New businesses throughout the country require a business license to operate in their state, city or county – or all three. Although specific business license requirements vary from location to location, new business owners should plan to apply and pay for a business license before they open their doors. Often, a state's Department of Licensing or Secretary of State's office can answer business owners' questions about license requirements.
TL;DR (Too Long; Didn't Read)
Issued by your county, city and/or state, a business license gives you the authority to operate your business. The cost for the license varies by location and can involve additional processing fees.
It usually ranges from $50 - $400 or more, depending on what type of business you're operating. There may be an additional processing fee of $25 or so as well.
Purpose of a Business License
A business license is the final step in ensuring a business has completed the necessary steps to open its doors. States require new businesses to file their business name, choose a business structure and register with the division of taxation. Once these steps are complete, the business owner can apply for relevant business licenses. During the application process, the state ensures that the business owner has completed the relevant steps to operate, and receipt of the business license confirms that these tasks are complete.
License Application Process
Business owners will submit an application to their state to begin the business license acquisition process. Most applications include basic business information, like the business name and whether it is a corporation, partnership, limited liability corporation or limited liability partnership. In addition, business owners will likely need to provide the start date for their business so that the state can process the application in time.
Cost of a Business License
The cost of a business license varies from state to state – and often even within states, depending on the type of license your business requires. Some cities, like Decatur, Alabama, and Greenville, South Carolina, determine business license fees depending on the anticipated gross revenue of the business.
However, Decatur's Revenue Department states that most business licenses start between $75 and $100. Sparks, Nevada, charges an $105 fee for a business license plus a $4 tech fee; additional fees apply depending on the type of business. A business license in Chino Hills, California, costs $20 a year.
Late Renewal Penalties
Business owners have to renew their licenses annually, and it is essential that they renew them on time to avoid late fees. Most licenses expire at the end of the fiscal – Sept. 30 – so business owners need to renew their license in person, by mail or over the phone before that date.
Check with your state to determine when the license expires and what the renewal fee is. In many cases, business owners can expect to pay the same amount every year.
- U.S. Small Business Association: Apply for Licenses and Permits
- Greenville, South Carolina: Business License Application
- Mesquite, Nevada: Business License Checklist
- City of Sparks: Business License Fees
- Chino Hills, California: How Much Does a Business License Cost?
- Decatur, Alabama: Business License Info and FAQs
- Ievgen Chepil/iStock/Getty Images