Starting your own business can feel like navigating a maze of legal terminology and requirements. You have to jump through multiple hoops, like getting permits and incorporating as an entity, to ensure your business has a solid legal foundation. 

Two questions that are on the top of the minds of every business owner, even the seasoned ones, are whether they need to form a Limited Liability Company (LLC) and which licenses they need to obtain. 

If you’ve decided to go the LLC route, you’re already on the right path. However, as you dive deeper into this path, one question may linger at the forefront of your mind: “Do I really need an LLC license?” 

In this blog, we’ll unpack the layers of LLC licenses—what they are, why some businesses might need them (or not), and how they fit into your business plan. Let’s demystify licensing requirements so that you can focus on what truly matters—building a successful enterprise!

Whether you’re just starting out or looking to make sense of existing regulations for your growing business, doola has got you covered! 

We provide all-inclusive services to simplify the process of forming an LLC for your business, from reducing paperwork to personalized support and ongoing assistance. 

What Is an LLC?

An LLC, or Limited Liability Company, is a business structure that combines the benefits of a corporation and a partnership. Your business will be treated as a corporation at the state level but is taxed like a sole proprietorship or partnership at the federal level.

Since the profits are passed to the LLC owner and members, LLCs are only taxed once on the owners’ personal income tax returns. This is more efficient than C corporations, in which profits are taxed once at the corporate tax rate and then again as shareholders’ income.

Apart from flexible taxation, the biggest benefit of an LLC is limited liability protection. This keeps the owners, also known as members, shielded from liability. So, if your business gets sued or goes bankrupt, you cannot personally be sued or go bankrupt.

Unlike corporations, where you need a board of directors and officers designated with specific roles, in an LLC, you can lead the charge or appoint one member as a managing partner who will handle day-to-day operations.

What Are LLC Licenses?

LLCs have become the most popular choice for new entrepreneurs in recent years. It offers the perfect balance of limited liability protection, management flexibility, and tax structure options for new businesses struggling to find their footing. 

However, with this popularity comes confusion about the necessary licensing requirements. So, what exactly are LLC licenses? Do I need local, state, or federal licenses, depending on where my business is located and the type of industry I am in?

The answer to all of the above is no! You just need to register your business as an LLC in your state. However, many specific types of businesses require another type of business license. You can find a list of examples further down.

An LLC license is an unofficial term for the paperwork involved in setting up an LLC. In short, it is proof that you run a company that’s registered as an LLC with your state. So, you don’t need an actual license required from an LLC. Likewise, an LLC doesn’t give you a license to operate a business. 

The only legal document you need is an Article of Organization. Once you submit this with your state, along with any other required documents and filing fees, you get your de facto LLC license. So, keep a copy handy if you want to open a business bank account and apply for other licenses.

The specific LLC licenses needed for your business will vary depending on factors such as location, industry, and the services or products you offer. For example, if you plan on selling alcohol in your LLC, then you will need to obtain a liquor license. 

If you have any questions or concerns about your LLC’s licensing process, consult with professionals with expertise in formation, tax, and compliance or contact appropriate government agencies.

Different Types of Licenses an LLC Needs

Many entrepreneurs overlook the importance of obtaining the necessary licenses and permits when starting a new business.

Depending on the nature of its operations and location, these can include business licenses, professional or occupational licenses, and industry-specific licenses. 

1. General Business Licenses

A business license is a license or permit issued by a state or other government entity that businesses must have in order to do business. It ensures that your company complies with basic business laws and regulations such as building codes, zoning requirements, health codes, safety standards, etc.

Federal, state, and local agencies issue various types of business licenses and permits based on business activities, so visit the Secretary of State’s website for detailed information.

2. Professional/Occupational Licenses

Certain professions or occupations require individuals to obtain specific licenses before they can provide services. Examples include doctors, lawyers, accountants, contractors, and real estate agents. 

If your LLC has members who fall under this category, they will need to obtain individual professional/occupational licenses in addition to any other general business license required.

3. Federal/State-Specific Permits

Depending on the location and type of activities your LLC engages in, it may be subject to specific requirements at the federal level for interstate commerce or at the state level for intrastate commerce. 

For example, you may need these permits to sell alcohol or firearms, operate trucking companies, handle hazardous materials, import/export goods, give legal aid, provide investment advice, etc.

4. Product Sales

If you sell goods or services, you may need to apply for a sales tax license and reseller’s permit. These show that your business is permitted to sell products and collect sales taxes.

5. Restaurants and Food Preparation

If you’re feeding anyone, you may need to meet health department rules. That could include licenses or permits for food safety, health inspections, and other regulations. 

In some cases, you may also need a food service establishment permit, a county health department permit, or a food handler’s permit.

6. Controlled Items

If your business sells or deals in liquor, tobacco, and cannabis, you must adhere to strict distribution, sales, and tax regulations. Since these are heavily regulated substances, you need to add additional permits or licenses to operate and sell even as an LLC. 

