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Highlights
- The typical cost range for a business license is between $25 and $550.
- Some of the factors that affect the cost of a business license include the business type, the license type, and the applicant’s geographic location.
- A business license may be required by the state in which the business owner resides, by the industry in which they work, or by their clients.
One of the first things an aspiring business owner needs to do is obtain a business license. A business license is a legal document that grants the owner the right to operate a business within a specific jurisdiction or area. The process of obtaining a business license involves navigating through a series of steps, including understanding state regulations, determining the different types of business licenses, and applying accordingly. A state business license and a city business license may have different fee structures, adding another layer to the application process.
But how much does a business license cost? The overall cost of a business license can vary depending on location, business type, and size. The typical cost range for a business license can be anywhere from $25 to $550, and different states and cities can have their own specific requirements and fees for getting a business license. It’s important for entrepreneurs to research the specific requirements and fees for their particular location, as well as learning how to apply for a business license in their municipality.
Factors in Calculating Business License Cost
Calculating the cost of a business license is more than just looking up a total and sending payment. Numerous factors come into play when an aspiring business owner is determining how much a business license will cost. The national average cost for a business license can range anywhere from $25 to $550, but it’s important for entrepreneurs to note that this can differ greatly depending on the business type, license type, and geographic location.
Business Type
The cost of getting a business license varies depending on the type of business. Different types of businesses have varying levels of complexity, risk, and regulations that are associated with the organization. As a result, there are various fee structures to reflect these differences, and there may be specific licenses or permits required. For example, a home-based consulting business may need only a basic business license, while a restaurant will need food-service licenses and health permits. Additionally, license requirements may differ depending on the business’s structure.
License Type
There are some important steps business owners need to follow to make sure their business operates legally. One of the first ones is to research what types of business licenses and permits they need so they can avoid any potential legal issues. By reaching out to the right government offices in their area, they can find out what specific permits and licenses are required for their type of business. This information can be found by getting in touch with the local business licensing department or looking online at the official state, county, and city government websites.
Geographic Location
Both the cost and the time it takes to get a business license will depend on the applicant’s geographic location. The different requirements for business licenses vary by city, county, and state, which is why it’s important for business owners to check with their local government offices to understand the regulations they need to follow. Some regions may require only a city business license while others may require county, state, or federal licensing. Knowing how much a business license can cost in their area can help business owners plan for licensing costs.
| State | Average Business License Costs |
| Alabama | $15 to several hundred dollars |
| Alaska | $25 to $100 |
| Arizona | Varies depending on business and license type |
| Arkansas | $50 to more than $1,000 |
| California | $50 to $100 |
| Colorado | Varies depending on business and license type |
| Connecticut | $20 to several thousand dollars |
| Delaware | $75 |
| Florida | Varies depending on business and license type |
| Georgia | $50 to several hundred dollars |
| Hawaii | Starting at $20 |
| Idaho | Varies depending on business and license type |
| Illinois | $75 to $6,000 |
| Indiana | Starting at $25 |
| Iowa | Varies depending on business and license type |
| Kansas | Varies depending on business and license type |
| Kentucky | Varies depending on business and license type |
| Louisiana | Starting at $50 |
| Maine | Varies depending on business and license type |
| Maryland | A few dollars to several hundred dollars |
| Massachusetts | Starting at $20 |
| Michigan | Some small businesses may not need a license. If a license is required, the cost varies according to type. |
| Minnesota | $15 to $10,000 |
| Mississippi | Varies depending on business and license type |
| Missouri | Varies depending on business and license type |
| Montana | Varies depending on business and license type |
| Nebraska | Varies depending on business and license type |
| Nevada | $200 to $500 |
| New Hampshire | Varies depending on location and business type |
| New Jersey | Varies depending on business and license type |
| New Mexico | Starting at $35 |
| New York | Varies depending on location |
| North Carolina | Varies depending on business and license type |
| North Dakota | Varies depending on business and license type |
| Ohio | Starting at $25 |
| Oklahoma | Varies depending on location |
| Oregon | Varies depending on location |
| Pennsylvania | Varies depending on business and license type |
| Rhode Island | Varies depending on business and license type |
| South Carolina | Varies depending on location and business type |
| South Dakota | Varies depending on location and business type |
| Tennessee | Varies depending on business and license type |
| Texas | Varies depending on business and license type |
| Utah | Varies depending on location |
| Vermont | Varies depending on location |
| Virginia | Varies depending on business and license type |
| Washington | Starting at $90 |
| West Virginia | Varies depending on business and license type |
| Wisconsin | Varies depending on business and license type |
| Wyoming | Varies depending on location |
Types of Business Licenses
It’s important for business owners to understand that there isn’t a one-size-fits-all business license. The licensing requirements vary based on the nature and industry of the business. For example, a web development agency may need a professional license and a permit for a commercial workspace, and it may be subject to other industry-specific regulations. A restaurant will need health permits related to food safety and sanitation, permits for alcohol sales, zoning permits, and more. The cost of the licenses will be impacted by the location, type of business, and even the number of employees.
