Understanding the Basics of Applying for a Business License

Are you starting your own home service business? 

It’s an exciting time, but the administrative work can seem complicated, so we’re breaking down the basics of business licensing to make the process easier. 

What is a business license?

A business license is a legal document that allows a business to operate in a specific region. They’ll say the country, state, or city you’re allowed to work in. It’s also referred to as a business permit.

You might ask, “Do I need a business license?” Legally, yes, it’s required.

Here are some common reasons why a business license is needed:

• You can’t register a business without proper licensing and permits
• You need one to charge and collect sales tax on goods and services provided to clients
• Hiring licensed staff, like an electrician or plumber, requires a business license 
• Zoning bylaws require specific permits to conduct work
• Health and safety guidelines require legal licenses and permits

While it seems like a lot of administrative work, there are benefits:

• Following licensing requirements means you don’t run the risk of fines or penalties
• Some areas offer tax benefits for fully licensed businesses
• You follow industry standards and gain a positive reputation and credibility
• You can bid on government contracts

Before applying for a business license, you’ll need to check local license requirements in your area. Each state has different regulations.

What is a business license number?

A business license number is on your specific business license or permit. It’s the unique number that identifies your business.

You’ll need this number to apply for other licenses and to use as legal identification. It’s also required for business tax purposes.

What are the different types of business licenses?

The type of license you’ll need depends on where you’re located and the business activity you provide.

General business license

A general business license is also called a vendor’s license. It serves as legal permission to conduct business in a specific area. These are issued at a city or municipal level, depending on where you’re located.

With this business licensing, you must follow regulations and guidelines as needed. Failure to do so can result in fines. It’s also required for tax purposes.

State business license

Depending on where you conduct work, you might need a state business license. These are issued at the state level, allowing businesses to operate in that specific state. You cannot transfer a state license between states.

Home-based business license

If you operate out of a residential address, you’ll need a home-based business license. Check zoning laws before applying for one. You might need a special permit to work from your home.

Sales tax license

You’ll need a sales tax license if you sell products directly to customers. This type of license is issued at the state level and tracks sales taxes. You can apply for one online.

Professional license

A professional license is required for any business that offers professional, regulated services. This is common for independent contractors and professional industries like electrical, HVAC, and carpentry. To qualify for one, you need to follow national codes and best practices for that trade.

Most professional regulations are given at the state level. Depending on your location, they may be municipal.

How do you get a business license?

Getting a business license is relatively straightforward if you follow the steps outlined below.

Before registering, you need to determine the following:

1. A business name. Spend time brainstorming names. Think of options that are unique and recognizable. Narrow down your options and see if they’re available to buy as a domain or use for social media accounts. Picking a business name is important, so get feedback and ensure it’s the right fit.
2. A business structure. When you register your business, you’ll need to state your business structure. Sole proprietorship or limited liability company (LLC) are two common options for home service businesses. Do your research to find what option best fits your needs as a business owner.
3. The type of license you need. Research what’s needed for the kind of business activity, and the area you work in. Look into municipal and state-level regulations. 

Once you’ve put that together, you can register for your business license. Follow these steps:

1. Register your business. You’ll need your legal name and business structure ready.
2. Apply for an Employer Tax Identification Number (EIN). You can get one through the IRS. It’s used for tax reporting, and every business needs one. EINs are also needed for business bank accounts.
3. Apply for your license. Most business license applications are online. Have your registration and tax numbers ready to submit. Depending on your business, you may need multiple licenses (city and state). Submit all paperwork as needed.
4. Renew your license. Business licenses don’t last forever. Make sure you know when yours expires so you can complete the business license renewal process accordingly.

Industry-specific business licensing and certification

For more detailed business license information and to learn about industry-specific licenses (including specific state level guidelines), check out these resources:

• Cleaning business license
• General contractor license
• Handyman licensing
• HVAC license
• Plumbing license
• Electrician licensing
• Pest control licenses
• Roofing business licensing
• Appliance repair certification