If you are operating a business, you most likely need a business license or permit to do so, even if you are working at home. Many small business owners skip this step in forming their business because they do not know what is required or they assume that do not need a license.
If you operate a business without a license, you may be subject to fees and penalties if you are caught. The laws differ from state to state and county. Here are the basics to get you started in doing business legitimately.
If you want to form any kind of corporation, limited partnership or other business entity beyond sole proprietorship, you will find information at the state level. Most states allow counties to govern the licensing of sole proprietorships.
You can find most of the information you need online. A word of caution: there are companies who will “assist” you and charge more than what the business license costs. For the best price and advice, go directly to your state’s homepage. The Small Business Administration has links to most state’s business page. Click here to find your state. If your state is not on this list, simply search for your state’s “official” home page. Usually, you can find information, FAQ’s, and even online forms for obtaining your business license from the websites. If you are unable to find the information you need online, call your state’s Department of Revenue or State Treasurer. They are usually the ones who handle these matters.
You can do the same with many county websites. There are many counties with the same name, so search for “Your County, Your State” to find the right one. Usually, the County Clerk will handle business licenses.
Business licenses are not expensive—many are under $100 per year. Some vary due to the type of business, as well.
A business license is not the same as a tax identification number. The tax ID number required by the federal government is necessary if you have employees or any form of corporation, and it is online at the IRS website but it will not replace a business license.