How to get a business license: A step-by-step guide

Starting a business requires you to get a license first. A business license refers to a permit granted by government agencies. You must have prepared well for a business to make it a success. The license is your basic requirement to show the authorities that your activities are legal. 

However, you only get a business license after the authorities ask the relevant questions. You need to provide them with the required details regarding your business. 

So, the first thing to do is to apply for a business license with your local authority. Only after that you can operate your business legally. 

Here is what you need to know about a business license.

What is a business license?

You might be thinking what is a business license all about? A business license is an agreement that gives a business the right to make, sell, distribute, or use a product or, service, brand, or technology. It is a permit from the state or any other government entity allowing the business to conduct its operations legally under their jurisdiction. 

Where to get a business license from? 

In the USA, you can apply for a business license from the Secretary of State’s office, a Business Agency, or a Business Bureau. You can apply for the license online on the authority’s website or personally visit the office and file paper documents. The authorities will approve the license in a few days or weeks, depending on your location and the type of license you apply for. 

Reasons why you need a business license

A business license is the basic requirement to start a business legally. You can get rid of many legal issues if you have the permit. If you think, do I need a business license, the answer is yes!  Here are some key reasons to acquire a business license from the right authority. 

Helps fulfill legal requirements  

With a business license, you can confidently show it to any authority wanting to enquire about your company and its business. The license can save you from many serious issues. 

Running a business without a license may result in serious consequences, such as heavy fines and even closure.

Helps win customers’ trust

When customers enter a shop, they look for some certificate hanging near the counter. If they find the business license right at the entrance, they build trust for such a business. They can then confidently buy from the shop or deal with a company that shows its license online or offline. 

So, the license works as a stamp of approval from the government authorities. Customers find such a business secure and credible. That, in turn, helps businesses build a trustworthy brand identity. 

Most importantly, winning customers’ trust through the license is not expensive. So, how much does a business license cost? Know that a business license is not very expensive to apply for and get. In the USA, the license cost may range from $50-$550 depending on the state, business type, processing, and filing fees. 

Offers growth & expansion opportunities 

Since a business license tells that the business is being conducted legally, this helps win customers’ and clients’ trust for building partnerships. 

For instance, if you need a loan for business expansion. Most banks will first check the license before approving a loan. 

Moreover, the license is essential to make legal professional transactions. Going into any merger or expansion requires business permit for validation. 

How much is a business license cost?

Depending upon your requirement, a business license may cost you from $50 to $500 or above. 

Business license structure 

When applying for a business license, ensure you know your business structure. There are several structures, each with a different license issued. Note also that choosing the right business structure is the first basic step to start your business. 

The right structure will also be a key to conducting your daily operations and protecting your assets. It is also important from the taxation point of view. 

Here are the four major business structures you should consider when you apply for business license: 

01. Sole Proprietorship

A sole proprietorship is a structure where one person owns and operates a business. It is a simple structure that allows a person to have complete ownership. Such a person alone can make business decisions. It also means that the person is liable for all business obligations and debts. That sometimes puts a person’s assets at risk in case of unpaid debts. 

This is an ideal structure for new business owners who do not want to start on a bigger scale. The structure saves them from the complexities involved in the formal registration of a business. 

02. General Partnership

The general partnership business structure allows two or more partners to share ownership, assets, profits, and financial liabilities. 

This structure has two or more people sharing ownership, including profits, assets, and legal and financial liabilities. All partners share the results of any actions taken by other partners. 

Those business owners who work with a small team and setup should opt for this structure.  

03. Limited Liability Company (LLC)

When thinking about how to get a business license, consider the Limited Liability Company (LLC) if it applies to your business. It is a hybrid structure with limited liability protection for a company with the tax benefits of its partnerships. This structure protects its partners’ assets from any business debts and lawsuits. 

Those business owners who want to keep their properties secure from personal liability should opt for this structure.  

04. Non-Profit Corporation

A non-profit corporation does not work to earn profit. Instead, its activities are for social causes, such as charitable causes. So, such a corporation may be running an educational, religious, or other institution for the welfare of people. 

