The single biggest mistake in starting a business in the United States is this: you form an LLC in Delaware, you get an EIN, you open a bank account, and then you assume you are ready to operate.
You are not. Forming a company and getting permission to run a specific business are two completely separate steps. The first is registration with the state. The second—getting a business license—is permission from the city or county where you actually work.
This distinction costs founders money. It also costs them the belief that rules about business licenses can be stated cleanly, the way rules about LLC formation can be. This page will tell you why.
Why licenses are so fragmented
The United States has no single business license system. There is no federal business license, and there is no law that says every business needs a license at all. What exists instead is a patchwork of thousands of local rules, each one issued by a different city, county, or state.
Here is the structure. Some industries—liquor sales, firearms, aviation, broadcasting, fishing, farming, and nuclear energy—require federal permits. Different federal agencies issue those: the Alcohol and Tobacco Tax and Trade Bureau for alcohol, the ATF for firearms, the FAA for aviation, the FCC for broadcasting, and so on. But for most businesses, the permission you need comes from your city or county government, or from your state. Even then, the state government does not always have a unified system. Delaware issues a general state business license. Wyoming does not have a general statewide business license; there, the requirements come from counties and cities instead.
The Small Business Administration's own guidance is blunt about this. Its page on licenses and permits tells founders to research their own state, county, and city regulations, and notes that industry requirements often vary by state.
That is not a shortcut. That is the actual rule. You look up your city, your county, your state, and your industry. Whatever you find is what you have to do.
What a business license actually is
A business license is a permit from a local government that says you are allowed to run a specific type of business at a specific address. It is not:
- Your company registration (that is filing articles with the state)
- Your tax ID (that is the EIN)
- Your tax registration (that is applying to the state tax authority)
- Your business name registration (that is filing a DBA)
A business license exists specifically to say: the city of San Francisco permits you to run a coffee shop at 456 Market Street. If you move to a different address, you probably need a new license. If you change what the business does, you probably need a new license. If you move to a different city, you definitely need a different license, because a different government issued the first one.
The license is not a piece of paper you keep forever. You renew it. Most cities renew licenses every year or two, and they charge a fee that ranges from nothing to hundreds of dollars depending on the city and industry.
Why it is different for non-residents
Here is the important part: none of this is about who owns the business. The rule is about the business itself—where it operates and what it does.
A person living in Tokyo can own a coffee shop in San Francisco and obtain a business license for it exactly the same way a San Francisco resident would. The city does not ask who owns the coffee shop. It asks what you are doing and where you are doing it.
In practice, non-residents run into barriers. Some city business license application forms require a physical address that does not have to be your home but does have to be somewhere you are available during business hours. Some forms ask for a local phone number. Some ask for a local person to sign the form. These are not legal barriers to non-residents, but they are paperwork barriers.
The simplest solution is to hire a registered agent or a business address service in that city. That person or service can often handle the business license application, or at least provide the local address and signature the form requires. The cost is usually rolled into their annual fee.
🇺🇸 If the IRS counts you as a U.S. person
You apply for a business license just like anyone else in the city or county where you operate the business. The application goes to the local government, not the IRS or the state. You will probably have to:
- Identify the exact address where the business runs
- Describe what the business does (this is where category matters—"consulting" is different from "restaurant," and the city treats them differently)
- Provide an owner or officer signature
- Pay a fee
For some industries, you apply to the state instead. If you run a daycare, a school, a medical practice, a salon, or a funeral home, your state usually requires a state license before you can touch local paperwork. Some industries need both: a state license and then a local business license on top of it.
If you operate across multiple cities, you usually need a separate business license for each one. If you run a web-based business, you typically only need a license where you maintain an office.
🌏 If it does not
You apply to the same local authorities, using the same forms, paying the same fee. The process is the same.
Where non-residents sometimes encounter delays is paperwork. If your business address is a virtual address or a coworking space, some cities ask for documentation proving you rent that space. If a form requires a signature and notarization, you might have to arrange that overseas and mail it back. If the city wants to contact you and you give a foreign phone number, the follow-up might be slow.
One more practical point: if your business sells something regulated locally—alcohol, food, vehicles—the city will probably require an inspection or a visit to verify the business exists. You do not have to be there for that inspection, but if something fails, you will need to arrange repairs or changes remotely.
The rule is the same; the practice is not
| Aspect | What is always true |
|---|---|
| Who decides | The city or county where the business operates, sometimes with the state. Occasionally the federal government. Never purely the state alone. |
| What matters | The industry (what you do) and the location (where you do it). |
| What does not matter | The owner's citizenship, residency status, or where the owner lives. |
| How you apply | You contact the city or county. The SBA website links to a directory; otherwise, search "[city name] business license." |
| When you need it | Before you legally operate that business in that location. Sometimes before you sign a lease, sometimes before you make your first sale. Check local rules. |
| How long it lasts | Typically one to two years. Renewal is automatic if you pay, but you have to pay. |
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Assuming that forming an LLC means you are ready to operate. You are ready to be taxed and to be sued. You are not ready to run the business unless you have checked whether your city and industry require a license.
- Setting up your business address on the LLC registration, then being surprised that a city license requires a different address (one where the business actually operates).
- Operating without a license because the penalty seems small. Cities can fine you, sue you, revoke your right to do business in that city, and sometimes fine you for each day you operate illegally. These add up.
🌏 If it does not
- Assuming that because you are not physically present, you do not need a license. If the business operates at a specific address, that city or county needs you to have a license. Hiring a local person to pick up paperwork does not change this.
- Delaying the license application because you worry about inspections or follow-up. In most industries, the city will not inspect anything unless your business requires it (like a restaurant). If you sell services only, there is often nothing to inspect.
- Forgetting to renew a license after the first year. When a license lapses, you lose your right to operate, and the city can fine you retroactively for operating without a current license.
FAQ
Do I need a business license if I form an LLC?
Yes and no. Forming an LLC is one step. Getting a business license is a separate step. Some businesses do not need a license at all (consultants who work from home, for example). Many do. You have to check your city, county, and industry.
Who issues a business license?
Usually the city or county where your business operates. Sometimes the state. If you operate in multiple cities, each city issues its own license. Some industries also need a state license first.
Can I get a business license if I live outside the United States?
Yes. A business license depends on where the business operates and what it does, not on where the owner lives. You may need to hire a local person or service to help with paperwork or inspections, but the license is the same for everyone.
How much does a business license cost?
It varies dramatically by city and industry. Some cities charge nothing. Others charge hundreds of dollars a year. There is no national standard.
What happens if I operate without a business license?
The city can fine you, sue you for operating illegally, refuse to renew or issue the license unless you pay back penalties, and sometimes impose daily fines for each day you operate without a current license. These penalties accumulate quickly.
How do I find out if I need a business license?
Use the SBA License and Permit Search tool (linked in the resources section), or search "[your city name] business license requirements" plus your industry. You can also call the city's business licensing office and ask. Many cities offer free guidance.
Do I need a business license for an online business?
Usually only if you maintain an office in that city. If you run everything remotely, you probably only need a license in the city or county where you keep an office. Check your state's rule.