The two types are based on existence and activity. A license to operate as a medical professional, for instance, requires the appropriate license, no matter what the activity – a licensed physician doesn't have to obtain a separate license for anything that falls under the scope of his or her practice. However, anyone operating a medical business (that treats patients) must be licensed to practice medicine. This is an existence based license. It would include business such as plumbers, electricians, lawyers and other professionals who require licensing to operate in their profession. Generally, if your business uses a known profession in the name, an existence license will have to be obtained.
And activity license gives permission to do a particular activity in commerce. This may be added to a basic license – for instance, a physician who wishes to take X-rays in their office might need an additional license – or may be a completely separate undertaking, unrelated to the basic license. Anyone who wishes to transport goods in interstate commerce has to obtain the proper inspections and permits on their vehicles. The interstate transport of goods requires an activity license for anyone wishing to participate.
Permits are usually obtained at the local level – either city or county. A local permit may be needed each time an activity occurs (such as putting on a fireworks show) or may be general (operating a vending machine within city limits). Professional licenses are issued at the State level and valid throughout the State. Some States recognize the professional licenses of other States (the legal term is reciprocity).
Federal licenses and permits are also required for certain activities that are regulated on the Federal level. These may include transportation (import and export), manufacturing of regulated materials and some investment services.
Business owners are responsible for knowing which permits and licenses they need to operate. Severe penalties and possible criminal charges can result from a failure to obtain proper licensing. All levels of government must be questioned – sometimes an activity will require more than one type of license from more than one agency.
Not all of these licenses (or permits) are required, and others might be in some jurisdictions, but these are the most common:
Proper licensing and permitting can seem like a burdensome chore, but it is better to have a permit that isn't needed than to operate without one that is. Renewal and inspection is also part of the process, as well as keeping up with required continuing education.