Do you Need a Business License?

Your company is official, and you’re ready to begin operations. But you want to make sure you're not missing anything, like licenses and permits. 

 

Business licenses are required by law to protect your company and employees, the general public, and the environment. Just like how you need a license to drive a vehicle, fly a plane, or sell liquor at a bar, most cities or municipalities require you to get a license to conduct business in their area. Here’s an example from one city: “Any person who engages in any business, occupation, pursuit, profession, calling, avocation, or trade within the City Limits is required to have a business license.”

One note: we distinguish “business licenses” from specialty licenses and permits. In a way, it’s an arbitrary distinction. But, in general, business licenses typically apply to virtually every business. Specialty licenses are more industry-specific.

Virtually every business will need at the very least a local business license. For example, city governments may have language that states, “Any person who engages in any business, occupation, pursuit, profession, calling, a vocation, or trade within the city limits is required to have a business license.” This would apply to both a lemonade stand and a considerable retailer.

Your industry and the type of goods or services you provide will ultimately guide you to obtaining the required business license. Federal, state, and local governments all have varying requirements, but in general, a business license is required at the local level, and specialty licenses are required in varying degrees in all forms of government. 

Here's How to Find Out if you Need a Business License

Here’s the easiest way to find out if local licenses apply: call your city hall(s). Call your license department for the county. Call your city hall for the city or municipality. While some people have expressed frustration with who they’ve dealt with, from my experience the vast majority of time you can get an answer on whether you need specific licenses for what your business is doing or not.

Business License Examples

The Alcohol Distributor

Your corporation, Tick Tock Spirits, Inc, just completed formation documents and is ready to begin producing your new whiskey line. However, before starting production, you must apply for the correct licenses and permits with the Alcohol and Tobacco Tax and Trade Bureau and the Alcohol Beverage Control Board at your state and local levels.

Chances are, if you’re selling alcohol, you know that. But many companies like Tick Tock Spirits might overlook that they also need a local business license.

The Tech Startup

Will owned Salesly, LLC and ran the company in a small municipality outside Saint Louis, Missouri. Will operated the company completely online and had no employees. He ran the business from his home.

A local reporter did a story about Salesly and one of the city administrators in Will’s municipality read about it and saw that Will had never registered for his business license. The administrator called Will and told him he could no longer operate his business until he had a business license. This was right when Will was about to make a bunch of sales from the new publicity, so Will had close his website down until he received his business license approval two weeks later, which cost him substantial revenue.

Will could’ve avoided this by calling his city hall and determining if he needed a business license when he started his company.