Licenses and Permits: Overview

It may seem strange to you that your little one consulting service or hand knit sweater business A home based home would have to meet numerous local, state and federal licensing and permitting requirements, but in all likelihood you will, so it is important to understand what to expect.

Business licenses and permits can range from general (a basic license to operate a business within a city or county) to specific (a state permit to sell alcohol or firearms).

Who issues business-related licenses and permits?

Business-related licenses and permits are issued at all levels of federal, state, and local government (city, county, or city). For example, if you decide to open a restaurant and bar in the city of Chicago, you will need to obtain all necessary licenses and permits from the city of Chicago, the state of Illinois, and the United States government. Therefore, you most likely need (among other possibilities) a federal tax identification number from the US government, a license to sell alcoholic beverages from the State of Illinois, a City of Chicago health permit (to prepare and sell food), as well as a basic business license to operate the bar and grill within the city. Below is an analysis of these and other types of licenses and permits.

What types of licenses and permits does a business need?

Here is an analysis of some of the most common types of licensing and permitting requirements that affect small businesses. This list is by no means exhaustive, and it is important to check with government agencies at all levels of regulation to ensure that your business has obtained all necessary licenses and permits:

  • Business licenses: There are many types of licenses. You need one to legally operate almost everywhere. If the business is located within the limits of an incorporated city, a city ​​license; if it is outside the city limits, then the county. For more information, contact the county or city office in your area or the SBA website that offers information on business licenses.
  • Property Use Permits: If you start a business that involves manufacturing, or if you decide to start a business outside of your home, depending on your location you may need to obtain a land use permit from your city or county zoning department.
  • Building Permits: If you are constructing a new building, or expanding or renovating an existing building in order to operate a business, you will most likely need to obtain a building permit from the city or county. The process may require you to submit a detailed set of plans to the department prior to approval of the work and issuance of the permit.
  • Certificate of Occupancy: If you are planning to occupy a new or used building for a new business, you may need to apply for a Certificate of Occupancy from a city or county zoning department.
  • Health Department Permits: These permits are most often required for businesses involved in the preparation and / or sale of food, among other types of businesses.
  • Some state licensing requirements are based on the type of product the business sells. For example, most states require special licenses before a business can sell liquor, lottery tickets, gasoline, or firearms.
  • Professional / Occupational Licenses: If you intend to open a business, and you (and / or the people who work for you) will be offering services in a wide range of areas – including medical care, auto repair, real estate sales, tax services, cosmetology, and legal representation (attorneys) – the business itself and / or individual employees working for the business must apply for and obtain state licenses authorizing the practice of such profession or occupation.
  • Employer Identification Number: Most businesses must obtain a federal employer identification number (or EIN, sometimes called a tax identification number) from the Internal Revenue Service (IRS). Your business may also need to acquire a similar tax identification number from your state department of revenue or tax.
  • Licenses and Sales Tax Numbers: Your state may have a sales and use tax percentage that applies to the retail purchase, retail site, rental, storage and use of personal property and certain services. In other words, sales tax must be collected on almost all tangible items sold. A tax identification number is required for each business before opening.

Licenses and Permits: Beware of “Grandfathering – Grandpa” Matters

In the context of business permits and licenses, “grandfathering – grandfather” means that a new law or code is not enforced against those businesses and / or individuals who are already in business when the law is passed. The key to remember with grandfathering is that once a business changes hands (that is, it is bought and sold) the new owner will most likely have to comply with all local regulations, including those from which the previous owner was exempt.

Tip: Get legal advice

Licensing and permitting requirements may seem challenging, but you don’t need to figure them out on your own. An experienced attorney can determine your obligations under the law and help you develop a plan to make sure you are compliant (See the article: Why You Need a Lawyer to Start a Business: Ten Reasons). Contact a local attorney for a legal evaluation to discuss how they can help your business avoid costly fines and litigation.

Leave a Comment