Starting a business involves enough complexity without adding confusion about licenses and permits. Yet this is one area where getting it wrong carries real consequences—fines, forced closures, and even legal liability. The challenge is that requirements vary dramatically based on where you operate, what industry you’re in, and what specific activities your business performs.
According to the U.S. Small Business Administration, most small businesses need a combination of licenses and permits from federal, state, and local agencies. There’s no single checklist that works for everyone, but understanding the landscape helps you figure out exactly what applies to your situation.
This guide breaks down the types of licenses and permits you might need, how to find your specific requirements, and what happens if you operate without them.
The Difference Between Licenses and Permits
These terms get used interchangeably, but they serve different purposes.
Licenses grant you legal permission to conduct business or practice a profession. A general business license registers your company with local government. A professional license (like one for a plumber or real estate agent) certifies you’ve met qualifications to work in a regulated field.
Permits authorize specific activities that might otherwise be restricted. A building permit allows construction work. A health permit confirms your food establishment meets safety standards. A sign permit lets you put up exterior signage.
In practice, the distinction matters less than making sure you have whatever your jurisdiction requires. Some “permits” function like licenses, and vice versa.
Levels of Licensing: Federal, State, and Local
Business licensing happens at three government levels, and you may need authorizations from all three.
Federal Licenses and Permits
Most businesses don’t need federal licenses—they’re only required for activities regulated by federal agencies. According to the U.S. Chamber of Commerce, federal licensing applies to specific industries including:
- Alcohol production or sales: Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)
- Aviation: Federal Aviation Administration (FAA)
- Broadcasting: Federal Communications Commission (FCC)
- Commercial fishing: National Oceanic and Atmospheric Administration (NOAA)
- Firearms and ammunition: ATF
- Investment advising: Securities and Exchange Commission (SEC)
- Interstate trucking: Department of Transportation (DOT)
- Importing/exporting: U.S. Customs and Border Protection
- Meat, poultry, and egg products: U.S. Department of Agriculture (USDA)
- Mining and drilling: Bureau of Land Management
If your business activities don’t fall into federally regulated categories, you can skip this level entirely.
State Licenses and Permits
Nearly every business needs something from the state level. Common state requirements include:
Sales tax permit (seller’s permit): Required in most states if you sell taxable goods or services. This authorizes you to collect sales tax and remit it to the state. States without sales tax (Alaska, Delaware, Montana, New Hampshire, Oregon) don’t require these.
Employer registrations: If you have employees, you’ll need to register with your state’s labor department for unemployment insurance and workers’ compensation.
Professional and occupational licenses: States regulate dozens of professions requiring specific licenses. More on this below.
Industry-specific licenses: Depending on what you do, you might need state-level authorization for activities like contracting, real estate, insurance sales, or childcare.
Local Licenses and Permits
Cities and counties impose their own requirements, which often include:
General business license: Many municipalities require any business operating within their jurisdiction to register and obtain a basic operating license. This is often called a business tax certificate or business tax receipt—essentially a registration that makes your business known to local government and may involve a fee based on revenue or number of employees.
Zoning permits: Your business location must comply with local zoning laws. Commercial activities in residential zones often require special permits or variances.
Home occupation permits: If you run a business from home, many jurisdictions require a home occupation permit, especially if customers visit your location or you store inventory.
Building and construction permits: Any renovation, construction, or significant alteration to your business space typically requires permits and inspections.
Sign permits: Exterior signage often needs approval regarding size, placement, and lighting.
Health department permits: Restaurants, food trucks, daycares, salons, tattoo parlors, and other businesses affecting public health need health department inspections and permits.
Fire department permits: Businesses using hazardous materials, hosting public assemblies, or operating in certain building types may need fire department approval.
Alarm permits: Many cities require permits for businesses with security alarm systems.
Professional and Occupational Licenses
Beyond general business licensing, many professions require individual practitioners to be licensed. The Bureau of Labor Statistics notes that occupational licensing has expanded significantly over recent decades, with state governments regulating an increasingly wide variety of occupations.
