ABA Family Legal Guide

Forming and Operating a Small Business

Starting a Business

Rules, Regulations, Licenses, and Permits

What kind of licenses and permits do I need?

What licenses and permits are required depends on the type and location of the business.

Licenses

All states have statutes and regulations that require tests, proof of financial responsibility, and compliance with other requirements to obtain a license to engage in certain businesses or professions. A state license to operate a day-care center is one example. Doctors, lawyers, architects, and structural engineers have to be licensed by the state before they can practice their profession. In some states, even barbers, bill collectors, funeral directors, and an assortment of other businesspeople have to be licensed. The type of businesses subject to these licensing requirements varies from state to state. Your state should be able to tell you what's required.

Most cities and many counties also require businesses located in their jurisdiction to have a business license. In reality, this is a tax based generally on the gross receipts of the business rather than a regulatory license designed to protect the public against shoddy work and incompetence. Avoiding this tax can be an important factor in choosing the location of a business.

Permits

Some businesses exempt from state licensing regulations are required to obtain a license or permit from a county or city to perform certain operations. Building contractors, for example, have to get a city or county building permit to build or remodel a house or commercial building.