Vermont Business License Basics

Turning your business idea into reality in Vermont begins with officially registering it. The registration process involves several steps, including choosing a business structure, selecting a business name, obtaining necessary licenses and permits, and registering for state taxes.

As you read this guide, you’ll better understand what’s needed to make your business official.

Related: Starting A Business In Vermont Checklist

Step 1: Business Structure

The first step to registering a business in Vermont is selecting a business structure. A business structure (also referred to as a business entity) is how a business is organized to do business.

There are four common types of business structures: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each offers varying levels of control, flexibility, personal liability protection, and tax obligations.

Related: Comparison of Business Structures

Sole proprietorship: This is the simplest business structure, where an individual operates the business without a separate legal entity. Profits and losses are reported on the owner’s personal tax return, and the owner has unlimited personal liability. This means if the business is sued, the owner is personally liable.

• Pros: Easy to set up, low start-up costs, and minimal paperwork.
• Cons: Unlimited personal liability, difficulty raising capital, and limited growth potential.

Related: How to Start a Sole Proprietorship in Vermont

General partnership: This is a form of business ownership where two or more people own and operate a business together. Profits and losses are divided among the partners and reported on their personal tax returns. Each partner also has unlimited personal liability for the business.

• Pros: Easy to set up, shared responsibility, and pooled resources.
• Cons: Unlimited personal liability for each partner, potential conflicts, and difficulty dissolving the partnership.

Corporation: A corporation is a separate legal entity owned by shareholders. It provides limited liability protection to its owners, meaning shareholders are not personally liable for corporate debts. Profits and losses are taxed at the corporate level, and dividends paid to shareholders are taxed again at the individual level, resulting in double taxation.

• Pros: Limited liability protection, easier access to capital, and transferable ownership.
• Cons: Potential for double taxation, more complex paperwork, and higher administrative costs.

Related: How to Form a Vermont Corporation

Limited Liability Company (LLC): An LLC is a hybrid structure that combines the limited liability protection of a corporation with the tax flexibility of a sole proprietorship or partnership.

• Pros: Limited liability protection, tax flexibility, and fewer administrative requirements than a corporation.
• Cons: More complex and costly to set up than a sole proprietorship or general partnership.

Related: How to Form a Vermont LLC

Step 2: Business Name

After choosing a business structure, some Vermont entrepreneurs will need to register a business name.

In Vermont, sole proprietors and general partnerships automatically operate under the owner’s legal name. However, if they wish to use a different name for their business, they must register a Vermont Assumed Business Name (also known as a DBA (Doing Business As) with the Vermont Secretary of State’s office.

For example, a sole proprietor in Vermont, John Maple, decides to start selling maple syrup. If John chooses to operate under his full name, “John Maple,” he doesn’t need to register an Assumed Business Name. However, if he wants to call his business “Maple’s Syrup,” he would need to register this name.

To register an Assumed Business Name, John first needs to check the availability of “Maple’s Syrup” using the Vermont Secretary of State’s online business name search database. Assuming the name is available, John would then file the necessary paperwork with the Vermont Secretary of State’s office to register his business name.

Corporations and LLCs typically don’t register an Assumed Business Name, as they already registered a unique entity name from their formation process. However, they might choose to do so if they want to operate an additional name.

Step 3: Federal Employer Identification Number 

Another common step for many businesses after choosing their business structure and name is obtaining a Federal Employer Identification Number (FEIN), also known as an EIN. This unique nine-digit number, issued by the Internal Revenue Service (IRS), serves as a federal tax ID for your business.

An EIN is necessary for certain types of businesses and situations. You’ll need one if your business has employees or if you’ve structured your company as a corporation, partnership, or multi-member LLC. While sole proprietorships and single-member LLCs without employees can use the owner’s Social Security number for tax purposes, many still opt for an EIN.

How to Apply for a FEIN

Step 4: Professional & Industry Licensing

Various professions in Vermont are regulated and require registration before offering services in the state. The Vermont Office of Professional Regulation oversees licensing for numerous professions, including:

• Barbers
• Athletic trainers
• Tattoo artists
• Real estate agents
• Nurses
• Accountants
• Architects
• Veterinarians
• Electricians
• Psychologists

This list doesn’t cover all of them. To learn more about which ones do, visit the Vermont Office of Professional Regulation.

