What is a Business License?

A business license is a type of legal authorization to operate a business in a city, county, or state. A license may even be required on a federal level. Typically issued in document form, the license gives a business owner the right to conduct entrepreneurial activities as set forth in the license application.

Requirements for a business license vary by state and municipality. Some locations require anyone conducting a business to obtain a license. On the other hand, some areas allow smaller home businesses to operate without the need for a license. Such small businesses could include consulting, web design, or typing services.

Whether or not you need a business license may depend, in certain areas, on the type of business you plan to operate. Therefore, it is important to put some time and energy into researching the requirements for your particular area. Finding such information is usually relatively easy, involving a phone call or visit to your city or state’s government office. Often, these offices are located in a local courthouse.

Though some areas may not require home-based businesses to obtain business licenses, it is risky to assume that a license won’t be required. This is because some cities and counties require a license of every individual who operates a business within city or county limits. In most cases, however, in-home businesses only require local licenses or permits. They typically aren’t expected to seek licensing on a state or federal level. Therefore, licensing fees for a home-based business may be considerably less than those of a larger business that is not based in a home.

Those interested in operating home-based businesses should check the zoning laws of the area in which they plan to operate. Zoning requirements may exist that limit or regulate the use of residential property for business operations. Certain business operations and activities may be restricted altogether. In some areas, a fire safety inspection may be required before a home-based business can obtain a business license.

Some businesses must obtain licenses on a state level as well. Such businesses may include those that involve contracting or serving food. Certain professionals, like lawyers, dentists, and social workers, are also required to seek state licensing. In some areas, even barbers must secure state business licenses. A call or visit to your local government office should help you determine whether or not you need a state business license.

Certain businesses are required to obtain federal business licenses. For example, a business that offers investment advice may be required to obtain a federal license. A business involved in the sale of firearms may also need a federal license.

Sometimes, individuals choose to start businesses without obtaining the appropriate licensing. Some are able to escape notice. However, there may be heavy fines and penalties associated with conducting a business unlicensed. For most, it is just not worth the risk.