Does my new business idea require a license or permit?
A question often asked of SCORE mentors is “Does my new business idea require a license or permit?” That is a very good and important question to ask. I will provide some suggestions and information as an overview of the basic business license requirements and how to determine which ones your business needs.
Most businesses are required to maintain a federal, state or local license to operate. Knowing which licenses and permits you’re required to obtain, however, can be a challenge. These licenses can come from a federal, state, or local agencies—or, in some cases, all three.
Getting a business off the ground is overwhelming as it is, and the work that goes into understanding which licenses are necessary can feel daunting. If you’re an owner feeling this pain, you’re not alone. Here are several resources you can use to find out if your business needs a license or permit before you launch.
Take your lead from the U.S. Small Business Association when determining license and permit requirements. They suggest that a good first step towards understanding your business’ license and permit requirements is to consult the U.S. Small Business Association or SBA. The SBA offers an easy-to-follow guide for business owners looking to understand these requirements before opening their doors. You can read more on the Apply for Licenses and Permits page of the SBA website.
According to Washington, D.C. SCORE mentor Hal Shelton, who is also a member of the SCORE Board of Directors and author of Amazon’s best-selling book “The Secrets to Writing a Successful Business Plan,” obtaining the proper licenses is a critical part of starting any business.
“If you do not have the required paperwork, the governing jurisdiction can shut you down,” Shelton says. “In most cases, required licenses/permits are for citizen protection so they are deemed important. Other documentation is needed to identify you and your business so your payment of sales, local, income and other taxes can be tracked.”
The type of business you operate is going to dictate the licenses you need. There’s no one-size-fits-all solution.
Here are some common requirements:
- You will more than likely need a general business license to operate in your city.
- If your business activities are regulated by a federal agency, such as agriculture, alcohol or TV broadcasting, you will need special federal licenses.
- If you run a business in a state-regulated industry, you may need to obtain a state business license and a municipal or local one.
- If you serve food or beverages, there are other required state licenses and permits.
- You may need a fire department permit if you are open to the public.
- If you run your business out of your home, you may still require licenses, such as the common Home Occupation Permit.
If your plans include serving food, transporting agriculture, operating an aircraft, engaging with any type of wildlife, or any other number of large-scale activities, you’ll need to work directly with one or more of the federal agencies that oversee these and other industries. In other cases, local retail shops may only need to work with their state and local agencies to apply for and secure a permit or license to start their business.
Regardless of the business you’re starting, it’s best to check the licensing requirements at the federal, state and local levels. Doing your due diligence now to ensure you have the licenses you need is the best way to avoid legal issues or even the shut-down of your business down the road.
“Start early to find which licenses apply to you, what you have to do to qualify, and how long the process takes—it usually takes longer than you anticipate,” Shelton says. “For example, to register your company and its trade name at the state could take 60 days if you do not want to pay expediting fees. To gain zoning clearance might take up to a year if there is some contention and hearings are required. Create an action time-line so all permits and licenses are obtained by the time you want to open your business.”
Seek support from trusted colleagues and partners in your industry as you do your research.
Use your network to your advantage and seek guidance from colleagues or partners experienced with business licensing. If you have a trusted industry partner who understands the licensing needs for your specific business-type, they may be able to point you in the right direction.
Working with a professional experienced in obtaining and maintaining a business license, like a SCORE mentor, is one of the best ways to get started. A SCORE mentor will direct you to the right resources to get the licenses your business needs and help you through the application process. Contact a SCORE mentor today.