LLC vs. Business License - Which Comes First?
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When you’re starting your business, there’s a lot of initial paperwork that needs to get filed. Sometimes, the order matters; sometimes, it doesn’t. But one of the most frequently asked questions is: should I file my business license or my LLC paperwork first?
The process of forming an LLC (limited liability company) and obtaining a business license can vary depending on the laws and regulations of the state and local government where you plan to operate your business.
However, in general— and in every locality I’ve seen— the formation of an LLC typically comes before obtaining a business license.
Forming an LLC is the process of legally creating a new business entity that is separate from its owners. Think of it as it’s own little marionette puppet— controlled by the owners, but separate in its body. You form the company first before any other step— if you think about it rationally, it makes sense that you’d need something to be in existence before you can start getting licenses and tax numbers!
This process involves filing “articles of organization” with the state where the business will be located, paying any necessary fees and meeting other legal requirements. Once the LLC is formed, it exists as a legal entity and can apply for a business license (so long as all information is kept up to date and annual fees remain current!).
Because they are seen as separate from the owners, LLCs can actually shield business owners from personal liability as well.
A business license, on the other hand, is a permit issued by the local government that allows a business to operate within its jurisdiction. The requirements for obtaining a business license can vary depending on the type of business and the location. Generally, a business will need to provide proof of its legal formation, such as a certificate of organization or articles of incorporation, as well as other information such as a tax ID number and proof of insurance. Sometimes, businesses— even home businesses— must go through a modified “zoning” process before they can obtain the business license.
➡️ TL;DR? While the exact process may vary depending on the location and type of business, forming an LLC typically comes before obtaining the business license (I can’t think of a time when it wouldn’t, but never say never).
If you’re feeling confused, it may be helpful to consult with an attorney or business advisor to ensure that you are in compliance with all applicable laws and regulations specific to your state and locality!
