How to get a business license: costs, types, steps

Published Thursday 26 February 2026

Table of contents

• What is a business license?
• Do you need a business license?
• Types of business licenses
• What you need to apply for a business license
• How much does a business license cost?
• How to get a business license
• Use Xero to manage your business with confidence
• FAQs on business licenses

Key takeaways

• Research all required licenses for your specific business type and location by checking federal requirements, visiting your state's Secretary of State website, and contacting your local city or county clerk's office before starting operations.
• Gather essential documentation including your business name, structure type, contact information, and any industry-specific permits before applying to streamline the application process.
• Budget $50-$400 for local business license costs, plus additional fees for state sales tax permits, professional licenses, and renewal requirements that typically occur every one to two years.
• Apply for your business license early since processing times range from same-day to six weeks, and operating without required licenses can result in fines, penalties, or forced business closure.

What is a business license?

A business license is official permission from a government authority to operate a business in a specific location. Federal agencies like the Small Business Administration (SBA) offer resources such as counseling and training to help entrepreneurs navigate these requirements. It proves your business complies with local, state, and federal regulations.

A business license isn't a single document. Depending on your industry and location, you may need multiple licenses and permits from different government levels. This guide covers the basics of determining what you need and how to apply.

Do you need a business license?

Yes, most small businesses need a business license. The main exceptions are freelancers with no employees who provide services that don't require licensing.

If you're launching a small business, one of your first questions should be: "What business licenses do I need?"

Licensed occupations require specific credentials before you can operate. Examples include teachers, doctors, lawyers, plumbers, electricians, nail technicians, and morticians.

Before launching a licensed service business, you typically need to:

• complete required education or training
• pass licensing exams
• register your license with the relevant state board

Brick-and-mortar businesses almost always need a local business license to operate. If you sell taxable goods or services in one of the 45 states with sales tax, you also need a state sales tax license.

States without state sales tax still have requirements. Alaska, Montana, and Oregon have local sales tax in many areas. New Hampshire assesses excise tax, and Delaware charges gross receipts tax.

Check the rules for your location to ensure you have the correct licenses. Software like Xero can help you track sales tax obligations.

Setting up an ecommerce business? Licensing rules vary, but you generally need:

• a business license for the area where you're based
• a state sales tax license for every state where you have nexus

Nexus means you have a significant business presence in a state and must collect sales tax from buyers there. Most states define nexus as 200+ sales or $100,000+ in revenue, though rules vary.

Types of business licenses

Identifying which licenses you need is often harder than the application process itself. If you're unsure, consult a CPA, business attorney, or your state's Secretary of State website.

Here are the main types of business licenses you may need:

• Federal licenses: Required only for specific regulated industries, including transporting agricultural products across state lines, alcohol manufacture, wholesale, or import, aviation, firearms, fish and wildlife import or export, maritime transportation, mining and drilling, nuclear energy, and radio and TV broadcasting.
• Industry-specific licenses: Required if you operate in a licensed profession. Food service, accommodation, salons, and massage facilities also need health department permits.
• Business operating license: Required by most towns and counties. Check with your local town board or county clerk for specific requirements.
• Seller's permit: Required if you sell taxable goods or services. This is your state sales tax license.
• Special permits: Some products require additional licenses. Alcohol sales, for example, need separate permits based on alcohol type (malt, vinous, spirituous) and business type (retail, bar, restaurant).
• Other permits: Requirements vary by industry and location. Examples include fire safety permits, signage permits, and environmental permits. Research local, state, and federal rules before opening.
• DBA registration: A "doing business as" name reserves your business name with your Secretary of State. This isn't a license, but it's often required. You can also register LLCs and corporations through the same office.
• EIN (Employer Identification Number): A federal tax ID that identifies your business on tax forms and banking documents. An EIN isn't a license, but most businesses need one, and the IRS limits applications to 1 EIN per responsible party per day.

Renewal requirements: Most licenses need renewal every one to two years. EINs don't expire, but maintain compliance. The IRS notes that failing to file required returns for three consecutive years can lead to revocation of their tax-exempt status. Renewals are typically simpler than initial applications.

What you need to apply for a business license

Gathering your information and documents before you start makes the application process faster and smoother.

