How Much Is a Business License?

Ready to start your business? One of the first steps is requesting permission from relevant government entities to operate—a process that may come with associated fees. Business licenses grant the privilege to operate within a designated location, such as a state, county, or city, or verify that an organization is qualified to work in a regulated industry, such as alcohol or agriculture. Costs differ depending on the type of license you get. 

All business licenses and their costs

Business license fees vary by type. The most basic business license is the general business license, which is only required in specific cities. If you operate a business within a regulated industry, you might also need to apply for federal or state licenses.

General business license

A general business license grants any type of business the privilege of doing business from a jurisdiction, such as a state, county, town, or city. 

In the U.S., most general business licenses are issued by city or county governments. Only Alabama, Alaska, Delaware, Hawaii, Nevada, Tennessee, and Washington have established state-wide rules and processes for obtaining general business licenses. Costs run between $15 to $500, depending on the location. 

Remember that your business license won’t be the only expense when starting your business. Depending on the nature of your business, you should incur additional fees for registration, formation, permits, and certifications. 

Federal business license

A federal business license is a type of license issued by the federal government to permit business activities within a regulated industry. Businesses that manufacture or sell alcohol, for example, are required to obtain a federal business license. Below are a few examples of federal business license costs. 

State business licenses

Any industries not regulated on a federal level will be regulated on a state level. You should expect to pay additional licensing fees for specific products or professional services.

• Occupational licenses: States often require specific licenses for professionals, such as accountants, real estate agents, physicians, and cosmetologists. Costs will vary by occupation but typically start upwards of a few hundred dollars.
• License for specific product types: Businesses selling regulated products, such as alcohol, lottery tickets, gasoline, or firearms, typically require special licenses. License costs start upwards of a hundred dollars and increase with sales volume. 

How much does a general business license cost in each state?

Only Alabama, Alaska, Delaware, Hawaii, Nevada, Tennessee, and Washington have enforced the use of state-wide general business licenses. Other states rely on counties or cities to regulate operations and differ in requirements per jurisdiction. With these local-level business licenses, costs typically differ depending on your location, industry, and business entity type.

Additionally, not all jurisdictions require general business licenses, limiting the enforcement of license requirements to specific regulated industries. 

*The marked states have uniform business license requirements on a state-level, rather than having different requirements by county, town, or city. We’ll go over them in depth after. 

 

Alabama

Most businesses in Alabama must obtain a general business license, called a business privilege license, to operate within the state. Although a statewide requirement, the business privilege license is only available through local county offices. Typically, probate judges and license commissioners will handle registration.

The issuance fee for a business privilege license is $1. However, you are also required to pay annual license taxes, and costs range from $1 to $1,001, depending on your industry, location, and local population. The average small business should expect to pay $100 at most. 

License taxes for restaurants range from $8.50 to $76. The price hinges on two factors: city population and your total seating capacity. The bigger your city or town, the more you have to pay. The same goes for seating capacity. 

Alaska

Businesses in Alaska must register for business licenses through the Alaska Division of Corporations, Business, and Professional Licensing. Applying for a business license costs $50, whether you get it online or via mail. 

Business licenses expire after one year and require a renewal fee of $50 for one year and $100 for two years. 

Delaware

The Delaware Division of Revenue charges an annual business license fee of approximately $75. You must request and pay for separate business licenses per unique business activity. For example, if you run a restaurant but also sell kitchen equipment, you will need two separate licenses for your restaurant and retail activities, respectively. 

Sole proprietors aged 65 or older can apply a 75% discount on annual licensing fees if they generate less than $10,000 in gross receipts per year. If you exceed this, the Delaware Division of Revenue will charge the full amount. 

Hawaii

To operate a business in Hawaii, you need to request the State of Hawaii Department of Taxation for a general excise tax license, which costs a one-time $20 fee. You can register online through the DOTAX website. 

Nevada

The Nevada State Business License costs $500 annually for corporations and $200 annually for other entity types. The only business types exempt from state business license requirements are non-profit organizations and corporations. 

Tennessee

Tennessee charges $15 per business license and requires one business license per new business. You are only exempt from needing a business license if you generate less than $3,000 in gross sales annually. You must obtain a license through the city or county clerk where your business address is located. 

Washington

The fee for the Washington business license application is $50. You must pay the fee for every new business you open. While there are no additional fees for new locations, there is an annual renewal processing fee of $5. 

Additionally, Washington only requires business licenses for businesses that meet one or more of the following criteria: 

• You generate an annual gross income of $12,000 or more. 
• Your business requires city, county, and state endorsements.
• You run your business with a name different from your full legal name. 
• You intend to hire new employees within the next 90 days.
• The products or services you provide require sales tax collection. 
• Your business is required to pay taxes or fees to the Department of Revenue.
• Your business buys or processes specialty wood products.
• Your business falls within Nexus threshold reporting requirements.

How to obtain a general business license

Steps for obtaining a general business license depend on your city, county, or state. Most regulating bodies will offer an online application form and request relevant business documents. 

The business documents often required in business license applications include:

• Valid government-issued ID
• Business name registration or doing business as (DBA) documents
• Applicable formation documents, such as articles of incorporation, articles of organization, partnership agreements, or bylaws
• Business plans and descriptions of operations
• Lease agreements or property ownership documents
• Financial statements or proof of capital

Once you submit your application and documents, pay the licensing fee and wait for approval. Processing time for general business license applications ranges from one to thirty business days. Typically, the more populated your jurisdiction is, the longer you have to wait. 

Start your business with confidence

When starting a business, it’s important to prepare for all possible costs, from business licenses to registration fees to the upfront operational costs. Proper research helps you ready all necessary funds, ensuring a friction-free start to your business journey.

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