For example, if your LLC supplies alcohol, you would need specific permits from federal agencies like the Alcohol and Tobacco Tax Trade Bureau (TTB) as well as state alcoholic beverage control boards.

7. Barbershops and Cosmetology

Whether you run a salon or do home visits to cut hair and do nails, your work is classified under cosmetology. Therefore, you must obtain a license requirement imposed through a state board. You may also need zoning permits and business licenses if you own a business or rent a booth from a salon.

8. Transportation Providers

Any transportation-related business operating taxis, buses, trucks, or even boats has a higher chance of safety accidents than many other industries.

So, these businesses often require additional permits or licenses, such as a Unified Carrier Registration Agreement (UCRA) license, International Registration Plan (IRP) registration, International Fuel Tax Agreement (IFTA) registration, and a commercial driver’s license (CDL).

9. Mining and Energy Extraction

Businesses like mining, oil drilling, and natural gas extraction involve handling heavy machinery. They also have a heavy impact on the environment and surrounding areas, which puts these industries under more regulations than others. These industries often require accompanying licenses and permits.

10. Construction

In construction, you may need a contractor’s license or another type of certification, license, or permit for each specific job. For example, if you’re doing both construction and landscaping, you need a separate permit for these jobs. If you are unable to obtain them and start working without proper permits, it can lead to fines and other penalties.

Failure to obtain necessary licenses can result in fines, legal action, and even the dissolution of your company. However, we have only listed the most common licenses and permits. 

Since this is not an exhaustive list, the final requirement will depend on your type of business, its location, and the industry you are operating in.

Consult with a professional to determine the specific licenses your LLC needs to operate successfully.

How to Start an LLC to Obtain Business Licenses

If you have obtained a business license without forming an LLC and no business license, you can run your business legally.

However, you put yourself and your company at risk of incurring a penalty (financial or legal) since you don’t have liability protection.

In some cases, businesses can only get a license or permit after registering as an LLC. To make it easier for you, we have broken down the steps you need to follow.

1. Choose Your State of Formation

The first step is selecting the state in which you want to form your business. This is crucial as each state has its laws and regulations regarding LLCs. Also, factors such as state laws, fees, and additional license requirements, which vary from state to state, should be considered.

For example, in California, New York, and Texas, there is no requirement for a standard state business license. However, you may have to apply for local business licenses at the city’s offices or city hall, depending on your business type.

2. Name Your Business

Once you have chosen the state of formation, you need to come up with a unique name for your LLC that complies with the laws of that particular state. The name should not be similar to any existing businesses in that state and should end with “LLC”, “Limited Liability Company”, or other appropriate abbreviations.

So, when you start choosing a business name, check out your state’s business registry online to ensure your desired name is not already taken. It’s also good practice to check for domain availability, trademarks, and copyright infringement that could prevent you from using the name.

3. Submit Paperwork

To officially form your LLC, you will need to submit paperwork known as “Articles of Organization” or “Certificate of Formation,” along with the required documents and filing fee. This document includes information about your business, such as your name, address, Registered Agent’s information, etc.

4. Register for Taxes

All businesses are required by law to register for federal taxes by obtaining an Employer Identification Number (EIN). It will also come in handy when you want to open a business account or apply for a credit.

Some states also require businesses to obtain additional tax registration numbers depending on their location or industry. Contact your state office or consult a business formation expert if you’re having trouble navigating the requirements for your company.

5. Get an Operating Agreement

An Operating Agreement is a legal document that outlines the ownership and operating procedures of your LLC. While not all states require this document, it is highly recommended to have one in place to avoid potential conflicts between members in the future.

By following these steps and seeking professional assistance if needed, you can ensure that your business is legally compliant and set up for success. Once you are done, you can start applying for additional permits or licenses from federal government agencies or local authorities.

Get the License to Kill Your Legal Worries with doola

Now, we know that there is no such thing as an LLC license, but it doesn’t mean that you should disregard other requirements to give your business a sound legal standing. Since setting up an LLC should be at the top of your list, we have the perfect solution for you.

Starting an LLC and obtaining the necessary licenses can feel like going in circles, but with doola, you can confidently navigate through the process. Our experienced professionals will handle everything for you and mitigate any potential challenges or issues before they arise.

We manage all the necessary documentation on your behalf, such as Articles of Organization, Operating Agreements, and state-specific forms. This not only saves time but also guarantees that all documents are accurately completed in accordance with state laws.”

That’s not all. We also provide post-formation support to ensure ongoing compliance with legal obligations such as annual report filing deadlines and bookkeeping. 

This plays a critical role in maintaining your company’s good standing with the state and avoiding costly mistakes or oversights during the tax filing process. 

Sign up today to form your dream LLC.