This is the best structure for those groups that work for public welfare and need tax exemptions. 

Why business structure matters 

You should choose a business structure carefully by first assessing your circumstances. Here are the reasons why picking the right structure matters the most:

• Tax obligations– If yours is a small business or a charitable organization, choosing the right structure will help you get the text exemption. The right structure will also save you from paying more taxes. 
• Filling requirements – Some business structures require you to provide extensive details. Others let you do business with the minimum documentation.  
• Growth in the future – Some structures allow for easier business scaling and adoption of changes, while other structures are not that flexible. 

But note that having a business structure does not mean you cannot change it in the future. You can opt for any other structure when your business grows. However, starting your business with the right structure would be advisable to avoid complexities regarding taxes, liabilities, and legal issues. 

Different business license types

Different types of business licenses serve different purposes. A business should get a specific license. Here are the major business license types:

Federal Licenses

The federal government issues Federal Licenses for agriculture, transportation, broadcasting, etc. So, most small businesses do not require these licenses. 

To get a federal license, go to your industry’s federal agency website and apply for one. For instance, if you plan to start a distillery, visit the Alcohol and Tobacco Tax and Trade Bureau website. 

State Licenses

Most businesses need state licenses, but the license type will depend on what kind of business you want to start. So, a construction company will require a business license that is different from a pet grooming service. 

Go to your business licensing website to apply for the state license that applies to your business. You can also visit your local Small Business Development Center to get help. So, if you want to run a healthcare business in Chicago, visit the Chicago Department of Health.

Local Licenses

You may be asked to apply for local licenses for businesses that serve alcohol and food. To get such a license, visit your county’s government website or go to the local office to apply for your local license for a restaurant or any such businesses.   

For example, you need a Food Establishment License from Chicago to start a restaurant in the city.

Professional Licenses

Professional licenses are issued to doctors, hairstyles, electricians, insurance agents, and real estate agents with many others. 

You can visit the relevant websites offering these licenses. Some state authorities may ask you to appear for a test before providing you with a permit. For example, if you want permit as an electrician, then you’ll have to appear for a state exam. 

Sales Tax Licenses

Sales tax licenses are required to sell products or services. With such a license, you can pay your sales tax as well. You can visit your state’s Department of Revenue website to “Sales Tax” or “Business Tax Registration.” Then, fill out the online application form with your business details and EIN or SSN.

For example, when applying for a seller’s permit in LA, go to the LA Department of Tax and Fee Administration website to apply.

Home-Based Business Licenses

You need to apply for home-based business licenses when starting a business from home. The license will ensure that you do not disturb the neighborhood while running a business from home. 

So, go to your city or county’s laws and authorities website to apply for a home-based business license. For example, if you live in Seattle and want to start a home-based business, check the Seattle Department of Construction & Inspections website. 

Ensure that you have the following documents before applying for a license  

• Business name and structure
• EIN or SSN
• Personal identification
• Business address and contact information
• Financial information
• Description of your business activities
• Proof of zoning compliance 

Steps to Apply for a Business License

While applying for the license, you will take steps before getting the approval. Here is how to get a business license:   

Approach the right authority 

The first step to getting a business license is approaching the right authority. You should find out which local authority is responsible for issuing the license. Typically, you need to go to a city or a county office. This can be, for instance, the Department of Business Services. 

First, visit your local authority’s website to get the guidelines. You can know if the office allows you to file your application online or if you must be present there in person to get the license. 

The authority will also let you know how much a business license is. That allows you to determine the cost for your small business in advance.  

Obtain the application forms

Next, get the necessary forms to apply for a business license. Most authorities let people get these license forms online. You can also get the forms by visiting the office in person. 

When downloading the forms online, ensure that they are the latest visions. Read the forms carefully before filling them out.  

Give the required details 

When filling out the forms, give the required information. Ensure that you pay attention to providing accurate detail without errors. Double-check your entries so that no wrong information goes to the authority from your application. 

Get someone to review the application so the authorities do not reject it.   

