Business licenses explained: what you need (and how to figure it out)
Filing the Articles of Organization or Incorporation is an important event in your business formation. But it doesn’t automatically give your business permission to operate. Even after obtaining a registered agent, drafting an operating agreement, and filing your articles, the reality is that your business will likely need one or more business licenses or permits to legally conduct activities at the federal, state, or local level.
The challenge is that licensing rules aren’t standardized. They vary based on location, industry, and how your business operates, which is why many business owners feel uncertain about what applies to them. This guide explains what business licenses are, outlines common license types for LLCs and corporations, and shows how to determine what your business may need.
What is a business license?
A business license is a government authorization that allows a business to legally operate within a specific jurisdiction. Licenses regulate how and where a business operates, not whether it exists as a legal entity. Business licenses can be issued at the federal, state, county, or city level, depending on business activity and location.
All business types, including LLCs and corporations may need business licenses, depending on what the business does and where it is based. Licensing requirements are based on business activity, industry, and location, not entity type. If an LLC and a corporation are running the same retail business in the same city, they will usually need the same license.
A business permit differs slightly from a business license, but the process of obtaining one is similar. Whereas a business license allows a business to operate legally in a certain location within the US, a permit acts as proof that said business is compliant with local and state public safety regulations. Many businesses will often need both permits and licenses.
Different types of business licenses and permits for LLCs and corporations
Requirements for business licenses and permits vary by jurisdiction, but those listed below are among the most common for US businesses.
1. Sales tax permit (seller’s permit)
A sales tax permit is necessary for businesses that sell taxable goods, or taxable services in certain states. This permit allows a business to collect and remit sales tax. Online businesses may still need a permit based on economic nexus rules.
Types of businesses that will commonly require this permit include:
Online and brick‑and‑mortar retailers
Wholesalers
Manufacturers selling directly to consumers
2. Professional or occupational licenses
Certain industries require professional licenses that regulate qualifications and standards, demonstrating the service provider’s competency. Depending on the state, these licenses may apply to the individual, the business entity, or both. Common industries that will need to apply for these licenses include the following:
Contractors and construction trades
Real estate brokers
Accountants
Healthcare providers
Cosmetology and personal services
3. Health department permits
Businesses involved in food handling or public health typically need permits from local or county health departments to ensure safe food handling, sanitation, and public health. These permits often require routine inspections and periodic renewals and apply to various different businesses such as:
Retail food locations
Public swimming pools
Personal services (tattooing, spas etc.)
4. Industry‑specific state licenses
Many industries are regulated at a state level, not federal, with business licensing requirements varying by state. These licenses are often separate from general business licenses and may involve ongoing reporting obligations. Common industries that are regulated state-by-state include:
Transportation and logistics
Professional licenses (Doctors, lawyers, accountants etc.)
Financial services
Construction and trades
When do businesses need to get licenses?
Businesses will usually need to obtain licenses and permits after entity formation but before operations officially begin. There are various situations that will trigger the need for a business to get a license such as:
Opening a physical location
Hiring employees
Selling goods or services
Operating under a DBA
Expanding into new cities or states
If a business starts to operate without the required license(s), it can lead to fines, delays, or operational restrictions and disruptions.
How to figure out which licenses your business needs
After a corporation or LLC formation, figuring out what business licenses and permits your business needs can difficult, especially since requirements differ across states. There is no universal checklist, but it helps to start by identifying a few key factors which can help you work out what licenses you need to apply for:
Where the business operates: City, county, state, and any additional states
What the business does: What products, services, or regulated activities do you sell?
How the business operates: Are you based out of a physical location, home‑based, or online? Do you have any employees, or plan to hire some?
Get support with your business licenses today
Because business licensing requirements change and vary by jurisdiction, many businesses use compliance support services to stay organized as they grow. Computershare Entity Solutions offers business license services to ensure all the licenses you hold are active and in good standing. We’ll handle the preparation and filing of all renewable and new licenses on your behalf, ensuring your business is fully compliant at all times.
Get in touch with the Computershare Entity Solutions team today if you require support with your business licensing needs.
FAQs: Business licenses explained
Do LLCs and corporations need different licenses?
Usually no. Licensing requirements are based on business activity and location, not entity type.
Do online businesses need business licenses?
Often yes. Online businesses may need licenses based on where the business owner is located or where customers are served.
Are business licenses permanent?
Most licenses and permits need to be renewed periodically. Renewal frequency depends on the issuing authority.
What happens if I miss a business license renewal?
If you fail to renew your business license on time, it can result in penalties or loss of operating authority. It's important that you stay on top of licensing renewal timelines. If you need support, Computershare Entity Solutions can assist.
Does a registered agent handle business licenses?
A registered agent does not obtain business licenses, but helps ensure businesses receive official compliance notices and state communications.
Disclaimer: This notice is provided by Computershare for general informational purposes only and is not intended and should not be construed as legal, regulatory, financial or tax advice. Computershare is not licensed or authorized to practice law in any jurisdictions and hence does not provide any legal advice and it does not hold itself out as doing so. Neither Computershare nor any of its affiliates or contributors accept any responsibility or liability for the quality, accuracy or completeness of any information contained in this notice. It is important that you seek independent professional advice relating to the subject matter of this notice before relying on it.