Applying for state business licenses may be an important early step for any business. Licensing helps states ensure that businesses follow the necessary safety and compliance regulations.
Each state has its own set of rules, so it's important to check with the proper agencies and follow their guidelines. For example, in New York, check with the Department of State, but in Ohio, the Business Gateway oversees licensing. In this article, get information on when you may need a business license and how to start your application. You may want to seek legal counsel prior to starting the application process.
Common types of state business licenses
Business license requirements vary by state, but certain industries are more likely to be required to file. Here are a few industries that often require an operational license:
- Animal or pest control facilities
- Auction firms
- Child care centers
- Construction firms
- Dating services
- Food production companies
- Funeral establishments
- Hotels, motels and bed and breakfasts
- Plant nurseries
- Restaurants, caterers and breweries
- Vending machine companies
How to find out if you need a state license
Each state handles business licensing in its own way. Usually, the easiest place to start is your state's official website. From there, follow links to business services and licensing.
Some states list links to the departments that oversee various types of licenses. Others have databases that share license types, costs and requirements. Still others have questionnaires that gather information about your company and tell you which type of license you need and how to apply.
For example, Delaware and Michigan offer searchable databases with licensing information for various business types. Pennsylvania has an online application checklist to help you get started.
If you can't find the right information and need extra help, call your state's business licensing agency directly. When you talk with a representative, you can ask questions about your unique situation. You can also confirm which licenses your business needs.
You can also check with your local Small Business Development Center (SBDC). The U.S. Small Business Administration manages SBDCs in cities and towns across the nation. These centers provide advice and information to current and prospective small business owners. In most cases, you can either call or make an appointment to talk with a counselor in person.
Applying for a business license
Every license type is different, so the requirements may vary from state to state. However, most of them require at least the following basic information:
- Business license application form: All licenses require you to apply either online or in person. Most applications require you to provide basic information, some of which is listed below. They may also ask for executives' or agents' names and your business address, too.
- Legal structure: If you run your small business on your own, you might be a sole proprietor. If you have partners, you might have a partnership or a limited liability company (LLC). You might have a corporation if you run a larger company. Either way, you need to file paperwork to form your business legally with your Department of State or Secretary of State.
- Trade name: Many businesses go by names that aren't the owner's name or the company's legal business name. This is known as "doing business as" or DBA. If you plan to use a DBA or a trade name, register it with your state's Department of Commerce and have this registration available for any license applications.
- Tax identification number: If you're a sole proprietor, your tax ID may be your Social Security number. If your business has any other type of legal structure, you need an Employer Identification Number (EIN). You can get an EIN by applying for one through the IRS.
- Licensing fee: Most states charge a fee when issuing a license. Some states charge a flat fee depending on the business type. Others have a fee scale that considers how your company is likely to impact the environment or the local economy. Make sure you find out what the fee is so you can have it ready.
- Regular renewals: Most business licenses last for a limited time, often a year or two. When yours expires, your business no longer has a valid license, which may lead to serious problems. To avoid letting your license expire, make sure to find out how long your license is valid for and renew it in time. In most cases, it's easier to renew a current license than apply for a new one.
- Paperwork copies: In most cases, you will have to provide additional copies of your legal business filing and any trade name applications. You may also have to provide copies of any professional licenses you need to work in your industry. For example, you may need a cosmetology license if you offer hair or makeup services.
From getting a business license to setting up bank accounts, starting a small business means checking a lot of boxes. Our starting a business checklist makes sure you have everything you need to get up and running quickly. If you're ready for the next steps, speak with a business banker and learn how we can help you.
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