Is a Business License Needed to Form an LLC?

When starting a business, you need to take many steps, which vary depending on the type of business you're going to operate. You'll usually need a business license to start a business but not to form an LLC.

Can you have an LLC without a business license?

In most states, forming an LLC doesn't require a business license, but you'll need to follow your state's procedures.

An LLC requires registering with the state and filing the appropriate forms.

But even though you don't need a business license to form an LLC, you probably need one to operate the LLC as a business.

When do you need a federal business license?

Whether you need a business license depends on various factors, such as the location and the type of business you want to start. Depending on the type of business, you may need town or city, county, state, or federal licenses.

Only certain types of businesses require a federal license. These businesses include those that engage in:

• Mining and drilling
• Nuclear energy
• Alcohol manufacturing, importing or selling
• Aviation
• Fishing and wildlife
• Commercial fisheries
• Agriculture
• Firearms, ammunition, or explosives
• Maritime transportation
• Radio and television
• Transportation

When do you need a local business license?

If the business you wish to run is not on the shortlist of federally required licenses, it's likely you'll need to get a license from your city, county, or state. The website of your secretary of state or other government office might tell you what licenses you need at the state level. It's a good idea to check with your city and county offices to see whether you need additional licenses.

Because most businesses need at least one business license to operate, start with the presumption that you'll need one. The following businesses require a business license in most states:

• Restaurants
• Childcare centers
• Hair and nail salons
• Dry cleaning
• Mechanics
• Insurance agencies
• Electricians
• Plumbers

Check with your state and local government offices to determine whether your type of business requires a general business license. If it doesn't need a general license, your business may require some other type of license.

What type of license does your business require?

Your business will need a license or permit, or both, based on several factors. For example, if you're running your business from your house, you'll have to ensure that zoning ordinances permit a home business and, if so, whether you can have customers or clients visit your house. Some other necessary licenses and permits, aside from general business licenses, include:

• Professional licenses for vocations such as accountants, attorneys, therapists, veterinarians, and physicians
• Licenses based on the type of industry, such as hotels or construction, which also usually require permits
• Sales tax licenses
• Fire, health, and other emergency services licenses or permits
• Pollution control permits to protect the environment
• Zoning and building permits
• Licenses to use signs
• Licenses to operate under another name, such as a "doing business as" (DBA) company

An income tax employer identification number (EIN) also is usually required.

Why do many businesses require a business license?

Business licenses have many purposes, including informing the public that the business is legitimate. Some of the other reasons behind requiring business licenses or permits include:

• Protecting public safety and health
• Prohibiting certain businesses from being conducted from your home
• Prohibiting certain types of business from being located near other types of businesses or buildings
• Holding the business accountable for liability purposes
• Allowing taxing authorities to keep abreast of sales and income tax
• Reassuring the public that your professional status is legitimate

If you're required to get a business license or permit but fail to do so, you may have to pay fines, penalties, or both, and you risk having your business closed.

How to file for a business license

First, check whether your business qualifies as a small business for licensing purposes with the Small Business Administration (SBA). If it does, try to apply for licenses according to the SBA's requirements.

Next, research what your state requires. At the state level, check with your state's website to see what licenses and permits they require for your business type.

Finally, check with your county or city office to see whether they require any additional licenses or permits. You can have an attorney check for you, or you can do it yourself.

While it's not difficult to file for a license or permit, thoroughly check all offices—federal, state, county, and city or town—to ensure that your business is properly licensed. When it is, you're ready to take the next steps to opening your doors.