Getting Licenses and Permits

Most state and local governments require businesses operating in their area to obtain licenses or permits. In some instances, the federal government may also require you to obtain a license or permit.

Licenses. There are essentially two types of licenses, general and special. A general business license, similar to a use tax, is assessed annually for the privilege of operating a business in the jurisdiction.

A special license is one that is issued to a business that will provide products or services that require regulation. Special licenses are issued to professionals, such as doctors, lawyers, barbers, and others who have met a certain level of training or education. Similarly, certain types of businesses, must obtain permits certifying that they comply with the special rules applicable to the type of business. Any business that serves food or alcohol is likely to need at least one special license.

Permits. State and local governments regulate the safety, structure, and appearance of the community through the use of local laws, called ordinances. Zoning ordinances, which regulate how property can be use, are a common type of ordinance. Once the jurisdiction determines that you have complied with such ordinances, it will issue a permit that will enable you to operate your business.

If, for some reason, your business is unable or unwilling to comply with an ordinance, you can petition the jurisdiction for a special permit, called a variance, that would allow you to, in effect, violate the ordinance. If you're interested in a variance, talk to your lawyer. Variances are not routinely granted and they can be expensive (in terms of legal fees) to obtain, so make sure you really need the variance before you request it.

Work Smart You can find out which licenses and permits are required for your business by calling the state and local government offices in the area in which you are going to operate. Ask them to send you information and any forms that may be required. Increasingly, this information is also available online.

Home businesses. If you decide to start a home-based businesses, one of your first steps should be to find out what your local zoning ordinances allow. Some jurisdictions have zoning ordinances that prohibit home-operated businesses altogether. Most, though, are less restrictive and will prohibit only those businesses that may pose a local health hazard or will disrupt the neighborhood. Call your city hall and ask them for zoning information in your area.