How to Start a Small Business: Step 7 – Registration, ID, Permits

August 5, 2020
hand holding stamp that says approval over a piece of paper

Starting a small business isn’t as easy as you might think. There are multiple steps involved if you want to set up a small business that complies with all of the rules. 

One of the most critical steps to pay attention to is getting your business license, permit, and registration. Once you have these in order, you can conduct business and remain open for business. 

How Do I Get a License and Permit to Start a Business?

There are a few steps to things to do first before you get a license and permit. You must choose a business structure (either a corporation, partnership, LLC, S-Corp, or sole proprietorship), and submit an available name. 

Next, you need to register your business. This will include registering with federal and state agencies, working with a registered agent to collect your business, filing for foreign qualification if applicable, and filing state documents. You’ll need the following documents according to how you chose your business in the preceding section:

  • Corporations (Articles of Incorporation and bylaws or resolutions)
  • LLCs (Articles of Organization and LLC Operating Agreement) 
  • Limited partnership (Certificate of limited partnership and limited partnership agreement)
  • Limited liability partnership (Certificate of limited liability partnership and limited liability partnership agreement)

After gathering the documents, you may have to submit them with your Secretary of State. This part of the process will ensure that your state legally recognizes your business. Next, you can apply for an Employer Identification Number (EIN), the last thing you’ll need to complete before applying for your business license or business permit.

What Permits Does My Business Need?

If your business falls into one of the following industries, you’ll need a business license to operate before practicing: 

  • Accounting
  • Architecture 
  • Dentistry  
  • Engineering 
  • Law 
  • Medicine 
  • Nursing 
  • Pharmacy  
  • Psychology
  • Teaching
  • Veterinary medicine

You’ll also need licenses and permits for more specialized industries which include:

  • Health permits (for businesses dealing with food products)
  • Building permits (for companies in a new location or renovating a current one)
  • Fire inspection and permit 
  • ATF (alcohol, tobacco, or firearms) if your business sells these products

Finally, if your small business will work with federal agencies, it will need either a federal license or a federal permit. The Small Business Administration (SBA) has a list of which industries may need federal licenses. 

How Much Does It Cost to Get a Business License?

The exact cost of a business license will vary. Factors such as your business activity, industry, institution, and where you will apply for the license (to the city, federal, or state government) will determine the final cost. There is another cost associated with state fees and penalty fees for not renewing licenses as needed. These factors can play a significant role in the final price that you pay for a business license.

What States Require a Business License?

Depending on the industry and state in which you’ll do business, you may need some combination of the following licenses or permits: 

  • Environmental permits 
  • General business operating license 
  • Professional license 
  • Seller’s license 
  • Tax registration and permits

Home-based businesses should look into additional licensing requirements because they may need an occupational permit depending on local laws. Small business owners whose homes aren’t in compliance with zoning laws in their city or county must modify their homes accordingly. Another option is to apply for an exception in the form of a conditional use permit.

You’ll also face further requirements if you need to advertise your business from home. You may need to work with your city or county government to receive the authority to use signage in front of your property. If you live at an HOA property, you may also want to check out your HOA’s rules about advertising. 

Once you have your registration, business license, and permits in place, you’re ready to move on to the next step of setting up your financing and funding.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.