General Business License
A general business license typically encompasses a wide range of business activities. Its purpose is to ensure that businesses adhere to local regulations and maintain a level of compliance with state and local laws. The specifics of a general business license can vary by location since different areas have unique requirements and procedures. Getting a business license commonly involves an applicant filling out an application for a business license, paying the fees, and complying with basic regulations. Certain cities and counties have specific rules regarding business licenses. Business owners can contact their local chamber of commerce or check the information on their local government websites to find out the exact licenses they need based on their location and business type. By using these resources, owners will be in a better position to ensure they have the correct licenses and permits to allow them to operate legally.
Industry-Specific Business License
Those who work in certain trades, such as electrical and plumbing, are required to have a professional license to perform their services. These licenses show that a business meets the safety standards and regulations set by the government. Industries such as construction, engineering, and HVAC installation also require professional licenses in order for the business to operate legally. These regulations are in place to ensure the safety of the business and its customers.
Sales Tax License
A sales tax license, also known as a seller’s permit or sales tax permit, is an official document issued by the state or local government that authorizes a business to collect and remit sales tax on their goods and services. The specific requirements for obtaining a sales tax license vary by location. Businesses typically need to apply for this license with the state or local tax agency, and when approved, they are given the authority to collect and manage sales tax.
“Doing Business As” (DBA) License
A “doing business as” (DBA) license is needed for sole proprietorships or partnerships to legally operate under a brand name instead of the owner’s name. Also known as a fictitious business name, trade name, or assumed name, a DBA is used when a business operates under a name different from its legal name. Independent contractors can benefit from obtaining a DBA license since it allows them to establish a professional identity and enhance their credibility. It also simplifies the process of opening a business bank account and separating personal and business funds. While a DBA is not a license in the traditional sense, obtaining and registering a DBA is a legal requirement in many locations to prevent businesses from operating under misleading names. In addition to a DBA, business owners may want to look into whether their local city or county requires a basic business license to operate legally.
Zoning Permits
Businesses operating in certain areas may need to obtain a zoning permit in addition to a local business license. This permit is essential to make sure that a business complies with community standards and regulations, particularly in relation to local land-use regulations. The purpose of a zoning permit is to allow a business to operate in specific zones, such as commercial or residential areas. This means that the type of business being operated must be appropriate for the designated zone. While a business license grants permission to conduct business in general, a zoning permit specifically addresses regulatory compliance regarding the location of the business. To get a zoning permit, business owners typically need to submit an application to the local government department that’s responsible for land-use regulations.
Commercial Building Permits
A commercial building permit makes sure that the building in which the business will operate meets all local codes and regulations. This permit covers various aspects of the building’s infrastructure, such as fire prevention, structural integrity, safety measures, and compliance with zoning laws. Without a valid commercial building permit, a business may face penalties or even be shut down for noncompliance. If a business owner wants to make any modifications to the building, an additional building permit may be required. Changes to buildings can include expanding the building’s size, changing the layout of the space, or adding accessibility features. Regardless of the nature of the changes, it’s necessary for business owners to obtain the required permits.
Home-Based Business License
A home-based business license is a legal permit that allows a business owner to operate out of their home. Some areas might require home-based business licenses to ensure that businesses don’t create excessive noise or disrupt the neighborhood in any way. This type of license might include guidelines related to the types of business activities allowed, permissible noise levels, and regulations on the frequency of client visits.
Sign Permits
Obtaining a sign permit is often a necessary step for business owners who want to display signage outside their establishments. For those planning to showcase a business sign, securing a sign permit makes sure that the signage complies with local regulations. These regulations can include placement, size, lighting, materials, and even content.
Do I need a business license?
For prospective business owners to determine whether their business needs a license, it’s necessary to research individual state and industry requirements. Clients or customers may also expect or require proof of a valid business license before they’ll hire the company or purchase goods from it.
State Requirements
Some states offer a state business license, and others don’t. The overall requirements for a business license differ from state to state, and that’s why it’s so important for business owners to research and contact their local secretary of state office.
