Understanding Small Business License Types

So, you’ve decided to take your business idea and turn it into a reality. Congratulations! From here, there’s a lot to do, but getting licensed to do business in your state should be at the top of your list. Deciding which small business license type you need can be challenging. Here’s some information about small business license types:

General Business License

Cities generally require businesses located or conducting business within their city limits to have a general license. There are a few different types of these licenses, including general (traditional business), a home business (a business you operate from within your home), and non-resident (for businesses that are located outside city limits, but that conduct business within city limits). These range in price, but there is generally a flat fee for the license, and an additional fee for each full-time employee, with a minimum of one.

Doing Business As (DBA) License

A “Doing Business As,” DBA, or Fictitious name is not a license, but an official statement that the business is doing business under a name other than the owner’s name. For Instance, Jennifer Jones’ business, Jones Hairstyles does not need a DBA statement. However, if her business was going to be known as Advanced Hair Styles, her name is not in the business name. She would then need a DBA statement.

Direct Sales License

A direct sales license is for those that are independent consultants or who sell for a larger business, such as Cutco, or Avon. With these business types, some companies collect tax on behalf of their consultants, and others don’t. Depending on the arrangement, you may or may not need a license. Check with your company if they collect sales tax and B&O tax on your behalf. If so, you don’t need a direct sales license. If they only collect sales tax, you might need a license, depending on your yearly sales. If they don’t collect a tax of any kind for you, you are required to collect and remit that tax yourself. In that case, you might be required to have a direct sales license.

Professional and Industry Licenses

Some professionals require a specific license type. Depending on your state, these may vary, but these generally include skilled professions, including some professional sports. Check your state’s list of professional and industry license types to see if your profession requires a special type.

Sales Tax Permit

Most states have a sales tax and require businesses to hold a sales tax permit before they are allowed to collect sales tax. If your state is a sales tax state, you might consider applying for a sales tax permit along with your business license.

Special State License

Some industries are regulated more tightly in different states. If you operate a business that sells alcohol, lottery tickets, gasoline, or firearms, you will need a special state license to sell those items.

Special Federal Licenses

Most small businesses won’t need to worry about federal licenses. The only businesses that will need to worry about these, are those that are regulated by a federal agency. You might need to have a federal license for any of the following:

• Agriculture
• Alcoholic beverages
• Aviation
• Firearms, ammunition, and explosives
• Fish and wildlife
• Commercial fisheries
• Maritime transportation
• Mining and drilling
• Nuclear energy
• Radio and television broadcasting
• Transportation and logistics

What type of license does your small business need?

Figuring out what licenses and permits you will need to legally operate your business can be a long and arduous process.  A good business attorney can help you navigate the process, making it easy to understand and follow.  Fill out our contact form and we’ll connect you with an excellent business law attorney.