Types of Business Licenses & Permits

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Microfinance for Entrepreneurs & Small Businesses

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:04 Federal Business…
  • 1:40 State Licenses & Permits
  • 2:48 Local Licenses & Permits
  • 3:55 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed
Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

Just about every business requires some form of licensing or permit. Licenses and permits are issued by federal, state, and local authorities and can range from a mere permit to conduct business to specific licenses.

Federal Business Licenses & Permits

When Cindy set out to open her cat breeding and bathing business in Danbury, CT, she had plenty to consider. For one, just how will she convince a cautious cat to take a bath? But more importantly, what type of licenses and permits would she need? Luckily, Cindy's licensing and permits would be the easier of the two decisions.

First, Cindy did her research. She located several websites that gave her the information she needed. Armed with data, she obtained her licenses and permits.

Cindy can follow a rule of thumb for federal licensing. If a federal government agency regulates the industry or business, a federal license or permit is needed. For example, a business that imports animals or plants between states or over state lines must apply for a permit with the Department of Agriculture. Since Cindy's customers may want a particular cat shipped to their home state, she will need to contact this agency right away.

A business that sells alcohol must apply for a permit with the U.S. Department of Treasury - Alcohol and Tobacco Tax and Trade Bureau. It is required mostly for the purpose of collecting taxes.

Several other government agencies oversee permits and licensing, such as:

  • Aviation
  • Nuclear energy
  • Commercial fisheries
  • Fish and wildlife
  • Mining and drilling

But it doesn't stop there. Even businesses that are required to hold permits or licenses issued by the federal government may also be required to apply for licenses and permits at the state and local level.

State Licenses & Permits

Suffice it to say, individual states may require different licenses and permits, but most states require standard licenses and permits. Most states require a business license. This license is so the state can track taxes and it is required by law. If a particular state collects sales tax, a tax license from the state's Treasury Department or Department of Revenue will also be needed. Occupational licenses are issued for professions that are regulated, including:

  • Doctor
  • Dentist
  • Hairdresser
  • Real estate agent

Generally speaking, the prospective business owner will need to pass a state test, and upon passing, the state will grant the appropriate license to do business. Businesses like liquor stores and gun shops are required to obtain a state license.

Keep in mind, each state has its own requirements. Since Cindy is operating her business in Connecticut, she will need a license. If Cindy relocated to Florida, no license would be required for the grooming part of the business. However, if she plans on breeding, she would have to check specific state and local regulations.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account