Does an LLC Need a Business License? Federal, State, and City Rules

Forming the LLC and getting a license are separate steps

Two government pages show the split clearly. The first is the City of Los Angeles Office of Finance. Its page for new businesses lists a city step and a state step. The city step is a Business Tax Registration Certificate, or BTRC, from the Office of Finance. The state step is separate: “If your business structure is a partnership, corporation, or limited liability (LLC), you must register or incorporate with the California Secretary of State.”

The second is the Washington State Department of Revenue. Its page on applying for a business license says some business structures “must file with the Washington Secretary of State before filing the Business License Application.” The list includes Washington domestic corporations and Washington domestic LLCs. So in Washington, the LLC filing comes first, and the license application comes after it.

The SBA guide keeps the two steps apart in the same way. It has one section called “Register your business” and another called “Apply for licenses and permits.” Our guide on forming an LLC before your first client covers the other duties that start once the LLC exists.

City and county business licenses

Cities and counties can have their own registration for businesses. The name changes from place to place. Some call it a business license. Others call it a business tax certificate or a business tax registration. The SBA says “Local governments determine registration, licensing, and permitting requirements, so visit local government websites to find out what you need to do.”

Los Angeles is one example. The Office of Finance says “All individuals or entities conducting business activities within the City of Los Angeles are required to apply for and obtain a Business Tax Registration Certificate with the City of Los Angeles, Office of Finance.” For an LLC, the registration checklist asks for the Federal Employer Identification Number, or EIN, a description of the business activity, the legal name and any fictitious name (DBA), the business start date, the business address, and contact details.

The Office of Finance says you receive a temporary certificate or registration number when you finish. It says “A permanent Business Tax Registration Certificate will be mailed within 4 to 6 weeks.” The page also says the first year is not exempt from tax. It says “The first year of taxes is paid in the second year when you renew your BTRC.” It describes a Small Business Exemption for businesses whose global gross receipts are under $100,000 and that renew on time. Depending on the business, the city may also require police, fire, or tobacco permits. Our guide to starting a business in Los Angeles covers the city and county filings in more detail.

State licenses, permits, and tax registrations

States regulate many kinds of work. The SBA says “The licenses and permits you need from the state, county, or city will depend on your business activities and business location.” It adds that “States tend to regulate a broader range of activities than the federal government.” The SBA’s list of activities that are commonly regulated at the local level includes auctions, construction, dry cleaning, farming, plumbing, restaurants, retail, and vending machines.

A state tax registration can also work like a license to sell. In California, the California Department of Tax and Fee Administration (CDTFA) issues the seller’s permit. Its FAQ says you must obtain one if you “Are engaged in business in California” and “Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail.” The FAQ says this rule “applies to individuals as well as corporations, partnerships, and limited liability companies.” It also says there is no fee for the permit. The CDTFA “may require a security deposit to cover any unpaid taxes that may be owed if, at a later date, the business closes.”

Washington has a statewide business license, issued through the Department of Revenue. Its page lists the conditions that require one. They include a business that needs city, county, or state endorsements, a business using a name other than the owner’s full legal name, a plan to hire employees within 90 days, and sales that require collecting sales tax. The list also includes “Your gross income is $12,000 per year or more.” When the license is issued, the business gets a Unified Business Identifier (UBI) number. The Department says online applications “will take approximately 10 business days to process.”

When an LLC needs a federal license

Federal licenses are tied to specific activities. The SBA says “Business activities regulated by a federal agency will need a federal license or permit.” Its guide then lists the regulated activities and the agency for each one.

The SBA’s list includes alcoholic beverages, through the Alcohol and Tobacco Tax and Trade Bureau and the local Alcohol Beverage Control Board. It includes firearms, ammunition, and explosives, through the Bureau of Alcohol, Tobacco, Firearms and Explosives. The list also includes aviation, through the Federal Aviation Administration, and radio and television broadcasting, through the Federal Communications Commission. Other entries cover agriculture, fish and wildlife, commercial fishing, maritime transportation, mining and drilling on federal lands, nuclear energy, and oversize or overweight vehicles.

An EIN is a tax ID number. It is not a license. The SBA says you need an EIN to “pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.” The Los Angeles registration checklist asks an LLC for its EIN, so you may want to get the EIN before you apply for a city registration.

Which address goes on a business license?

Local licenses can be tied to where the business operates. The Los Angeles registration covers businesses “conducting business activities within the City of Los Angeles.” Its checklist asks for two addresses: “Business Address and Primary Mailing Address (if different).” The page explains them as “Where your business is located and where you receive mailings.” Another Office of Finance page asks for “The exact business address and primary mailing address for your business location if different from the business location.”

The CDTFA also ties the seller’s permit to places of business. Its FAQ says you are engaged in business in California if you “Have an office, sales room, warehouse, or other place of business in this state (even if the location is only temporary).” It also says “If you have more than one place of business (located on different premises), you may need a separate permit for each location.” Its FAQ also names the business address and the mailing address separately when it asks you to report an address change. Our guide to California seller’s permit address fields explains each field.

The SBA says “Your business location determines the taxes, zoning laws, and regulations your business will be subject to.” None of the pages we read say that a mailing address alone decides which city license you need. If your LLC is formed in one state and has an address in another, our guide to business licenses at a virtual address in another state covers that question.

Ask the licensing office whether a given address may go in its business address field. For the LLC’s general mail, our Los Angeles business address and Silicon Valley virtual office address pages describe the business addresses save office offers.

How to find which licenses your LLC needs

The SBA says “You’ll have to research your own state, county, and city regulations.” It suggests you “Visit your Secretary of State’s website to find out which permits and licenses you need.” Some states offer a tool for this. Washington’s page points to its Business Licensing Wizard, which gives “a list of agencies to contact, additional endorsements and helpful tips about your business license.”

Licenses also need upkeep. The SBA says “Some licenses and permits expire after a set period of time.” Washington’s Department of Revenue says “Most city and state endorsements must be renewed annually.” Los Angeles collects the first year of tax when you renew the BTRC.

1. 1Check the SBA’s federal list to see if your activity needs a federal license or permit.
2. 2Check your state’s Secretary of State and Department of Revenue sites for state licenses and tax registrations, such as a seller’s permit.
3. 3Check the city and county websites for each place where your LLC conducts business.
4. 4Ask each office which address it needs, and keep the business address and mailing address apart where the form asks for both.
5. 5Write down each license’s renewal date.