How to get a business license

Published Friday 5 June 2026

Table of contents

• What is a business license?
• Do you need a business license?
• Types of business licenses
• Additional permits you may need
• What you need to apply for a business license
• How much does a business license cost?
• How to get a business license
• Business licenses for online and home-based businesses
• 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 documents, including your business name, structure type, contact information, and any industry-specific permits, before applying to streamline the process.
• Budget $50 to $400 for local business license fees, plus additional costs for state sales tax permits, professional licenses, and renewals that typically occur every one to two years.
• Apply early since processing times range from same-day approval 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 an official permit issued by a government authority that gives you legal permission to operate a business within a specific jurisdiction. Federal agencies like the Small Business Administration (SBA) offer resources such as counseling and training to help entrepreneurs navigate these requirements. The license confirms that 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 levels of government. This guide covers how to determine what you need, what it costs, and how to apply.

Do you need a business license?

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

Navigating these requirements matters. According to the MetLife and U.S. Chamber of Commerce Small Business Index, 51% of small businesses say regulatory compliance is negatively impacting their growth. Understanding exactly which licenses apply to your business from the start can save you time, money, and stress down the road.

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.

If you're a sole proprietor, you'll still need a local business license in most areas. LLCs and corporations have the same requirement, plus additional state registration filings.

Brick-and-mortar businesses almost always need a local business license. 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 allows localities to impose local sales tax in many areas. Montana charges a resort tax in designated resort communities, and Oregon has no local sales tax but imposes other business taxes. New Hampshire assesses excise tax, and Delaware charges gross receipts tax.

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

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 alcohol manufacture or import, aviation, firearms, fish and wildlife, 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).
• Occupational licenses: Required for regulated professions like healthcare, real estate, cosmetology, and accounting. Each state sets its own requirements, including education, exams, and continuing education.
• 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.
• Employer Identification Number (EIN): 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 one EIN per responsible party per day.

Most licenses need renewal every one to two years. EINs don't expire, but you still need to maintain compliance. Renewals are typically simpler than initial applications.

Additional permits you may need

Beyond standard business licenses, your location and industry may require additional permits before you can open your doors. Here's what to look into.

Zoning and building permits

Zoning permits confirm that your business location is approved for commercial use. If you're renovating or building out a space, you'll also need building permits from your local planning department. Home-based businesses may need a home occupation permit to verify the business won't disrupt the surrounding area.

Health department permits

If your business handles food, beverages, or personal care services, you'll likely need a health department permit. This applies to restaurants, food trucks, cafes, salons, spas, and tattoo studios. Expect regular inspections to maintain compliance.

Fire department permits

Businesses that occupy a physical space typically need a fire safety inspection and permit. This is especially true for restaurants, retail stores, and any location open to the public. Your local fire marshal will verify that fire exits, sprinklers, alarms, and extinguishers meet code.

Sign permits

Most municipalities require a permit before you put up exterior signage. Sign permits regulate the size, placement, lighting, and type of signs you can display. Check your local zoning ordinances before ordering signs for your business.

Environmental permits

If your business generates waste, emissions, or handles hazardous materials, you may need environmental permits at the state or federal level. The Environmental Protection Agency (EPA) oversees federal requirements, while state environmental agencies handle local rules.

What you need to apply for a business license

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

You'll need to provide personal information, including:

• Your full legal name and contact information.
• Social Security Number or EIN.
• Home address (if applicable).

Prepare basic details about your business:

• 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.

Describe how your business operates:

• Description of your business activities.
• Industry classification codes (if required).
• Number of employees (if applicable).

Include details about the people running the business:

• Names and contact details for all owners, partners, or corporate officers.
• Background check information (for certain industries).

Some locations also require financial information:

• Estimated annual revenue.
• Business bank account information.

You may also need supporting documents, which 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 the specifics.

How much does a business license cost?

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

Here's what local business licenses typically cost:

• Typical range: $50 to $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 licenses have their own fee structures:

• Sales tax licenses: usually free to $100.
• Professional licenses: $100 to $500 or more, depending on the profession.
• Industry-specific permits: vary widely.

Federal licenses apply to fewer businesses but can be more expensive:

• Only required for specific regulated industries.
• Range from a few hundred to several thousand dollars.

Don't forget these additional fees when budgeting:

• Processing and filing fees.
• LLC or corporation filing fees.
• DBA registration: $10 to $100.
• Expedited processing fees (if available).

Beyond direct license fees, compliance costs add up. A Q4 2024 survey by MetLife and the U.S. Chamber of Commerce found that 69% of small businesses spend more per employee on regulatory compliance than larger competitors. Factor in the time and resources needed to stay compliant, not just the application fees.

Plan for ongoing renewal costs as well:

• 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. Your structure affects which licenses you need and how you register. If your state requires it, file your formation documents with the Secretary of State. Obtain an Employer Identification Number (EIN) from the IRS if you plan to hire employees or operate as an LLC or corporation.

2. Research your specific requirements

Check federal requirements for your industry at SBA.gov. Visit your state's Secretary of State website for state-level licenses. Contact your city or county clerk's office for local permits. Make a list of every license and permit your business type and location require.

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. Having everything ready before you apply helps you avoid delays.

4. Complete and submit your application

Fill out application forms carefully and double-check all information for accuracy. Submit payment for required fees. Keep copies of all submitted materials for your records.

5. Follow up and track progress

Monitor your application status and respond promptly to any requests for additional information. Processing times range from same-day approval to several weeks; for example, 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 specific to your situation.

Business licenses for online and home-based businesses

Running a business from home or selling online doesn't exempt you from licensing requirements. The rules are slightly different, but most online and home-based businesses still need permits to operate legally.

If you run a home-based business, you'll typically need:

• A local business license for the city or county where you live.
• A home occupation permit, which confirms your business activity is allowed in a residential zone.
• A seller's permit if you sell taxable goods or services.

For ecommerce businesses, licensing depends on where you're based and where your customers are. You'll generally need a business license for your home location, plus a sales tax license for every state where you have economic nexus.

Nexus means you have a significant business presence in a state and must collect sales tax from buyers there. Most states set an economic nexus threshold of $100,000 in revenue. Some states also use a 200-transaction threshold, though this number is shrinking as more states move to revenue-only rules. Check each state's current requirements, as thresholds change frequently.

Even if you sell exclusively online, your local jurisdiction may still require a general business license. Check with your city or county clerk to confirm what applies to your situation.

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. Discover how your small business can thrive and Get one month free.

FAQs on business licenses

Here are answers to frequently asked questions about business licenses.

How long does it take to get a business license?

It depends on your location, license type, and whether your application requires review by multiple departments. Local business licenses are often processed within days, while professional and industry-specific licenses can take several weeks due to background checks, exams, or board approvals. Check with each issuing agency for current processing times before planning your 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, like setting up your accounting software and ordering supplies.

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

You may face fines, legal penalties, or forced business closure. You could also have difficulty opening a business bank account, working with vendors, or obtaining insurance. The risks far outweigh the time and cost of getting licensed.

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 before you start operating.

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

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

Is an LLC the same as a business license?

No. An LLC (limited liability company) is a business structure that protects your personal assets from business debts. A business license is a separate permit that gives you legal permission to operate. Forming an LLC doesn't replace the need for a business license; you'll typically need both.