What Licenses Do You Need to Start a Small Business?

Dre filed his LLC paperwork in Georgia in March. He thought that was the licensing piece done. By June, he had also picked up a city business license, a state sales tax permit, a federal EIN, and, because he was selling food, a county health permit and a food handler card. Five more pieces of paper than he expected, none of which the LLC filing service had warned him about.

One license is almost never enough. Here's the framework most new businesses actually need to work through.

Start With This: Most New Businesses Need More Than One License

When people ask "what license do I need to start a business," they usually expect a single answer. The honest reply is that almost every new business needs several licenses, typically one from each level of government that has a claim on what you do.

Here is the framework. Use it to map out your specific situation in about fifteen minutes. For the bigger picture of how business licensing works in the U.S., start with our state-by-state business license guide.

The Four Buckets of Licenses

Almost every license a new small business needs falls into one of four buckets.

1. General Business License

This is the baseline operating license. Most cities and counties require it, and a handful of states do as well. It registers your business with the local government and is usually issued in exchange for an annual fee.

• Local (city or county). Required in the majority of jurisdictions in the United States.
• State-level general license. Required in a smaller number of states. Some states require it for every business; others only for specific activities.

If your business operates in more than one city or county, you likely need a general license in each one.

2. Industry or Occupational License

If your industry is regulated, you also need a state-level license for the work itself. Common examples:

• Trades. Contractors, electricians, plumbers, HVAC, and roofing.
• Personal care. Cosmetologists, barbers, estheticians, and massage therapists.
• Healthcare. Doctors, nurses, dentists, pharmacists, therapists.
• Financial and legal services. Accountants, attorneys, real estate agents, insurance brokers.
• Food service. Food handler permits and (in many states) certified food manager credentials.

These come from a state-level licensing board, typically have education or examination requirements, and renew on a set schedule.

3. Health, Safety, and Operational Permits

If your business has a physical operation that touches the public, you probably need permits beyond the general license. These include:

• Food establishment permits. Restaurants, food trucks, bakeries, caterers, anyone preparing or serving food.
• Building and occupancy permits. Any commercial space you operate from.
• Fire department permits. Public-facing spaces, places that store flammable materials, or businesses hosting events.
• Health department inspections. Childcare, healthcare, and food businesses are subject to ongoing inspections.
• Environmental permits. Businesses that generate waste, discharge into water systems, or emit pollutants.
• Sign permits. Most cities regulate the size, type, and placement of business signage.

4. Tax and Regulatory Registrations

These are technically not "licenses" in name, but you cannot legally collect revenue without them.

• EIN (Employer Identification Number). Issued by the IRS. Required if you have employees, operate as a corporation or partnership, or have certain tax filings. Free to obtain.
• State tax registration. Required for income tax withholding if you have employees, and often for state income tax purposes generally.
• Sales tax permit. Required if you sell taxable goods or services. Issued by your state's department of revenue.
• Unemployment insurance. Mandatory in every state for businesses with employees.
• Workers' compensation insurance. Mandatory in most states for businesses with employees.

If your business sells across state lines, you may need sales tax permits in multiple states because of post-Wayfair economic nexus rules.

What You Need Before You Can Apply

Before you start filling out license applications, you need a few things in place. Without them, applications stall.

1. A business entity. Decide on a structure (sole proprietorship, LLC, S corp, etc.) and register it with the state. The LLC or corporation registration is what gives your business its legal name.
2. An EIN. Free from the IRS, usually issued instantly online. Most licenses ask for this.
3. A NAICS code. A six-digit industry classification code. Many license applications and grant programs ask for it. Read our NAICS Codes Explained guide if you are not sure which one applies.
4. A registered business address. Some states require a physical address (not a PO box) for licensing purposes. If you are home-based, your home address typically works, but check local zoning before listing it on public documents.

A Step-by-Step Sequence

Start with the items at the top, each step depends on the one before it.

1. Choose and register your business entity with the state.
2. Get your EIN from the IRS.
3. Look up your NAICS code.
4. Apply for your state-level general license (if your state requires one).
5. Apply for your city or county business license.
6. Apply for any industry-specific occupational license you need.
7. Get your sales tax permit if you will be selling taxable goods or services.
8. Apply for health, fire, or building permits before you open your physical location.
9. Set up unemployment and workers' comp if you will have employees.
10. File any federal licenses (alcohol, firearms, broadcasting, aviation, transportation, etc.), most small businesses do not need these.

For the detail on what each application asks for and how long each step usually takes, walk through How to Apply for a Small Business License.

How to Figure Out Exactly What You Need

Generic checklists only get you so far. The specific licenses you need depend on three things: your industry, your state, and your city. Each of those is a topic in its own right, we walk through the geography question in Do You Need a Business License in Every State?, the jurisdictional layers in State vs Local Business Licenses, and the industry-specific picture in Business Licenses by Industry.

Start at Your State's Business Portal

Every state has an official business registration website. Most include a wizard or questionnaire that walks you through licensing requirements based on a few simple questions about your business.

Call Your City Clerk

For local licensing, your city or county clerk's office is the most accurate source. Many cities post their requirements online, but a five-minute phone call often clears up faster than searching their website.

Check Industry Boards

For occupational licenses, your state's professional licensing board for your industry is the authoritative source. Search for "[your state] [your profession] licensing board" to find it.

Use a Local SBDC

Small Business Development Centers are free SBA-funded consulting offices in every state. They will help you map out your specific licensing requirements based on your industry and location. There are nearly 1,000 SBDC locations across the country.

Common Reasons New Businesses Get Caught Off-Guard

• Forgetting local on top of state. A state license usually does not satisfy your city's requirements, and vice versa.
• Missing the sales tax permit. Many service businesses assume they do not need one until a customer asks for tax-exempt status, by then you may already owe back taxes.
• Hiring before registering employment-related accounts. Unemployment insurance, workers' comp, and tax withholding registrations all need to be in place before your first payday.
• Operating from a residence without checking zoning. Most cities allow some home-based businesses but restrict others. Confirm before listing your home as your business address.
• Skipping the federal layer. Alcohol, firearms, broadcasting, commercial fishing, mining, transportation, and aviation businesses all need federal licenses. Skipping these is not a gray area.

Stay Ahead of the Renewals

Most of these licenses renew annually or biennially. Build a simple inventory the day you receive each one: issuing agency, license number, issue date, expiration date, renewal fee, and what is required to renew. Set a calendar reminder 60 days before each expiration. Many jurisdictions send renewal notices, but the responsibility is on you whether they do or not.

Licensing requirements also change. Cities add new permit categories. States update professional rules. New regulations create obligations that did not exist when you started. Our guide on how to monitor regulations for your business walks through how to build a system for catching these changes early.

Bizmoon's compliance monitoring tracks regulatory changes at the federal and state level, including changes to licensing and permit requirements. When a new rule affects your industry or location, you get an alert with a plain-language explanation of what changed and what you need to do.

See how Bizmoon works or create a free account to start monitoring the rules that apply to your business.

Bottom Line

There is no single license that lets a new business operate legally. Most new businesses need a stack of them, one from the city, one from the state, one for the industry, plus the tax and regulatory registrations that go along with collecting money. The good news is that working through this list in order, top to bottom, gets you legally open in days, not months. The painful version is finding out you missed one after you have already started serving customers.

Start the list early. Knock it down step by step. Build the renewal calendar before you forget.