Pay the form fees 

You need to pay the application fee to get your business license. The fees will depend on the location of your authority’s office and the business type. You might be asked to pay anywhere between $50 and $200 or above. 

You can also be asked to pay additional charges, such as processing fees. Make sure that you have the payment method acceptable to your authority office. 

Wait for the approval

Now, submit your business license application to the office and await their approval. The application processing may take a few days to several weeks for approval. 

You should take the phone number of the authority when submitting your application. Ensure that you have a copy of the submitted documents for records.

Business license mistakes to avoid  

Here are five common pitfalls you should avoid:

Not filling all the blanks  

Make sure that you do not leave any of the blacks because they are there for a reason. The authority checking your forms needs clarification on those unfilled blanks. In that case, the authority or the office can return the form to the applicant for completion.

When filling out the application, write ‘N/A’ (not applicable) if there is nothing to write in a blank. This will tell the authority that you acknowledge the blank and the section.    

Submitting the wrong license application

Business licenses are different everywhere; one license only works for some types of businesses. Each business type has its own business license that you must apply for separately. Submitting a wrong license application will result in its prompt rejection. 

So, find out which of the different business licenses your type of business requires and fill it adequately.  

Not signing the forms  

Another mistake that some applicants make is they submit applicants without signing. The authority will promptly return an application if it still needs to be signed. So, double-check all the blanks that require your signature and sign. 

Not gathering documents  

Some people apply for business licenses without preparation. They then panic at the last moments. Therefore, ensure you have gathered all the documents before applying for the business license. 

So, get your proof of identification, business address, zoning approval, etc. Check each document and ensure that they are complete and updated. 

Paying the wrong application fee 

Ensure you have the right application fee when applying, or it will be rejected, and approval will take time. Note that any overpayment will take time before the authority refunds the money. In case of underpayments, the approval process can be delayed. 

Therefore, submit the right amount with the application using a credit card or a check so that the transaction can be tracked. 

Steps to take after you get the license 

After successfully getting your business license, what should you do to take advantage of it for your business? Here is what you must ensure regarding the license:

Display the license to customers 

You are legally required to display your business license at a place where your customers can easily see it. That also helps improve the credibility of your business. 

Place the license at the entrance, counter, or reception desk, where people can see it immediately. When operating your business online, its website should mention the license on the ‘About Us’ page. 

Set reminders for the license renewal 

You will be required to renew your business license on its expiration due date. You will be asked to pay fines if you do not renew the license on time. Or the license may be suspended. 

So, it would be good to set reminders to alert you well before the due date. You can set up multiple reminders to be ready for the renewal and attend the due date. 

Give updated information 

Whenever there is a change of address, business name, or the nature of your business, it should be mentioned in the application form for the business license.  Inform the licensing authority about such changes so that your business documents are legal. 

You must visit your state’s Secretary of State, the IRS, and the local agencies.   

Maintain records 

You should have a system to organize and maintain your business documents. That will save you time during audits and inspections.  

Using a filing system digitally to store business license copies is advisable. The system can alert you when the renewal date is due, and you must make the correspondence. You can keep the documents securely in a cloud storage service.  

Stay informed about the regulation updates

You should be aware of the changes made in the laws and regulations regarding business licenses. With updated information, you can take the right steps on time to conduct your business smoothly. 

To be updated, subscribe to your industry-specific organizations and bureau. You can get the changes and insights quickly.  

So, these are the major aspects of obtaining a business license. Apply for the license only after considering all of its crucial aspects. That is the way to get your license approved without delay. 

When starting a business, besides the license, you need a logo to build your brand’s visual identity for your potential customers along with trademark and copyrights. Designhill, the leading creative marketplace, is where you can access a unique and custom business logo design. You can start a logo design contest or hire a designer to design your logo. 

Wrapping Up 

Starting a business legally needs you to obtain a license. However, you must approach the right license-issuing local authority with the required documents. Apply using the right application form and provide the required details. Pay the fees and then wait for the approval. The process to get the license is simple.