Personal information:

• your full legal name and contact information
• Social Security Number or EIN
• home address (if applicable)

Business information:

• business name and DBA (if applicable)
• business structure (sole proprietorship, partnership, LLC, or corporation)
• business start date or expected opening date
• business address and location details

Business operation details:

• description of your business activities
• industry classification codes (if required)
• number of employees (if applicable)

Owner and officer information:

• names and contact details for all owners, partners, or corporate officers
• background check information (for certain industries)

Financial information (some locations require):

• estimated annual revenue
• business bank account information

Supporting documents (vary by location):

• proof of business ownership or lease agreement
• zoning clearance or certificate of occupancy
• certificate of insurance
• professional licenses for licensed occupations
• specialized permits from the health department or fire marshal

Requirements vary by location and business type. Check with your local licensing office for specific needs.

How much does a business license cost?

Business license costs typically range from $50–$400, depending on your location and business type. Budget for these fees as part of your startup costs.

Local business license costs:

• typical range: $50–$400
• may be a flat fee or based on revenue, business type, or employee count
• some cities offer reduced rates for home-based businesses

State-level costs:

• sales tax licenses: usually free–$100
• professional licenses: $100–$500+, depending on the profession
• industry-specific permits: vary widely

Federal license costs:

• only required for specific regulated industries
• range from a few hundred to several thousand dollars

Additional fees to consider:

• processing and filing fees
• LLC or corporation filing fees
• DBA registration: $10–$100
• expedited processing fees (if available)

Renewal costs:

• usually similar to initial application fees
• due annually or every two years, depending on license type
• some jurisdictions offer online renewal discounts

To find exact costs for your situation, check your city or county website, contact your local licensing office, or ask your accountant.

How to get a business license

Getting a business license involves several steps. While requirements vary by location, this general process applies to most applications.

1. Determine your business structure: Decide whether you'll operate as a sole proprietorship, partnership, LLC, or corporation. Register your business structure with your state if required. Obtain an EIN from the IRS if needed.
2. Research your specific requirements: Check federal requirements for your industry. Visit your state's Secretary of State website. Contact your city or county clerk's office. Identify all required licenses and permits for your business type and location.
3. Gather required documentation: Collect your business name, entity type, and contact information. Prepare details about the responsible party. Include information about business assets, loans, and premises if required.
4. Complete and submit your application: Fill out application forms carefully. Double-check all information for accuracy. Submit payment for required fees. Keep copies of all submitted materials.
5. Follow up and track progress: Monitor your application status. Respond promptly to requests for additional information. Processing times range from same-day to several weeks; for instance, the IRS states that if you apply for an EIN by mail, you'll get your EIN in about four weeks.

For more guidance, check resources from the Small Business Administration. Focus on official government websites for the most reliable information. Rules change frequently, so consult an accountant for guidance.

Use Xero to manage your business with confidence

Getting your business licenses is an essential first step. Now you can focus on what matters most: serving your customers and growing your business.

Manage your finances easily from day one with Xero. Track expenses like license fees and renewals, automate your bookkeeping, and get real-time insights into your business performance.

With organized records and automated bank feeds, you'll stay on top of compliance while spending less time on paperwork. Get one month free and discover how your small business can thrive.

FAQs on business licenses

Still have questions about getting a business license? Here are answers to common concerns.

How long does it take to get a business license?

Processing times range from same-day approval to four–six weeks, depending on your location and license type. Apply early to avoid delays before your planned opening date.

Can I operate my business while waiting for my license?

Generally, no. Operating without required licenses can result in fines, penalties, or forced closure. Use the waiting period to prepare other aspects of your business.

What happens if I don't get the required business licenses?

You may face fines, legal penalties, or business closure. You could also have difficulty opening a business bank account, working with vendors, or obtaining insurance.

Do I need a business license if I work from home?

Yes, most home-based businesses still need a local business license. Some locations also require a home occupation permit. Check your local zoning rules and licensing requirements.

What's the difference between a business license and an EIN?

A business license is permission from a government authority to operate your business. An EIN is a federal tax identification number used on tax forms and banking documents. Most businesses need both, but they serve different purposes.