Breaking Down Business Licenses on a Federal, State and Local Level

Literally every business requires licenses, permits and registrations to operate. Navigating this bureaucratic jungle can be overwhelming as there are 70,000 licensing jurisdictions in the US, each with their own separate rules and obligations.


The vastness of licensing jurisdictions combined with diversity of industry classifications means that most businesses require multiple licenses. Fundamentally, licenses can be broken down into three categories: federal, state and local.

For your convenience, we’ve put together a quick overview of licensing requirements on each level.

Federal licenses

Businesses engaged in activities regulated by federal agencies require a federal license. Industries related to energy, agriculture or interstate commerce are among the most affected by these regulations.

Licenses may be obtained from the relevant regulatory agency.

For example, a company involved in the manufacture, maintenance or commercial use of aircraft needs to receive a license from the Federal Aviation Administration (FAA). Mining or drilling companies need to apply for permits from the Bureau of Ocean Energy Management, Regulation and Enforcement.

These industries influence the lives of a large segment of the population living in multiple states, necessitating strict federal oversight.

Certain enterprises of a more local nature also require federal licenses. For example, businesses involved in the production or sale of alcohol or firearms need federal permits in addition to state and local permits.

The Small Business Administration’s website provides an extensive overview of industries affected by federal licensing requirements.

State licenses

Every state oversees its own unique licensing regime based on state law.

All states require acquisition of a state business license of some sort. This permits you to conduct business in the state and is used to monitor your enterprise’s tax status. States with a sales tax also require you to obtain a permit for collecting sales tax.

States also issue occupational licenses for certain professions.

All lawyers, doctors, real estate agents and accountants, among other occupations, require certification from a state level agency. These licenses, however, only apply to business conducted within state boundaries. For example, even if you’re a well-respected lawyer or doctor you cannot work in another state unless you’re certified there as well.

You may also need to acquire a license for selling certain products. As previously noted, distributors of alcohol and firearms require a state level license to legally conduct business. Licensing requirements for retail transactions vary by state.

County and local licenses

County and city governments also issue certain licenses. Most municipal governments require enterprises to obtain a business permit to operate locally. This is essentially a municipal-level version of the state business license.

In many cases, you may also need a zoning permit from your county or city government.

Depending on local law, certain types of businesses may only operate within designated areas. Many municipalities, for example, zone certain areas specifically for residential use. Commercial enterprises cannot operate in these areas.

There also many other permits you may need to obtain depending on the location and nature of your business.

Restaurants need to obtain health permits verifying they meet sanitary standards. Many businesses also require licenses from fire departments affirming conformity to fire safety standards.

Be sure to understand what specific permits and licenses you need before you open your business. Otherwise, authorities may shut down your business or initiate legal action.

You can find information on local licensing requirements from your county or city government.

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FG International Associate Writer
Chris is a suburban kid from Connecticut who relocated to Tokyo two years ago. He is currently studying Japanese and giving the "startup thing" a shot.

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