You’ve made the decision to start your own business. But before you open your doors or make your first sale, you’ll need to make sure everything’s legal. This means obtaining the proper business licenses and permits. These vary by city, state and country, as well as according to the type of company you’re operating.

Licensing Your Business

Often states or municipalities will require businesses to obtain a simple license to operate, which can be obtained for a fee. If you plan to operate your business from home, then a separate home occupation business license is required. Additionally, a contractor who has a project in a city outside his home base may be required to obtain a special license in the city where his project is.

Your business may be required to obtain a state license as well. This is standard among regulated industries such as medicine and law. If you’re in the retail business, for example, the state may require you to obtain a sales tax license, which enables to you collect sales tax on the state’s behalf. Other businesses that may require a state license include:

Barber/Hairdresser
Auto mechanic
Real estate agent

In some cases, a business may need a federal license as well. Broadcasters and pharmaceutical companies are two kinds of businesses that must be federally licensed.There are valuable online resources that can make it easier for you to research the licensing process. The U.S. Small Business Administration offers a list of how to start the licensing process in every state. In addition, DoingBusiness.org, a Web site run by The World Bank, examines business procedures around the globe and details the first steps required for registering your business with the government.

Obtaining the Proper Permits

In addition to licenses, you may also be required to obtain permits, which regulate how you conduct your business. These may be required on the local, state or federal level – as is the case of highly-regulated industries such as interstate trucking and firearms.

The permits you’ll need vary by location and type of business. A restaurant needs occupancy permits, liquor permits and a fire certificate, among others. The permits for an office business could vary based on how big the office is and what type of operation you’ll be running. There could also be regulations on how many parking spaces and bathrooms you have to offer, as well as what degree of access you have to offer for physically-challenged customers or clients. All of these will take time and could have fees attached to them.

International outlook

The U.S. is actually one of the most business-friendly economies to operate in. DoingBusiness.org reports the average U.S. business requires 18 steps for permits and licenses, which takes an average of 69 days and costs 16% of income per capita. It’s not as efficient as Denmark, which requires only seven procedures for permits and licenses, or Korea, where the process takes on average only 52 days. But the U.S. asks far less of businesses than Sierra Leone, which requires 48 procedures on average to obtain a permit or license. Nor does it take anywhere near as long to obtain the necessary paperwork as in Iran, where it takes an average of 668 days.