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What Is a Business License? Definition and Guide

what is a business license

A business license grants the owner the right to start and run a particular type of business in the city, county, state, or country that issues it. It is a type of permit indicating the company has the government’s approval to operate.

Government agencies can fine or shut down a business that operates without a license, so find out if you need one as part of your start-up process—not all businesses require a license.

Depending on the type of business you run, you may need a local, county, state or federal license (or none at all). Where your company is located will determine the type of license you need and where to obtain it.

City business licenses

Check with your city’s planning or zoning department to learn whether you need a business license to start a business locally.

Whether you do may depend on whether you’ll be setting up shop in a home office, which some towns closely regulate, or if you’ll be leasing commercial space. Your planning department can tell you.

County business licenses

Some counties require a business license, even if your city or town does not. Check with your county clerk to find out if you need one for your type of business.

State business licenses

States often require licenses of particular occupations to protect the health and safety of its residents. The most common occupations that require licenses include:

  • Automotive mechanics
  • Building contractors
  • Collection agencies
  • Electricians
  • Insurance agencies
  • Personal service providers (e.g., barbers, hairstylists, cosmetologists, doctors, and nurses)
  • Plumbers
  • Real estate brokers
  • Repossessors

Licenses are also required to serve alcoholic beverages, which applies if you run a restaurant, bar, catering company, or special event.

Federal business licenses

Only a few types of business require a federal business license, and most only apply to major corporations. Federal licenses are required for companies that:

  • Manufacture, import, or sell alcoholic beverages
  • Import or transport animals, animal products, or plants across state lines
  • Operate aircraft
  • Manufacture, deal, or import firearms or ammunition
  • Have wildlife-related activities
  • Are commercial fishing businesses
  • Provide ocean transportation
  • Drill for natural gas or oil
  • Produce commercial nuclear energy or fuel
  • Broadcast via radio, television, cable, or satellite
  • Operate an oversized vehicle

To learn more about required federal business licenses, check the descriptions here.

Business License FAQ

What does license mean in business?

In business, license refers to a formal agreement that gives a company the right to manufacture, distribute, sell, or otherwise use a product, brand, or technology owned by another company. It is often granted for a certain period of time, and may include payment of a fee or royalty to the owner.

What is a business license in usa?

A business license is a legal document issued by a federal, state or local government agency that grants permission for a business to operate within a particular jurisdiction. It is generally required for businesses operating within the United States and is used to track and tax businesses. Depending on the type of business, additional licenses and permits may be required.

What is the most common business license?

The most common business license is a general business license, which is typically required for any type of business activity. Depending on the jurisdiction, additional licenses may be required for specific types of businesses, such as a liquor license for a bar or restaurant, or a professional license for certain professions.
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