Business Licenses and Permits: What You Actually Need
You're making money from handmade goods. But do you have the right licenses and permits? The answer isn't simple—requirements vary wildly by state, county, city, and type of product. A candle maker in Ohio faces different rules than a food maker in California. A jewelry maker in Austin faces different rules than the same maker in Dallas. Most handmade makers operate in a gray area: they're not sure what they need, what it costs, or what penalties they face for getting it wrong. This complete guide breaks down every requirement, the real costs, how to check your specific obligations, and what happens if you get it wrong.
The Reality: You Probably Need More Than You Think (And It's Cheaper Than You Fear)
Most handmade makers skip license requirements because:
- • They don't know what they need
- • They think it's too expensive
- • They're selling online and think "nobody checks"
- • They started as a hobby and never formalized
The problem: Operating without required licenses creates real risk. You could face:
- • Fines: $100-$10,000+ per violation (varies by jurisdiction)
- • Forced shutdown: Your store or studio gets closed
- • Product seizure: Finished goods confiscated and destroyed
- • Tax penalties: Back taxes + penalties + interest if you get audited
- • Legal liability: Harder to defend yourself if a customer gets hurt
The good news: Most licenses and permits are cheap ($20-$500 per year) and the process is straightforward once you know what you need.
Core Licenses Every Handmade Maker Needs to Check
1. General Business License (AKA Business Operating License)
What it is: A basic license showing you have permission to operate a business in your city/county.
Who Needs It
Almost all cities and counties require it if you're operating a business, even from home.
Typical Cost
$25-$200/year (varies by location; some places charge based on revenue)
How to get it: Contact your city or county's business licensing department. Some cities allow online registration. Processing time: 1-7 days.
What it actually does: Lets authorities know you exist. For tax purposes, it doesn't create liability protection (see Sole Proprietor vs. LLC for that). But it's legally required in most places.
2. Seller's Permit / Sales Tax License
What it is: Permission to collect sales tax from customers.
Important Note for Etsy/Shopify Sellers
In most cases, Etsy and Shopify handle sales tax collection for you in states that require it. You don't need to manually collect it. But you still might need the permit for tax compliance purposes.
Who needs it: If you're in a state with sales tax (most states) and selling taxable products, you typically need one—even if Etsy/Shopify collects on your behalf.
Typical cost: Free in most states (you register online with your state's Department of Revenue/Finance)
How to get it: Search "[Your State] Department of Revenue seller permit" or "sales tax license". Most states have online registration. Free. Processing: immediate to 2 weeks.
3. EIN (Employer Identification Number)
What it is: A federal business tax ID number from the IRS. Even sole proprietors can get one (you get a free one).
Who Needs It
If you have an LLC, hire employees, or want to separate business finances from personal taxes.
Cost
FREE from the IRS
Why get it: An EIN lets you open a business bank account, hire employees, and separate your business finances from personal. If you're operating as a sole proprietor and don't have employees, you don't technically need one—your Social Security Number can serve as your tax ID. But it's free and provides privacy (you don't have to use your personal SSN publicly).
How to get it: Apply online at IRS.gov/EIN. Takes 15 minutes. Instant approval for online applications.
Craft-Specific Permits and Certifications
Different products have different requirements. Here's what applies to common handmade categories:
Food Products (Jam, Baked Goods, Chocolate, Honey)
Food is heavily regulated. You'll need:
- Food Handler License: Basic food safety certification (~$15-30, online, 2 hours)
- Commercial Kitchen License: If making from home, you need approval for residential kitchen use (or need access to a commercial kitchen). Varies by state; some allow home kitchens for non-potentially-hazardous foods
- FDA Food Facility Registration: Free online registration if you manufacture food for human consumption
- Cottage Food License (optional): Many states allow certain "non-potentially-hazardous" foods (jam, granola, dried goods) to be made in home kitchens under a cottage food exemption
For detailed guidance, see Handmade Food & FDA Regulations.
Cosmetics and Bath Products
- FDA Cosmetics Registration: Free online registration if you manufacture cosmetics
- Ingredient Labeling: Must include all ingredients on product labels (FDA requirements)
- Soap Registration: If making soap with lye (cold-processed), it's classified as a cosmetic. Bath bombs and fizz products have specific requirements
See Cosmetics and Bath Products Regulations for full details.
Textiles and Finished Goods
- Lead and Phthalate Testing: For children's products, textiles, and painted items. Testing costs $100-$500 per product
- Care Label Requirements: Must include fiber content and care instructions
- CPSIA Certification (for children's products): Third-party testing and certification required
See Textiles and Lead Testing Compliance.