Industry Requirements
Certain industries, including finance, alcohol sales, and health care, face extensive regulations, while general contractor license requirements may vary. When operating a business in these highly regulated areas, business owners may need to get specialized licenses to meet any type of additional requirements. For those who have an Etsy storefront, understanding whether they need a business license to sell on Etsy will help them be compliant with local regulations.
Client Requirements
Having a business license not only means the organization is in compliance with state, county, and city regulations, but it also helps to build trust with clients. In order to work with a local business, some organizations may require that the business be licensed and insured for any transactions to be approved. Clients can even use a business license lookup tool to check and see if a contractor they’re considering hiring is licensed or not. The cost of small-business insurance is another necessary expense for any business owner. It’s wise for a business owner to get a comprehensive policy from one of the best small-business insurance providers (such as NEXT Insurance or Thimble) to help protect them from liability.
How to Save Money on Business License Cost
Saving money on licensing costs is an excellent way for entrepreneurs to streamline their budgets. By following some cost-saving tips, business owners can navigate the licensing process more efficiently and use their resources effectively.
- Early renewal. Renewing the business license before the expiration date may qualify business owners for discounts or avoid potential late fees.
- Bundle licenses. In some cases, a business may need multiple licenses. Owners will want to ask if their area offers cost-effective packages for businesses that need various licenses or permits.
- Research fee structures. It’s important for business owners to understand the licensing fee structures of different jurisdictions. In some cases, neighboring areas might have more favorable costs, allowing them to choose the most cost-efficient location for their business.
- Use online resources. It’s recommended that business owners explore online platforms that provide comprehensive information about business licenses. This can streamline the application process and potentially reduce administrative costs.
- Look for small-business incentives. Some regions offer incentives or reduced fees for small businesses. Owners will want to research local programs designed to support small businesses and take advantage of available cost-saving opportunities.
- See if fee waivers are available. In certain situations, fee waivers may be available, especially for nonprofit organizations or businesses contributing to community development. Business owners are advised to investigate whether their business qualifies for any exemptions.
Questions to Ask About Business Licenses
Asking a registered agent service or business registration service the right questions about business license costs can help a business owner avoid miscommunication and ensure a smooth licensing process.
- What are the initial costs involved in getting the necessary business licenses?
- Are there recurring fees for license renewals, and if so, what is the frequency and cost?
- What is the expected timeline for getting the business license from application to receipt?
- Are there any hidden fees or additional charges that may arise during or after the licensing process?
- Can you provide references from previous clients who have successfully obtained business licenses with your assistance?
- What type of support is available to address any concerns or questions throughout the application process?
- Will the service help in maintaining and updating license records?
FAQs
Running a business comes with its fair share of expenses, and one that is often confusing to entrepreneurs is the cost of a business license. Understanding the answers to some frequently asked questions can help entrepreneurs better grasp this essential part of starting a business.
Q. Are an LLC and a business license the same thing?
An LLC and a business license are not the same thing; with an LLC, business license requirements may be different. When a business owner forms an LLC, they are essentially creating a separate legal entity that operates independently from themselves. This separation acts as a layer of protection since it helps shield the personal assets of the owner from any debts or liabilities incurred by the business. Some business owners opt to hire one of the best LLC services (such as LegalZoom or Northwest Registered Agent) to help navigate the process.
Q. Do I need multiple business licenses for multiple locations?
Every jurisdiction has its own set of requirements regarding business licenses and what type of activities each license covers. Some areas allow business owners to operate multiple businesses on the same license, while others require the owner to apply for a new license for each new business.
Q. How long does it take to obtain a business license?
Getting a business license can take anywhere from a few days to a few weeks, depending on the state and the specific type of license. Applying for a local license may be faster than applying for a federal or state license. While it’s difficult to determine the exact timeline, there are ways to speed up the process. Applying for an online business license, if available, is faster than submitting a paper application. It’s important for the business owner to follow all directions and submit all the required documents to avoid delays.
Q. What papers do I need to have when applying for a business license?
To get a state business license, an owner typically needs to supply the employer identification number (EIN), any required permits or paperwork that are specified by the individual state, the owner’s name and contact information, and the business name and contact information.
Q. How long does a business license last?
How long a business license lasts depends on the type of license. Some may last for as long as the business is operating, and others may need to be renewed every year or every 2 years. It’s important for business owners to know the specifics of their license since laws can change and affect the terms of the business license.
Sources: Square, ZenBusiness, Wise, Wolters Kluwer