Small business resources commonly advise the entrepreneur that his business exists as soon as he makes his first sale. While this may be true in the sense that sole proprietorship simply means being the sole owner of a business, it's not wise legal advice. Most states require you to obtain some form of license to start your business, even if it is a sole proprietorship.
Business Licenses
Most local governments require business owners to obtain some type of license to operate their businesses. This may or may not be the case where you live, as regulations vary by state, city and even county. In the cases of county and city licenses, the license simply allows the business owner to operate within the jurisdiction. States, on the other hand, typically only require licensing for businesses whose product or service can greatly affect customers' wellbeing, such as bartenders, hairdressers, financial advisers and mechanics. Contact your county clerk, city hall and secretary of state to find out what licenses your business requires.
Sales Tax Licenses
Even after your business is legal in your area, you shouldn't sell anything until you obtain a sales tax license or permit from the state tax department. A sales tax license or permit allows you to charge taxes to your customers, and in some states, you may face criminal charges for not having one. Sales taxes typically only apply to transactions with in-state customers, but contact the tax department in each state where you do business to make sure.
Resale Licenses
Wholesalers work as the middlemen between manufacturers and retailers. They supply goods to the retailer in large quantities and at reasonable prices --- that is, at a discount and free of sales tax. This arrangement is as attractive to retailers as it is to some dishonest consumers, which is why wholesalers commonly require proof of business ownership from their buyers. An employer identification number may suffice in some cases, but other wholesalers may require you to furnish a resale license or certificate. You can obtain one from the same place you get your sales tax license.
Occupational Licenses
Like state governments, the federal government requires certain types of businesses to have licenses. Licenses are necessary for businesses that handle highly regulated items such as food, weapons and financial advice. If your business involves more than one such item, you may need multiple licenses. You may wish to hire an attorney to help you navigate the process to avoid legal repercussions.
