Join our Waitlist for Expert Advice!

Business Licenses and Permits Compliance is key when starting a business. Find out which permits you need to obtain for your new venture.

When you're embroiled in the excitement of starting a new business, it's easy to ignore the need for licenses and permits. Sure, getting licenses and permits is about as fun as visiting the dentist. But failing to do so-and doing it right from the beginning-is one of the most common mistakes new entrepreneurs make.

Following are some of the most common licenses and permits homebased small-business owners may need and where to go for more information.

Business License
Contact your city's business license department to find out about getting a business license, which essentially grants you the right (after you pay a fee, of course) to operate a business in that city. When you file your license application, the city planning or zoning department will check to make sure your area is zoned for the purpose you want to use it for and that there are enough parking spaces to meet the codes.

You can't operate in an area that is not zoned for your type of business unless you first get a variance or conditional-use permit. To get a variance, you'll need to present your case before your city's planning commission. In many cases, variances are quite easy to get, as long as you can show that your business won't disrupt the character of the neighborhood where you plan to locate.

Because you're planning to start a business in your home, you should investigate zoning ordinances especially carefully. Residential neighborhoods tend to have strict zoning regulations preventing business use of the home. Even so, it's possible to get a variance or conditional-use permit; and in many areas, attitudes toward homebased businesses are becoming more supportive, making it easier to obtain a variance. Visit the Zoning section of this article for more information.

Fire Department Permit
You may need to get a permit from your fire department if your business uses any flammable materials or if your premises will be open to the public. In some cities, you have to get this permit before you open for business. Other areas don't require permits but simply schedule periodic inspections of your business to see if you meet fire safety regulations. If you don't, they'll issue a citation. Businesses such as restaurants, retirement homes, day-care centers and anywhere else that lots of people congregate are subject to especially close and frequent scrutiny by the fire department.

Air and Water Pollution Control Permit
Many cities now have departments that work to control air and water pollution. If you burn any materials, discharge anything into the sewers or waterways, or use products that produce gas (such as paint sprayers), you may have to get a special permit from this department in your city or county. Environmental protection regulations may also require you to get approval before doing any construction or beginning operation. Check with your state environmental protection agency regarding federal or state regulations that may apply to your business.

Sign Permit
Some cities and suburbs have sign ordinances that restrict the size, location and sometimes the lighting and type of sign you can use outside your business. To avoid costly mistakes, check regulations and secure the written approval of your landlord (if you rent a house or apartment) before you go to the expense of having a sign designed and installed.

County Permits
County governments often require essentially the same types of permits and licenses as cities. If your business is outside any city or town's jurisdiction, these permits apply to you. The good news: County regulations are usually not as strict as those of adjoining cities.

State Licenses
In many states, people in certain occupations must have licenses or occupational permits. Often, they have to pass state examinations before they can get these permits and conduct business. States usually require licensing for auto mechanics, plumbers, electricians, building contractors, collection agents, insurance agents, real estate brokers, repossessors, and anyone who provides personal services (i.e., barbers, cosmetologists, doctors and nurses). Contact your state government offices to get a complete list of occupations that require licensing.

Federal Licenses
In most cases, you won't have to worry about this. However, a few types of businesses do require federal licensing, including meat processors, radio and TV stations, and investment advisory services. The Federal Trade Commission can tell you if your business requires a federal license.

Sales Tax License
There are two reasons you need a certificate of resale (in other states, this may be called a "seller's permit" or a "certificate of authority"). First, any homebased business selling taxable goods and services must pay sales taxes on what it sells. The definition of a taxable service varies from state to state. Depending on individual state rulings, both the parts and labor portions of your bill may be taxable.

Sales taxes vary by state and are imposed at the retail level. It's important to know the rules in the states and localities where you operate your business because if you're a retailer, you must collect state sales tax on each sale you make.

Before you open your doors, be sure to register to collect sales tax by applying for each separate place of business you have in the state. A license or permit is important because in some states it's a criminal offense to undertake sales without one.

Health Department Permits
If you plan to sell food, either directly to customers as in a restaurant or as a wholesaler to other retailers, you'll need a county health department permit. This costs about $25 and varies depending on the size of the business and the amount and type of equipment you have. The health department will want to inspect your facilities before issuing the permit.

Source: Start Your Own Business, Entrepreneur magazine and Biz Start Ups.


Continue on to the next section of our Home Based Legal How-To >> Zoning

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

You Have One Month Left to Buy a House, According to Barbara Corcoran. Here's Why.

"If you are planning on waiting a year and seeing where interest rates go, you are out of your mind," Corcoran said.

Franchise

The McRib Is Back, But Only at Select McDonald's — Here's Where to Find It

This scarcity is nothing new. In 2022, McDonald's announced a "Farewell Tour" for the McRib, suggesting that it might be the last time customers could get their hands on it.

Business News

These 3 Side Hustles Make the Most Money While Working Fewer Hours, According to a New Survey

The survey also found that having a side hustle doubled as a path to becoming more employable.

Side Hustle

I Made $14,000 in 1 Week With a Spontaneous Halloween Costume Side Hustle — Here's How

Sabba Keynejad was in art school when he started to refine his entrepreneurial skills.

Business News

This Is the Goal-Setting Method Shohei Ohtani Learned in High School That Helped Get Him to the World Series

The MLB superstar's success did not come as a surprise to him. He had a plan.

Business News

This New Restaurant Is Banking on One Dish — Because It's the Only Entrée on the Menu

The new hotspot is gaining buzz on social media for its innovative yet super simple concept.