In most states in the U.S., starting a retail or other types of business requires specific business licenses. For example, If you want to open a liquor store, convenience store, bar, or any other place where alcohol is served, you need a liquor license that gives you the right to sell liquor or any other alcoholic beverage.
There are several types of business licenses, and the requirements vary depending on your business, location, services provided, etc. Not only are business licenses or permits required before opening a business, but they also guarantee some form of credibility for your business with your customers or business partners.
This article will explain what a business license is, the common types of business licenses and permits, and how to get them. Read on to learn more.
Table of Contents
Types of Business Licenses for Small Businesses
- What is a business license?
- What kinds of businesses need a license?
- What are the benefits of a business license?
- The most common type of business licenses and permits
- Other important business licenses depending on certain business sectors
- How do you get a business license?
- How much does a business license cost?
1. What Is a Business License?
A business license is a legal document that gives you the right to open and operate a business in a particular area. Obtaining a business license means that your business is registered and recognized by the federal government, which lets your customers and lenders know that you are a legitimate business. It can play a vital role in establishing a bank loan or alternative financing options for your business.
The government, county, or municipality has regulations regarding what your business can and cannot do regardless of what you sell and where your business is located. Thus, obtaining business licenses is essential for doing business legally in your state or city.
2. What Kinds of Businesses Need a License?
In general, all types of businesses require licenses or permits for several common reasons:
- If you’re opening a brick-and-mortar business, you may be required to obtain a license before conducting any business on the property or if you are building or renovating your business location. Similarly, you may need a permit if you install signage or fire safety equipment.
- If you operate as a retail business, you sell products to consumers or other businesses. This includes bike shops, health stores, pet stores, vape shops, salons that sell hair products, clothing stores, bookstores, etc. You will need a vendor’s license to collect sales tax from customers.
- Suppose you provide services as a landscaper, a lawyer, an electrician, a medical provider, an accountant, or a food processor. In that case, you will need licenses specific to the industry in which you practice.
3. What Are The Benefits of a Business License
While it is tempting to ignore the need for a business license or permit, there are many benefits and opportunities that come with having a license. It is therefore essential to meet the licensing requirements before opening your business. Here are some of the benefits you can take advantage of.
Before you can be granted a business license from a state or county, you must first meet the requirements of the city or state issuing the license. So by applying for a business license, you are ensuring that your infrastructure, plans, and policies comply with the city’s regulations. In addition, all states require a business license to protect owners from illegally closing their businesses.
Business licenses allow the city to record all businesses that may owe taxes to the city. In addition, to keep their license current, some cities or municipalities require license owners to pay quarterly taxes on goods sold. From an entrepreneur’s standpoint, business licenses are essential as they allow them to quickly pay the taxes required by the city, thus avoiding legal and financial issues down the line.
Customers are often on guard when you’re a new business and provide mainly services (medical provider, accountant, bailiff). They want to be sure of the legitimacy of your business and of what you offer as a service.
If you display your business license in your store, on the internet, or anywhere else, it reassures customers that they’re dealing with a legal business, not a crook. Also, if you’re considering partnering with businesses in the same field as you, they may require you to show your business license before doing business with you.
Wholesale license benefits
As a retailer or brick-and-mortar owner, wholesale licenses allow you to purchase items at wholesale prices. You buy the item at the price it was produced rather than the store price. According to BusinessNameUsa.com, when you resell goods purchased elsewhere, you can get them for less if you have a wholesale license.
Business owners are exempt from paying tax on items purchased for resale. Thus, many suppliers or manufacturers require business owners to have a wholesale license before selling the items at a discounted rate.
From a supplier or manufacturer’s standpoint, the license ensures that the contractor is a legitimate businessperson, not someone trying to purchase wholesale items for personal use at low prices.
As a retailer, you need a good working relationship with your suppliers if you want to get the best deals on your wholesale purchases. The best supplier negotiation strategies will help you get the best margins. Learn more about 8 Supplier Negotiation Strategies You Can Use For Business.
4. The 6 Most Common Types of Business Licenses and Permits
Business licenses vary from one industry to another. However, a typical business needs at least one. The following is a list of the most common types of licenses and permits you may need:
General business license
A general business license is a basic license required before operating a business in almost every state in the United States. The general business license is often issued by the Department of Revenues and the Secretary of State, depending on the office responsible for business registration.
If the city or county in which you are located does not have a specific department responsible for issuing business licenses, you can contact your local tax office. Obtaining a general business license can take about 45 days.
Doing Business as (DBA) Licenses
A DBA license, which stands for “doing business as,” enables you to conduct transactions in the company’s name and manage accounts. If you are running a business using a name other than the sole proprietor, then you are required by law to obtain a DBA license. This license will also be used to file tax returns and comply with other regulatory requirements.
If your business is located in a state with a sales tax on goods and your company sells goods of any kind or services, you will need a seller’s permit, also known as a sales tax license. To find out if your products fall under the category of goods or services, contact your city, state, or county tax agency. The sales permits allow you to sell your products in your stores and online and collect sales tax on taxable products.
Another business license you cannot do without is a zoning permit. It’s a document signed and issued by a municipal zoning officer. If you want to build a retail store, or lease a location for your business, obtaining a zoning permit is the first step.
