State and Local Licensing Requirements for Independent Contractors

You might need a license to work as a freelancer

I'm a freelance software developer. Do I need a business license to work as an independent contractor?

It depends on where you work and what kind of work you do. A few states -- such as Alaska and Washington -- require all businesses to get a state business license. Most states don't have this requirement, but they do require people in certain occupations -- for example, doctors, lawyers, nurses and architects -- to get a license. I don't know of any state that requires software developers to obtain a special business license.

Many cities, counties and municipalities require local business licenses, even for one-person, home-based operations. Usually, you just have to pay a fee to get this type of license. Some cities don't impose license requirements at all, or exempt very small businesses.

To figure out what to do, call the appropriate local official in charge of business licensing. This is often the city or county clerk, the planning or zoning department, the city tax office, public works department or building and safety department. Your local chamber of commerce may be able to tell you who to call.

One word of warning: before you apply for a local business license, check your local zoning laws to make sure that home businesses are allowed where you live. If your city or county bars home businesses and enforces the ban, you could get into trouble when you apply for a license. You'll have to provide your business address to get the license, and your city and county may check first to see whether the area is zoned for business.

Many self-employed people, particularly those who work out of their homes, never bother to get a local business license. If your local government discovers that you're running an unlicensed business, it may fine you and prohibit you from continuing your business until you get a license. However, the chances of getting discovered are probably small, especially if you're not doing anything to annoy your neighbors (and increase the likelihood that they will report you to the local authorities).