Jewelry and Precious Metals
- Precious Metal Hallmarking: If claiming gold, silver, or platinum content, must have proper assay testing and hallmarking (usually done by suppliers or testing labs; ~$50-$200 per batch)
- Gemstone Disclosure: Must disclose if stones are natural, synthetic, or treated
See Jewelry and Precious Metals Standards.
Candles and Wax Products
- Burn Testing: Some platforms (Amazon, Etsy's insurance partners) require burn testing for candles (~$300-$1,000 per test)
- Fragrance Disclosure: Must disclose fragrance ingredients on labels
- Warning Labels: Fire hazard warnings required on all candles
State-by-State Variations (It's Complicated)
Business license requirements vary dramatically by state. Some examples:
California
Requires general business license in most cities. Also has high requirements for food and cosmetics manufacturing.
Texas
Some cities require business licenses; others don't. Home business permits vary by city.
New York
Business license required. State-level sales tax license required. Additional city/county permits may apply.
Colorado
Some cities require licenses; others are very lenient. County level varies widely.
The only way to know what applies to you: Check your specific city and county government websites. Search "[Your City] business license" or "[Your County] business permits" or call your city's business development office.
Home-Based Business Permits and Zoning
If you work from home, you might need additional permits. Here's what you need to know:
Home Occupancy Permit
Many cities require a "home occupancy permit" or "home business permit" if you run a business from a residential address.
- • Cost: $20-$200/year
- • What it does: Lets your city know you're running a business from home (for zoning purposes)
- • Requirements: Usually just paperwork; no physical inspection
- • Where to get it: Your city's building/zoning department
Zoning Restrictions
Your neighborhood's zoning classification determines what types of home businesses are allowed.
Most residential zones allow: Handmade crafts, art, jewelry, small-scale manufacturing that doesn't create noise, odor, or traffic
Usually NOT allowed from residential: Heavy manufacturing, food production (in most jurisdictions), auto repair, retail stores with customer foot traffic
Check your zoning classification by contacting your city's planning department or viewing the zoning map on your city's website.
Commercial Kitchen Requirements (for Food)
If you're making food, even from home, check if you need a commercial kitchen or can use a home kitchen.
- • Some states allow "non-potentially-hazardous" foods (jam, granola, cookies) in home kitchens
- • Other states require all food production in licensed commercial kitchens
- • Commercial kitchen access costs $15-$50/hour or $100-$500/month depending on the facility
Real Cost Breakdown: What You'll Actually Spend
Here's what typical licenses and permits actually cost:
Annual renewal required
One-time registration with state
One-time from IRS; optional for sole proprietors
If required by your city
One-time or 3-year renewal (varies by state)
If home kitchen not allowed
One-time per product (may be required by platforms)
Typical Annual Cost (General Handmade Maker)
If you don't make food or highly regulated products: $25-$400/year for basic licenses.
If you do make food or need specialized testing: $500-$2,000+/year depending on product and location.
The Hidden Challenge: Renewal Deadlines
Most licenses and permits require annual renewal. Missing a deadline means:
- • Your license becomes invalid
- • Operating without a valid license can result in fines
- • Late renewal fees (often 50% more expensive)
- • Possible business interruption
Best practice: Create a calendar reminder for each renewal deadline (usually the anniversary of when you first obtained the license). Mark it 30 days in advance so you have time to renew.
Most renewals can be done online or by mail, taking 5-15 minutes. The key is not forgetting.
Your Action Checklist: Getting Licensed and Permitted
- Identify your jurisdiction(s): What city and county do you operate in? (If you have a home studio, that's your jurisdiction; if you're shipping from multiple states, you're typically regulated by your home state/county)
- Check zoning: Look up your property's zoning classification. If you're in residential, confirm home businesses are allowed.
- Search requirements: Go to your city's website and search "business license" or "business permits". Also check your county website.
- Identify craft-specific rules: If you make food, cosmetics, or other regulated products, research those specific requirements (see Legal Compliance & Business Structure hub for craft-specific articles).
- Register: Get your general business license first. Then seller's permit. Then any craft-specific permits.
- Apply for EIN: Free; takes 15 minutes at IRS.gov.
- Set renewal reminders: Create calendar alerts for each license/permit renewal date.
Pro Tip: Start With Your City
Your city's business development office (or website) is your single best resource. They'll tell you exactly what you need. One phone call saves hours of research.
Key Takeaways
- Most handmade makers need at least 3 things: General business license, seller's permit, and an EIN (or equivalent for tax purposes).
- Craft-specific requirements exist for food, cosmetics, textiles, jewelry, candles, and other regulated products. Research YOUR craft.
- It's cheaper than you think: Most licenses are $25-$200/year. Craft-specific testing might add $300-$1,000 per product.
- Your city/county has the answers. Contact their business development office or check their website first.
- Renewal dates are critical. Set calendar reminders to avoid operating with expired licenses.
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