Commonly licensed professions include:
Healthcare: Physicians, nurses, dentists, pharmacists, physical therapists, chiropractors, optometrists, psychologists, counselors
Legal: Attorneys, court reporters (in some states)
Financial services: Certified Public Accountants, insurance agents, securities brokers, real estate agents and brokers
Construction and trades: Electricians, plumbers, HVAC technicians, general contractors, roofers, architects, engineers
Personal services: Cosmetologists, barbers, estheticians, massage therapists, nail technicians
Education: Teachers, school administrators
Other regulated fields: Funeral directors, private investigators, security guards, pest control operators, surveyors
Licensing requirements vary significantly by state. Some states require licenses for occupations that others don’t regulate at all. A profession requiring 1,500 hours of training in one state might require only 300 hours in another.
If you’re starting a business that involves providing professional services, research your state’s specific licensing requirements before you begin. Operating without required professional licenses can result in criminal charges, not just fines.
Industry-Specific Requirements
Certain industries face particularly complex licensing landscapes.
Food Service
Restaurants, food trucks, catering companies, and food manufacturers typically need:
- Business license
- Food service license from the health department
- Food handler permits for employees
- Liquor license (if serving alcohol)
- Signage permits
- Fire department permits
- Possibly USDA permits for certain products
Health inspections happen regularly—often multiple times per year—and violations can result in closure.
Construction and Contracting
Contractors often need:
- State contractor’s license (with specific classifications for different work types)
- Local business license
- Building permits for each project
- Bonds and insurance as licensing prerequisites
- Separate licenses for electrical, plumbing, or HVAC work
Many states have different license levels based on project value, and working outside your license classification creates serious liability.
Healthcare Practices
Medical practices require:
- Professional licenses for each practitioner
- DEA registration (for prescribing controlled substances)
- State medical board registrations
- Business license
- HIPAA compliance (not a license, but a legal requirement)
- Facility licenses for certain practice types
Childcare
Daycare centers and home-based childcare typically need:
- State childcare license
- Background checks for all staff
- Health and safety inspections
- Zoning approval
- Fire department inspection
- Specific insurance requirements
Childcare licensing is among the most regulated because of child safety concerns. Requirements often specify staff-to-child ratios, facility standards, and staff qualifications.
Retail
Retail businesses generally need:
- Business license
- Sales tax permit
- Signage permits
- Certificate of occupancy
- Additional licenses for regulated products (tobacco, alcohol, firearms, lottery tickets)
How to Find Your Specific Requirements
Given the variation across jurisdictions and industries, here’s a systematic approach to identifying what you need.
Step 1: Start with federal requirements
Check the SBA’s website for federal licenses to determine if your business activities fall under federal regulation. If they don’t, move on.
Step 2: Research state requirements
Visit your state’s Secretary of State website and your state’s department of revenue or taxation. Search for “[your state] business license requirements” and “[your profession] license [your state].”
Many states offer online portals that let you search by business type to find applicable requirements.
Step 3: Check local requirements
Contact your city or county clerk’s office and ask what licenses or permits your business type requires. Many municipalities have business development offices that help new businesses navigate requirements.
Step 4: Research industry-specific requirements
If you’re in a regulated industry (food service, healthcare, childcare, construction, etc.), contact the relevant state agency directly. Industry associations often provide guidance on licensing requirements as well.
Step 5: Consult professionals
For complex situations, a local business attorney or accountant can identify requirements you might miss. This is especially valuable if you’re in a heavily regulated industry or operating in multiple jurisdictions.
The Cost of Licenses and Permits
Licensing costs vary enormously depending on type and location.
General business licenses: Typically $50-$400 annually, though some jurisdictions charge based on revenue or number of employees.
DBA (doing business as) filings: Usually $10-$100, plus possible newspaper publication fees.
Sales tax permits: Often free, though some states charge nominal fees.
Professional licenses: Range from under $100 to several thousand dollars, depending on the profession. Medical and legal licenses tend to be the most expensive.
Health permits: Typically $100-$1,000 annually for food service establishments.
