chapter 5


Now that you've got a plan for starting your business, you'll still need to ensure that you're legally allowed to operate in your state and in your chosen field.

As you can imagine, your state has an interest in your business and wants to make sure that you know what you're doing. This interest manifests itself through licenses and permits. Be sure to check with your state to see if you need a license to practice your specific trade.

We'll run you through a quick list of the common permits, licenses and other essentials that you may need to apply for:

Employer Identification Number (EIN)

This was covered in the naming a business section, but it's worth repeating since nearly every business will need one.

An EIN acts as your ID number for federal taxes and is required by all businesses that do any of the following:

  • have employees

  • operate as a corporation or partnership

  • file tax returns for employment, excise, alcohol, tobacco, or firearms

  • have a Keogh plan (a retirement account for self-employed individuals)

  • are involved in estates (trusts and IRA's), real estate, non-profit organizations, farming cooperatives, or plan administrators

Doing Business As (DBA)

A DBA (doing business as) name is the legal name that you'll be operating your business under. Almost all businesses will need a DBA. As a sole proprietorship, you'll need a DBA if you're operating under anything else than your full name. For all other businesses, a DBA is required if you represent yourself as something other than the name that you incorporated under. For example, if you were running a business registered as "Justin's Bagels and Donuts" you'd need a DBA if you branded that shop as "Justin's Bakery." Furthermore, many states require a DBA.

Fire Department Permit

If your business location will be accessible to the public, or if it deals with any sort of hazardous materials, you'll likely need a permit from your local fire department.

Health Permit

Do you plan on preparing or producing food? Running a dry cleaning business? If you plan on being in any industry that cooks, cleans, or handles any potentially hazardous materials then chances are you'll need a health permit, too.

Zoning and Planning

Zoning is the control of land use by the state. No matter what type of business you plan on starting, chances are you won't be allowed to do it anywhere designated as a residential area. You'll also need to check with your city or county to ensure that the area is zoned for commercial business. Similarly, if you plan on operating a business out of your home, you'll need to be sure that it's allowed.

It never hurts to be certain, especially if you plan on buying property for your business.

Home Occupation Permit

Working from home is great, but if you're running your business there, many cities and counties require you to have a permit.

Sales and Use Permit (Seller's Permit)

Depending on your state, you may need this permit to sell any tangible good and to collect sales tax.

Proof of Residency Requirement

If you're going to have any employees, federal law requires that they be eligible to work in the United States.

Professional Licenses

Many states require certain professionals to hold licenses—these can often include, but are not limited to, attorneys, electricians, mechanics, insurers, cosmetologists, and medical care personnel.

And MoreĀ…

There's a lot to go through when it comes to licenses and permits. Fortunately, most states offer websites that make it easier to find any that affect you. We'll link to some of these resources in the final chapter of this guide.

If you're in a hurry—or just curious—you can jump right to it here.


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