There are a lot of things you have to deal with when starting an online business. From product to platform, inventory, operations, finance, marketing, branding and a host of other things it takes to start a profitable brand.
Operating a virtual office does not eliminate the need to produce certain legal documents. A business license is one such document. Can I sell online without a business license? Some questions may cross your mind, like do you need a business license to sell on Shopify, and many more. So, keep reading on.
What Is a Business License?
A business license allows you to run your own business. The specific business licenses you will need vary from state to state, but their purpose is the same: they show that you have government approval to operate your business in the area in which you have been approved.
Do You Need a Business License to Sell Online?
Do I need a sellers permit to sell online? The short answer to whether a business license is a requirement to sell online: yes. A business license is a requirement for selling online and is an important part of setting up your business as legitimate and legal. But applying for an online sellers permit is not as easy as just asking for a document. There are several other considerations to take.
Read also: Complete Guide: Online Business Registration Philippines
Requirements for Online Selling
There are also some requirements for selling online that you will need to meet in order to start your e-commerce business, besides “business license”. Some of it won’t apply to you directly, but it’s essential to know them all to make sure you have the right working documents before you start selling online.
Business License (General License)
A business license, sometimes called a “business operating license” or a “general license” that allows you to operate as a business in a certain area.
Almost any business, whether online or not, will require a business license to operate. How to get a business license? The requirements for obtaining a business license vary by region, as do the fees to apply for a license (in general, they are relatively low). The commercial license will need to be renewed every few years.
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Seller’s License
Do you need a business license to sell on Instagram? If your business sells taxable products, most states require you to obtain a seller’s license, whether your store has a physical location or is online-only. You will need to collect sales tax, which your seller’s license allows you to do.
It may also allow you to purchase certain products from suppliers without paying sales tax. This happens through what is known as a “resale certificate”, which shows that the products you are buying will be sold in your store, whether wholesale or retail.
Again, this requirement varies from state to state, so you will need to check with your local jurisdiction to find out if you need a seller’s license. Additionally, if you actually operate in multiple states – even including home inventory – you may need to apply for multiple seller’s licenses per state.
One additional thing to note: in some states, there are so-called “temporary seller’s licenses”, which allow you to sell online temporarily if that’s all that you need.
Read also: How to Become a Reseller in Shopee? Do I Need a License?
Sales Tax License
An important part of being able to sell products online is calculating sales tax for customers. It’s a requirement, not an option – which means you’ll have to bear the cost if you don’t.
As such, you will need a sales tax license. As you’d expect, this varies from state to state, as sales taxes also vary from state to state. You should check with all of your local municipalities and the jurisdictions in which you do business.
Your state may also require additional sales tax returns, so again, be sure to ask about regulations in your area.
Employer Identification Number
EIN is very important for every business. An employer identification number is like a social security number for your business: it identifies you as a business and helps you comply with taxes and other regulations. If you are considering incorporating as a business other than sole proprietorship, this is essential.
Another thing the EIN allows you to do is get a business bank account. This may seem secondary, but you will need your income paid into a separate business account, as it is important to separate your business and personal assets.
License “Doing Business As”
Most businesses register a business name when they register their business with their state. However, not all business entities are required to be registered, namely sole proprietorships and general partnerships. In this case, your company name is by default your legal name.
However, if you don’t want to run your business in your own name – or if you want to operate under a different business name than you have registered with your state – then you will need to consider DBA license. This will allow you to operate under a trade name. If you use a different name, you will also need your DBA license to perform certain contracts, such as opening a business bank account.
This online seller business permit will only apply to certain companies, but, again, you’ll want to check with your state to determine what regulations they have regarding DBA licensing. If you’ve used a different name and want to change it, it’s especially important that you look into it.
Home Occupation Permit
If you work from home as reseller, which is common for many online sellers, you may need a home occupation permit as reseller permit for online business. This is a fairly common license, especially for businesses that ship from home. If you hire employees, you will likely also need a home occupation permit. Different cities, counties, and states will have different rules about whether a home residence permit is required.
Determining Which Business Licenses You Need to Sell Online
Your nearby jurisdiction will decide what sort of licenses are necessary to sell online. Some might also additionally require a few licenses and probably aren’t in this listing and that can be proprietary in your area. You’ll need to test federally as well as at the state, county and city level.
Do I need a business license to sell crafts? The licenses you need might also rely on the varieties of products which you’re selling. For instance, in case you had been selling fireworks, you’d possibly want a specific license than if you had been selling jewelry.
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How to Apply for an Online Business License
To apply for an online selling permit for your business explained below.
Check the Rules in Your State
As with other parts of the process, when you need to apply for an online business license to sell online varies depending on where you’re selling. In some cases, you may have to register before you can start selling. In other areas, you may need to reach a certain size before you need to apply for permits and licenses.
How Much Does a Commercial License Cost?
The basic business license will have a nominal fee of $50 to $550. Some licenses may not cost anything.
Keep in mind that you will also incur costs when you want to renew your license – some licenses will be lower on renewal. The biggest cost of a business license is not getting one at all. You can be charged large fees if you are selling without a business license or the license expires.
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Requirements to Get a Business License?
It is important to review the specific requirements of your local jurisdiction to determine exactly what you need to apply for a license to sell online. However, there are certain documents that you can gather in advance to make the process go smoothly.
Make sure you have information about the type of legal entity you do business in, the required tests or permits specific to the products you sell, the name in which you will be operating and, in some cases, EIN.
Conclusion
After knowing do online businesses need to be registered, now you will realize how important a business license is. Including when you sell online at Amazon business license is also needed.
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