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You won’t soon find a liquor store next to an elementary school or daycare. Getting a zoning permit means that the chosen structure or building complies with zoning guidelines or variance has been obtained beforehand.
So before you build anything, make sure you have a zoning permit that approves you abide by the city’s zoning laws and that the building you choose meets all the standards.
As the name implies, a liquor license is a license to sell alcohol or any other alcoholic beverage in a store. In the United States, liquor licenses are granted under different laws in each state. Each state defines the rules and requirements for obtaining a permit. A licensing process allows governments to enforce laws regarding the service of alcohol that would otherwise be difficult to control.
There are generally four types of liquor licenses:
Restaurant liquor license: This is the most popular type of liquor license. It is also called an “all alcohol license” because it generally allows for all types of alcohol to be served.
Beer and Wine License: This is also a popular type of license. However, this type of liquor license and the “all alcohol” license is that it is not allowed to sell hard liquor or spirits.
Tavern liquor license: This license is usually granted to restaurants serving alcohol and food. However, at least 50% of their sales must come exclusively from the sale of alcohol.
Server’s License: In addition to the licenses that are granted to restaurants, bars, and liquor stores, some jurisdictions also require individual servers to be licensed.
Check with the Alcohol and Tobacco Tax and Trade Bureau for more information on federal licensing or permit requirements.
Sign permits provide legal permission to display information related to your business. This information can be in the form of words, signs, symbols, images, etc., to promote your business. Retailers and restaurant owners are aware of the power of a good sign.
5. Other Important Business Licenses Depending on Certain Business Sectors.
As aforementioned, each industry requires some specific business licenses. In addition to those listed above, here are some of the business licenses you will need depending on your industry.
Food and beverage places
Obtaining all the necessary food permits and licenses involves a lot of paperwork and patience. It takes time to get each one approved. In addition to general business licenses, zoning permits, liquor licenses, here are some licenses you will need:
Food service license
Food service licenses are usually issued by the city or county health department. The health department will visit your business location to ensure you comply with all food safety regulations. Once you obtain the license, the health department will continue its regular visits to inspect your restaurant. You can apply for a food service license from your local health department online or in person.
Employee health permit
As the owner of a bar, restaurant, beauty salon, tattoo parlor, winery, etc., you must have employee health permits. The US FDA (Food and Drug Administration) offers specific training resources for the health of your employees. In addition, your employees must be trained in state-approved food and beverage handling. The employee health permit helps you ensure the safety of your customers and employees during your business.
Valet parking permit
A good business location should offer valet parking to its customers. If you want to open a fine dining restaurant, you would like to provide this type of service. However, many states require a valet parking permit to do so.
Professional / Occupational Licenses
If you want to perform a profession that pertains to a service, you must have the required license. For example, to conduct a business in the field of cosmetology, law, real estate, stock exchange, medical care, electricity, law, you will need a professional license or a permit to practice.
To obtain a license in the field you claim to be an expert in, you will have to prove that you can provide these professional services. If you are unsure of how to apply for these licenses, it is advisable to contact a qualified business lawyer for expertise and advice.
PS: For small business owners and other entrepreneurs, visit the SBA website for more information on the type of business licenses that are right for you, depending on the business you want to open.
6. How Do You Get a Business License?
The process for obtaining a business license also varies depending on the state, county, or city your business is located. However, there are some basic steps to follow if you want to obtain a business license:
- The first step is to find the best legal structure for your business. You can set up your business as a sole proprietorship, a limited liability company, or cooperation. The application for a business license is made in your company’s name. The name of your company must be trademarked. For more information, please visit the USPTO website.
- After finding the right legal structure and name for your business, you must get it registered. Apply for an employer identification number (EIN). Businesses other than sole proprietors without employees require an EIN. You can obtain an EIN through the IRS website.
- Find out about the different types of business licenses you will need for your business. Depending on the type of business you’re running, you’ll need a federal, state, or local permit. Check with your local Small Business Administration office or an attorney with expertise in this field to find out more.
- It is advisable to apply for your business license as early as possible before you open your business, as in some states, the approval process can be pretty lengthy. Usually, general business licenses and sales permits are approved without much delay.
- Some licenses can be obtained online, or you may have to submit paper applications for local licenses. A business license is not a lifetime document. It is renewable on an ongoing basis. Talk to a lawyer to find out how long it takes to renew your license and avoid any interruption of your license.
7. How Much Does a Business License Cost?
The different types of licenses generally cost between $50 and $400. The cost of a business license depends on the state and the type of business you plan to open. You may also be allowed to run certain businesses without a business license. However, it is always a good idea to ask around.
Run Your Retail Business With KORONA POS
Getting a business license is just one of the steps involved in running a business. Once you’re done with the administrative paperwork, you also need to think about the technology that will allow you to run your business smoothly.
And for that, a POS system is undoubtedly one of the tools you need, mainly if you operate as a retailer or a quick-service restaurant owner. KORONA POS is a cloud-based POS system that will facilitate and secure your transactions within your store and manage your inventory, especially during the holiday season when sales are higher.
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