Finimpact

Frequently Asked Questions (FAQ)

What happens if I do not obtain a business license?
Operating without the proper licensing is illegal. In addition to being subject to fines and penalties, you could face enormous legal trouble. For example, if you tried practicing law without a license, you could face imprisonment.
What happens after I have my business license?
Once you obtain your license, it will be your responsibility to renew each one by the designated renewal period. Most require an annual renewal.
Why do I need a business license?
A business license is required by law for almost all types of businesses to operate in the U.S. Additionally, federal, state, and local governments each have their own rules and regulations for businesses and may require further licensing to operate.
Which states require a business license?
All states require either a license or permit to operate. Each state has its own requirement, which is why it’s essential to research which specific licenses are required by the state your business operates in.
Is an LLC and a business license the same thing?
Although commonly confused, no, an LLC and business license are not the same thing. An LLC stands for limited liability company and is a business entity that determines how your business is structured for legal and tax purposes. A business license is simply a permit or license granted that allows your business to operate within the local municipality and state, and has nothing to do with tax status.
Can you sell on Amazon and eBay without a business license?
Yes, you can sell on Amazon or eBay without a business license, but it may be required if you are selling an item that is federally regulated. You should also check with your state licensing requirements to confirm the requirements for an online business.
Can you run a business without registering it?
If you run a business as a sole proprietorship or general partnership (you and one or more partners) then you may not have to register it. However, sole proprietorships and partnerships may still need to register DBAs (doing business as)  and obtain business licenses from government agencies to operate legally.
Do you need an EIN to run a business?
An EIN is not required for all businesses. For some it is mandatory, and for others it is optional. However, it’s a good idea to obtain the 9-digit identifier, since you will need it to open up a business checking account or if you want to eventually hire employees.
How much does a business license cost?
The cost of a small business license depends on the type of business activity you are engaged in and where your business is located.

Conclusion

Like so many topics in business, the answer to “Do I need a business license to start a business?” isn’t as straightforward as we might like. Fortunately, there are plenty of resources to confirm the licensing requirements. 

  • Start with your local and state government to find out what is required.

  • Forming a limited liability corporation (LLC) is not the same as obtaining a business license.

  • The type of business license or permit your business needs depends on what type of business entity it is, where it’s located, and if it involves federally regulated products.

Now that you know how to register your business, you might like to find out where to look for additional small business funding sources. Explore the most recommended start-up business loans with no revenue in our latest article.

About the Authors

Sara Coleman

Written by: Sara Coleman

Freelance Financial Writer

Sara Coleman is a freelance writer with several years of experience covering personal finance topics such as insurance, loans, credit cards, budgeting and more.

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Kal Salem

Reviewed by: Kal Salem

CPA, PMP and Finance Consultant

A CPA and finance professional working with small businesses to educate owners and grow alongside their businesses. He holds a Masters in Accounting and a BS in Supply Chain Management. Owner at Salem CPA Services LLC.

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Somer G. Anderson, Ph.D.

Fact checked by: Somer G. Anderson Ph.D., CPA

Accounting and Finance Professor

Dominique Broadway is an award-winning personal finance expert. She provides advice on all areas of personal finance including student loans. Her advice has been featured in numerous publications. Dominique is committed to helping tackle the student loan crisis and helping individuals make informed financial decisions.

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