter of public safety. Automobile mechanics who fix cars and trucks must be specifically licensed to do so. An error could result in the loss of life or devastating injuries.
- Electricians:
Electricians work with electricity, which can cause fires and electrocution. The government requires them to be appropriately trained and licensed before they can work in the field.
- Plumbers:
Plumbers must be licensed and well-versed in local building and safety codes to ensure public health and safety. Each plumber must undergo extensive training to learn all about plumbing codes and maintenance of water and sewer systems to prevent waterborne illness and injuries.
- Insurance Agencies:
Insurance products can be complex and confusing to the public. To ensure public confidence, insurance agents must be thoroughly trained on all the products they sell and licensed by the state to sell them. Insurance business licenses are essential to avoid scammers, maintain industry standards, and comply with federal and state laws.
- Collection Agencies:
There are strict laws about abusive debt collection. Collection agencies must operate without harassment, misleading practices, and unfair tactics and instead engage in ethical and legal debt recovery procedures. As a rule, collection agencies must familiarize themselves with the laws governed by the Fair Debt Collection Practices Act (FDCPA) and get licensed before collecting even one dime.
- Construction Companies:
Construction companies build homes and commercial structures that people use to live and work. To preserve public safety, these buildings must comply with dozens of state, federal, and local building codes. Construction firms are subject to multiple business licenses depending on where they operate and the services/products they provide.
- Tattoo Parlors:
Due to the dangers of the business, tattoo parlors must also have a business license to operate. Using needles on people's skin is a recipe for disaster. Tattoo parlors also offer piercing services, which can lead to infection and injury.
- Doctors:
Obviously, doctors and other people working in medicine have crucial but vulnerable jobs that could lead to injury, illness, and death. Doctors must not only be highly trained and skilled but they must also be licensed by the jurisdiction in which they want to work.
- Nurses:
Nurses assist doctors by doing a lot of the heavy lifting, like inserting IVs, taking vitals, changing bedpans, and more. They, too, must undergo years of education, training, and on-the-job testing before they can work as nurses. They must also pass an exam and get a nursing license to practice.
- Lawyers:
Our legal system is fragile and built on integrity and ethics. Every lawyer who practices in the U.S. must be thoroughly educated and licensed (usually by the state bar) to practice law. A law license ensures public protection and verifies the attorney's competence to practice law in the state. It also prevents unqualified individuals from practicing law and harming clients.
- Real Estate Brokers:
Real estate agents and brokers must obtain the necessary licenses to protect real estate buyers and sellers and to ensure the agent acts ethically with the client's best interest at heart. A real estate license reassures the public that the agent has completed the necessary education and other requirements to practice in the field.
- Appraisers:
Building appraisers perform a necessary function by valuing residential and commercial property. The process can be complex and requires formal training, apprenticeship, and on-the-job training before an appraiser can be licensed to work independently.
- Pharmaceutical Companies:
Pharmaceutical companies create life-saving drugs to ease various symptoms and cure illness. These are high-risk organizations that require industry-specific licenses, education, and other requirements before they can develop drugs for public consumption.
- Labs:
Labs that work with dangerous substances or diseases must be licensed by the federal government or state to operate, and they must comply with strict laws to keep the public safe.
- Restaurants/Diners:
Anyone who works with or serves food must be specially licensed. Licensing for food establishments comes with strict rules and regular health department inspections. If there are too many health code violations, the place may be shut down.
- Bars:
Bars and package stores that sell alcohol to the public must be licensed by the city or county. A whole list of regulations affects the sale of alcohol and tobacco.
The list above is only partial. Additional businesses requiring licenses include aircraft transportation, firearms manufacturing or sales, commercial fishing, oil drilling, nuclear energy, broadcasters (TV, radio, satellite, etc.), oversized vehicles, or companies transporting animal products across state lines.
Why are Business Licenses Necessary?
The basic premise behind business licenses is to keep the public safe. They are also issued to protect compliance with government regulations and tax collection and establish credibility and legitimacy. Business licenses allow a company to operate legally in its chosen jurisdiction. They help protect consumers by ensuring companies adhere to specific safety and quality standards and operate ethically. They also help businesses avoid penalties and fines.
Where to Get a Business License

Federal, state, county, and city governments issue licenses. Companies that deal with food will have to contact the state health department. Businesses that sell alcohol or tobacco must get their license from the alcohol and tobacco control departments. You can contact the local county clerk or Secretary of State to find out what type of business license you need and where to get it. Many different types of government offices issue them for various purposes. Some have online application portals you can use to apply. The steps include:
- Download an application and complete it.
- Gather any required documentation (ID, tax info, stakeholder details, proof of insurance, etc.).
- Pay the permit fee.
- Submit your application.
- Receive and publicly post your license.
Getting a business license can take anywhere from a few days to months. Plan early to get yours before you need it.
What are the Requirements for a Business License?
The requirements for a business license depend heavily on the type of company and its primary business activity. You will often need a specific business entity structure and an EIN from the IRS. Most licenses require particular education or training; you must pass an exam and pay a fee before receiving your license.
How to Perform a Business License Search
As you can see from above, business licenses are extremely important. They provide peace of mind that you are dealing with a qualified, legitimate, and law-abiding business. To allay any fears, you can easily perform a business license lookup to learn about the company's licenses and other facts you may want to know.
Step one is to determine the jurisdiction where the business resides. Once you know that, you can take additional steps to find a copy of its business license. You can use both government and commercial sources to find business licenses.
Some ways to look up a business license include:
Many licenses are issued by or stored with the Secretary of State. Some Secretary of State offices have search tools on their website. You may have to visit others in person to get a copy of the records. However, these government agencies charge a small fee for copies.
You can visit the town clerk's office in the county where the business operates to ask about business licenses. If they don't maintain copies there, they may be able to point you in the right direction. You can also try searching city and county websites. Many of them offer online public records search tools.
When searching for a business license, you may need to tap into additional government offices like the ones below:
- Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)
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- Alcohol and Tobacco Tax and Trade Bureau (TTB)
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- Federal Communications Commission (FCC)
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- The Securities and Exchange Commission (SEC)
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- The Food and Drug Administration (FDA)
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- Department of Transportation (DOT)
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- U.S. Department of Agriculture (USDA)
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- Internal Revenue Service (IRS)
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- U.S. Small Business Administration (SBA)
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Depending on the type of business, you may have to contact a state-level industry agency to get copies of business licenses. For example, you would contact the Division of Licensing Services for a real estate business license in New York. If the business is a hair salon or barber shop in Massachusetts, you would contact the Board of Registration of Cosmetology and Barbering. If you want to check out an appraiser in Florida, you should contact the Florida Real Estate Appraisal Board (FREAB).
There are hundreds of industry-related agencies across the county. First, identify the type of business and then perform a Google search to determine which agency issues licenses. Many will have an online search portal where you can pull up information.
A faster, better option is a commercial solution like EntityCheck, where you can pull a complete business background check with business licenses within minutes. Access millions of nationwide records for all types of businesses and enjoy learning fascinating facts about the company. You can run unlimited searches on companies anywhere in the U.S. Some of the types of information you can find with EntityCheck include:
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