Getting the Right Business Licenses and Permits

beginner6 min read · updated 2026-06-20

Getting the Right Business Licenses and Permits

Most new owners assume "getting licensed" is one form and one fee. It is not. Licensing in the U.S. is a three-layer stack — federal, state, and local — and each layer is independent. You can be perfectly compliant at the state level and still be operating illegally because the city wants its own general business license. The SBA is explicit that the licenses and permits you need "will depend on your business activities and business location" depends on activity and location.

The good news: for most small businesses this is cheap and fast. A general business license commonly runs $50 to $550 depending on the state and business type, and your federal tax ID (EIN) is free. The hard part is not cost — it is knowing which of the three layers actually apply to you.

Education, not advice. Rules differ by jurisdiction and change. Verify with the issuing agency or a professional before you act.

The three layers

1. Federal. Most businesses do NOT need a federal license. You only need one if you operate in a federally regulated industry. Per the SBA, the agencies that license activities include:

• USDA — agriculture (animals, plants, biologics)
• TTB (Alcohol and Tobacco Tax and Trade Bureau) — alcoholic beverages
• ATF — firearms, ammunition, explosives
• FAA — aviation
• U.S. Fish and Wildlife Service — wildlife
• NOAA Fisheries — commercial fishing
• Federal Maritime Commission — maritime transport
• NRC — nuclear energy
• FCC — broadcasting (radio/TV)
• U.S. DOT — oversize/overweight vehicles

If you sell coffee, build websites, flip houses, or clean offices, you almost certainly skip this layer.

2. State. Nearly every business touches the state layer in at least one way: a sales tax permit (sometimes called a seller's permit or resale certificate) if you sell taxable goods or services in a state with sales tax, plus any occupational/professional license for regulated trades (contractors, cosmetologists, real estate agents, electricians, accountants, etc.). States regulate a much broader range of activities than the feds.

3. Local (county/city). Most businesses need a general business license — often just a tax-registration certificate that gives you legal approval to operate inside that county or city. Restaurants, retail, home-based businesses, and anything with a physical sign or foot traffic typically also need zoning approval, a health permit, a sign permit, or a home-occupation permit.

Numbered step-by-step

• Form your entity and get your EIN first. If you are running an LLC or corporation, register the entity with your Secretary of State, then apply for an EIN at IRS.gov for free. Apply online and the IRS issues it immediately. Two warnings the IRS itself gives: never pay a third-party site for an EIN (it is free direct from the IRS), and you must complete the application in one session — it expires after 15 minutes of inactivity free, one session, expires after 15 min. The online tool runs limited hours (roughly Mon–Fri 6am–1am ET, with shorter windows on weekends).

• Get your state tax ID and sales tax permit. If your state has income tax or sales tax, register with the state department of revenue. The SBA notes most businesses need a state tax ID number and points you to your state's site to register most businesses need a state tax ID.

• Check whether your industry is federally regulated. Run down the agency list above. If nothing matches, you are done with the federal layer. If something matches (alcohol, firearms, broadcasting, aviation, etc.), go straight to that agency's site for the application.

• Check your state occupational/professional licensing board. Search "[your state] + [your trade] + license." Regulated trades cannot legally operate without the board's license, and penalties are steep.

• Get your local general business license. Contact your city or county clerk / business-tax office. This is usually the cheapest and fastest piece — and the one people forget.

• Get use-specific local permits. Depending on your business: zoning/land-use approval, home-occupation permit (for home-based businesses), health department permit (food), fire/occupancy permit, sign permit, and a building permit if you are doing buildout.

• Calendar your renewals. Most licenses are annual. Put every expiration date on a recurring reminder the day you receive the license — a lapsed license can shut you down or trigger penalties.

How to find your exact requirements

Do not guess and do not rely on a single generic checklist. Use the official sources:

• SBA's "Apply for licenses and permits" guide for the federal agency map and the framework three-layer federal/state/local framework.
• Your Secretary of State's website for entity and state-level requirements.
• Your county clerk and city business-tax office for the local general business license and use permits.

Budgeting

Expect the EIN to cost $0 and a general business license to land in the $50-$550 range. For a typical low-risk small business, an all-in licensing budget of a few hundred dollars is realistic, though regulated industries (food, contracting, anything requiring bonding) run higher. Plan roughly $800 as a conservative ceiling for a standard service or retail startup, and confirm the real numbers with each issuing agency.

The one mistake to avoid

The most common failure is stopping after one layer. People register an LLC and think they are licensed — they are not. The LLC is a legal entity; the licenses are separate permissions to operate. Walk all three layers (federal, state, local) deliberately, even if two of them turn out empty for you. Confirming "I don't need this one" is part of the job.