Building permits: Usually calculated as a percentage of project cost—often 1-2% for significant construction.
Liquor licenses: Vary dramatically by state and license type—from a few hundred dollars to tens of thousands in some jurisdictions.
Budget for both initial application fees and ongoing renewal costs. Most licenses require annual or biennial renewal.
Consequences of Operating Without Required Licenses
Operating without proper licenses isn’t just technically illegal—it creates real business risks.
Fines and penalties: The most common consequence. Fine amounts depend on jurisdiction and violation severity, but can range from hundreds to thousands of dollars. Some jurisdictions calculate fines based on how long you operated without a license, essentially charging you for the license fees you should have paid plus penalties.
Forced closure: Authorities can shut down your business until you obtain proper licensing. According to CSC Global, even a minor renewal oversight can result in closure—in some cases within 60 days of the license lapsing.
Inability to enforce contracts: Courts may refuse to enforce contracts made by unlicensed businesses, leaving you unable to collect payment for work performed.
Lawsuits and liability: Operating without a license can be cited as evidence of negligence or fraud in lawsuits. An unhappy customer could use your lack of licensing to strengthen their case against you.
Loss of business opportunities: Many contracts—especially government contracts and work with larger companies—require proof of proper licensing. Without it, you can’t even bid.
Criminal charges: In some industries (particularly healthcare, law, and contracting), practicing without a license constitutes a criminal offense, not just a civil violation.
Reputation damage: If word gets out that you’ve been operating illegally, customers may question your professionalism and trustworthiness. Rebuilding that reputation takes time.
Keeping Licenses Current
Getting licensed is only the first step. Maintaining compliance requires ongoing attention.
Track renewal dates: Most licenses expire annually or biennially. Create a calendar system to track when each license needs renewal—ideally with reminders 60-90 days in advance.
Update when things change: Moving to a new location, adding business activities, or changing your business structure may require new licenses or permit modifications.
Keep copies accessible: Maintain organized records of all licenses and permits. Some must be displayed at your business location. Others you may need to show to customers, landlords, or contractors.
Stay informed about regulatory changes: Requirements evolve. Join industry associations, subscribe to relevant government notifications, and periodically verify your compliance.
When Your Business Spans Multiple Locations or States
Licensing complexity multiplies when you operate in multiple jurisdictions.
Multiple locations: You typically need separate local business licenses for each physical location, even within the same city.
Multiple states: If you have employees, physical presence, or certain types of sales in multiple states, you may need to register and obtain licenses in each state. This is sometimes called “foreign qualification” for businesses operating outside their home state.
Online businesses: E-commerce creates particular complexity around sales tax permits. Recent court decisions require online sellers to collect sales tax in states where they have significant sales, even without physical presence. This “economic nexus” means online retailers may need sales tax permits in dozens of states.
Getting Help
Navigating business licensing doesn’t have to be a solo effort.
Small Business Development Centers (SBDCs): Free consulting services, often affiliated with universities, that help small businesses with startup requirements including licensing.
Local economic development offices: Many cities and counties have staff dedicated to helping businesses understand and obtain required permits.
Industry associations: Trade groups often provide licensing guidance specific to their industry.
Attorneys and accountants: For complex situations or heavily regulated industries, professional advice is worth the cost.
Licensing services: Companies specialize in identifying and obtaining business licenses, which can be valuable if you operate in multiple jurisdictions or highly regulated industries.
The Bottom Line
Business licensing requirements aren’t designed to make your life difficult—they exist to protect public safety, ensure tax collection, and maintain professional standards. Understanding and complying with them is part of operating a legitimate business.
The process doesn’t have to be overwhelming. Start by identifying what applies to your specific business type and location. Work systematically through federal, state, and local requirements. Keep records organized and renewal dates tracked. And don’t hesitate to ask for help—from government offices, professional advisors, or industry peers.
Taking licensing seriously from the start prevents problems that are far more expensive and disruptive than the cost of compliance. It’s one of those business fundamentals that, done right, you barely have to think about again.