Licensing & Compliance
Business Licensing Checklist for Service Trades
Short answer
Every service business needs an EIN, a state or city business license, and (in most states) a sales tax permit if you sell parts. Regulated trades (electrical, plumbing, HVAC, contractor) add a state trade license on top.
Licensing is where most owners either overpay a formation service for things they don't need — or skip a real requirement and get a $500 fine two years later. Here is the actual list.
The stack of licenses, from federal to local
| Level | What you need |
|---|---|
| Federal | EIN (free at irs.gov) — required to hire, open a business bank account, or file as an LLC / S-corp |
| State | Trade license if you're regulated (electrical, plumbing, HVAC, contractor), plus a sales tax permit if you sell tangible goods |
| City / county | A general business license — flat fee ($50–$300 / year) in most municipalities |
| DBA | "Doing Business As" filing if your legal name and operating name differ ("Bob Smith" operating as "Smith Plumbing") |
Regulated trades that require a state license
- General contractor (in ~40 US states above a dollar threshold)
- Electrical
- Plumbing
- HVAC / mechanical
- Pest control
- Locksmith (many states)
- Landscape contractor (some states, over a threshold)
- Cosmetology / esthetics
Sales tax permits — the one owners forget
In 45 US states, if you resell parts or materials to a customer, you must collect sales tax and remit it. Most states offer a resale certificate so you don't pay tax when you buy materials — but you must have the permit first.
Registering is free in most states and takes 10 minutes online. Missing it is one of the most common audit triggers for trades.
The order that saves you weeks
- Register your entity (LLC or S-corp) with your state.
- Get your EIN from the IRS.
- Open a business bank account (bank will ask for both).
- Apply for state trade license if regulated — some require 2–4 years of documented experience.
- Apply for sales tax permit at your state's department of revenue.
- Apply for city / county business license.
- File DBA if your operating name differs.
- Buy insurance (see the insurance guide) — many licenses require proof of GL and workers' comp before they'll issue.
Frequently asked questions
Do I need an LLC to start?
Legally, no — you can operate as a sole proprietor. Practically, most trades set up an LLC before their first job to separate personal assets from business liability. Formation costs $50–$500 depending on state.
Do I need a license to work in another state?
Yes for regulated trades. Some states have reciprocity (they'll accept your home-state license) but most require a separate application. Check your target state's licensing board before quoting work there.
What happens if I skip the sales tax permit?
You'll owe every dollar of uncollected sales tax plus penalties (typically 10–25%) and interest going back to your first sale. It's cheaper — by orders of magnitude — to register on day one.
Run the whole job in one app.
Signed estimates, invoices, payments, and customer records — Glo Invoice keeps the paperwork side of the business quiet so you can work.