Is a Business License Needed to Form an LLC?

By Edward A. Haman, J.D.

Is a Business License Needed to Form an LLC?

By Edward A. Haman, J.D.

A business license is not required in order to form a limited liability company (LLC), but it may be required before you begin business operations. Whether a business license is needed depends upon the state, county, or city where you operate your business. It may also depend upon the nature of your business.

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Forming an LLC

An LLC is one of several ways to organize a business. Other options include a sole proprietorship, partnership, limited partnership, and corporation.

Formation of an LLC is a matter of state law and is done by filing certain documents with the appropriate state agency. This is typically the Secretary of State or a business registration or corporation division of a branch of the state government. The basic document to form an LLC is most often called the articles of organization, which usually sets forth basic information such as the official legal name the LLC will use, the address of its main office, the name and address of a registered agent (where legal papers may be served if the LLC is sued), and the names of the owners, who are also called members. Not all states require the names of the members. Registration also involves paying a fee.

An LLC with only one member is called a single-member LLC, while an LLC with two or more members is called a multimember LLC. It is generally recommended that an LLC also have an operating agreement, which spells out in more detail how the LLC operates. This is especially recommended for multimember LLCs so as to help avoid or resolve any disputes between members.

The LLC and Business Licenses

Whether your LLC requires a business license is a separate matter from forming an LLC.

Check with your state and local governments to find out if you need a license to conduct business. Types of business licenses that are required by some states, counties, or cities include:

Business licenses. This is a type of license that is typically required by a county, city, or other local government. It is generally required of anyone doing business in the county or municipality, regardless of whether the business is organized as a sole proprietorship, partnership, limited partnership, LLC, or corporation. It is essentially a tax on your business.

Occupational licenses. This is a license that applies to certain types of businesses or professions. An occupational license may be required by state law, local law, or both. Just a few examples of the hundreds of types of businesses that may require an occupational license are accountants, ambulance services, barbers, burglar alarm contractors, construction contractors, electrologists, junk dealers, landscape architects, manicurists, pest control, pet shops, real estate appraisers, surveyors, tattoo parlors, and warehouses.

A state can easily have hundreds of types of businesses that require licensing, and it can be a challenge to find them all. States are constantly adding to the list of businesses and occupations that require licensing, so it is dangerous to assume you can start business operations without determining whether a license is required.

Tax licenses. Many states require businesses to collect and pay certain taxes, such as sales tax, business income tax (based on such factors as sales, gross receipts, or profits), employee tax withholding, unemployment compensation tax, and workers compensation tax. Depending upon the nature of your business, your LLC may also be subject to various other taxes, such as motor fuel taxes; taxes related to sales of tobacco products, firearms, or liquor; and hotel and motel room taxes. Your business may also be subject to various local sales or income taxes. Any of these may require you to obtain a tax license or register with the appropriate taxing authority.

Determining if You Need a Business License

To learn if your LLC needs some type of business license, you can check with one or more of the following:

  • Your state and local government, at its website, by phone, or at the closest office. Many state governments offer special assistance for those seeking to start a new business.
  • The U.S. Small Business Administration, at their local office or at www.sba.gov.
  • Any trade or professional association related to the type of business in which you are engaged.

Although you are not required to have a business license in order to form your LLC, before starting business operations, you should check with the appropriate state and local agencies to find out if you need to obtain some type of business license.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.