In addition to professional licensing, some businesses require specific state licensing. Depending on the industry, these licenses are typically handled by different state agencies. A few examples include:

• Food Establishments: The Vermont Department of Health’s Food and Lodging Program oversees licensing for restaurants, cafeterias, food trucks, and other food service operations.
• Day Cares: Childcare facilities are licensed by the Vermont Department for Children and Families, specifically the Child Development Division.
• Salvage Yards: The Vermont Agency of Natural Resources, Department of Environmental Conservation, handles licensing for salvage yards.
• Liquor Stores and Bars: The Vermont Department of Liquor and Lottery manages licensing for businesses selling alcoholic beverages.
• Pesticide Applicators: The Vermont Agency of Agriculture, Food and Markets oversees licensing for pesticide applicators.
• Home Improvement Contractors: While not requiring a license, these contractors must register with the Vermont Office of the Attorney General.

Professionals and business owners should consult the Vermont Office of Professional Regulation or the relevant state agency to ensure they have all necessary licenses before beginning operations.

Step 5: Business Tax Account

Most Vermont businesses will register for a business tax account with the Vermont Department of Taxes. This process involves obtaining necessary tax permits and establishing tax obligations with the state.

Businesses that need to register include:

• Those collecting sales tax (Sales Tax Permit)
• Vermont employers withholding income tax
• Corporations (or LLCs that elect corporation taxation) paying corporate income tax
• Businesses that are subject to meals and room tax

To register or for more information, visit the Vermont Department of Taxes.

Step 6: Certificate of Exemption

Businesses that purchase merchandise for resale typically benefit from obtaining a Vermont Certificate of Exemption, commonly known as a Resale Certificate. This document allows these businesses to buy inventory without paying sales tax at the time of purchase. When the inventory is sold, the business collects sales tax from their customer and sends it to the Vermont Department of Taxes.

Who needs a Certificate of Exemption:

• Retailers
• Wholesalers
• Manufacturers who resell finished products
• Online sellers who purchase items to resell

To obtain a Certificate of Exemption, businesses must first register with the Vermont Department of Taxes and receive a Sales Tax Permit. Once registered, they can generate a Resale Certificate through their tax account.

Step 7: Business Licenses

While there isn’t a state business license, many Vermont municipalities require specific local licenses for certain business activities. Here are some common types of local business licenses you might encounter:

• General Business License: Many Vermont municipalities require a general business license to operate within their jurisdiction. These are typically issued by the town or city clerk’s office. For example, the City of Burlington requires a General Business License issued by the City Clerk’s Office for most businesses within city limits.
• Food-based Business License: Food-based businesses often require special local licenses in addition to a state health permit. The City of Montpelier, for example, requires a “Food Establishment License” issued by the City Clerk’s Office for restaurants and other food service businesses.
• Other Specific Licenses: There are a variety of other specialty licenses that may be required at the local level. For instance, the Town of Brattleboro requires a “Sidewalk Use License” issued by the Town Clerk’s Office for businesses wanting to use public sidewalks for outdoor seating or displays.

Licensing requirements can vary significantly between Vermont municipalities. Some towns may have extensive licensing systems, while others may have minimal requirements. Business owners should always check with their local town or city clerk’s office for specific licensing requirements in their area.

Step 8: Local Building & Zoning Permits

When setting up a business location in Vermont, it’s important to understand local building and zoning regulations before committing to a property purchase or lease. These requirements ensure that businesses operate in appropriate areas and meet safety standards.

Different types of permits and approvals you may need include:

Zoning Permits: These determine if your business type is allowed in a specific location. Zoning regulations vary by municipality and dictate land use, building size, and parking requirements. Check with your local planning or zoning office to understand the regulations for your proposed business location.

Home Occupation Permits: For those planning to run a business from home, some Vermont towns require a special permit. These ensure that home-based businesses don’t disrupt residential areas. Check with your local zoning office for specific requirements.

Building Permits: Required for new construction, renovations, or significant changes to an existing structure. These ensure that any modifications meet local building codes and safety standards. Building permits are typically obtained from the municipal building department.

Certificate of Occupancy: Many Vermont municipalities require a Certificate of Occupancy before a business can operate in a building. This document certifies that the structure is safe and complies with all building codes and zoning laws.

Sign Permits: If you plan to install business signage, you may need a separate permit. Sign regulations can be quite specific, covering size, placement, and illumination. These are usually handled by the local zoning or planning department.

Requirements can vary significantly between Vermont municipalities. Always consult with local authorities to understand the specific regulations in your area.