Do I Need a Business License to Sell Online?

Do I Need a Business License to Sell Online?

If you’re starting a new online business, or even taking over an existing one, there are so many things to think about.

Staff, inventory, premises, finances, suppliers, marketing, websites, eCommerce solutions – the list is endless, so you can’t blame people for forgetting or not thinking about paperwork and the less exciting aspects of a new venture. 

But without getting the correct paperwork and legal formalities in place, you simply won’t be able to operate your business in a proper manner. 

So the short answer to the question “do I need a business to sell online” is: almost certainly yes..

There is a slightly longer answer, and that’s what Latona’s is here to help you with. 

What is a business license?

A business license is a permit that allows you to run your operation and shows you have been approved by whichever jurisdiction your business is located in.  

It may be issued by national, state or municipal authorities, depending on the nature of the license or your business. But even if you don’t have a physical presence like a store or warehouse, in all likelihood you will need a business license for your online store, wherever you are based. 

A business license will convey an element of legitimacy to your operation: whether you are an eCommerce business operating entirely online, or whether you have a physical presence, it will tell other businesses that you are a serious enterprise and encourage them to deal with you. 

You will have to pay a fee for your business license, which will vary from location to location, but in the US you will probably have to pay something in the region of $50-200. 

The specifics of what a business license entails will depend entirely on where you are: these things differ from country to country, from state to state and even from county to county. 

Why do you need a business license?

You will have enough to worry about when establishing your eCommerce business, so you may ask “do you need a business license for an online store?” 

It might feel like needless bureaucracy, but it is important. You may need the license in order to register with your local authority for tax purposes, or perhaps so that you operate under the requisite industry regulations, or simply so that the government can keep tabs on how you are operating. 

Without one, you may not be able to operate at all: other businesses may not wish to deal with you, you may not be able to register your business for tax purposes, and you may be subject to significant fines, depending on the regulations in your area. 

In the US, you will need a federal license if your business deals with anything that is heavily regulated by the Food and Drug Administration: consumables, medication, animal products and even explosives can fall under this umbrella. 

It’s crucial to discover what the exact regulations in your local area are, and ensure you and your business complies with them. It’s arguably more important than any business plan you can put together: if you aren’t allowed to trade and operate, then there isn’t much point in putting in any of the other work. 

Will you also need a seller’s permit?

Again, this will depend on your location and what sort of business you operate, but if you are selling any kind of products the likelihood is you will also need a seller’s permit.

In short, a business license allows your business to operate, a seller’s permit will probably be required for you to sell your products. In the US, the seller’s permit will allow you to collect sales tax on whatever you sell, which you then must pass on to the relevant taxing authorities. 

There are five states which do not collect sales tax: Alaska, Delaware, Montana, Oregon and New Hampshire, but even if your business is located in one of these states, it’s best to check whether you still require a seller’s permit.

How do you get these?

The first step you must take is to form your business, register it with the necessary authorities, settle on a name, and establish what sort of business entity you are. You’ll also probably need to apply for an employee tax identification number – this varies from state to state, but in many cases you will need this number for your business license. 

When that is taken care of, get in touch with your local authority to discover what the relevant regulations are. There are various different types of business licenses so it’s important to ensure you apply for the right one, so you can get on with growing your operation.

Jurisdiction can be tricky, particularly if you are running an eCommerce business that wouldn’t typically have a physical, bricks and mortar home. If you are operating outside the US, for example, you may encounter problems with overlapping regulations, which unless you are careful could result in you having to pay two types of sales tax. It’s handy to have a US mailing address and phone number, which are easy enough to obtain even if you aren’t actually operating in the country. 

You will need to provide plenty of information about your business – what you sell, where you are located, your primary method of sales etc – so make sure you have all of your paperwork in order before you apply, otherwise it could be a drawn-out process.

These things can be confusing, so if you are in the US it is worth consulting the Small Business Administration website, who will be able to guide you through the process, and if you are really unsure then consult an accountant who should be able to point you in the right direction.

For the most part though, once you have determined what sort of license you require and have all the required information ready, the process should not take too long. Most states or regulatory authorities will allow you to apply for a license through their websites. Business licenses will have to be renewed every year or two, depending on your local regulations, but again this should be a relatively straightforward process.

If you are only operating a temporary business, you may not necessarily need a permanent license: you might be able to apply for a temporary permit, but if your intention is to set up in the longer term, you will need a full license. 

Buy a business from Latona’s

Now you’ve got your business license, it’s time to start doing something with it.

There are plenty of options of course: you could have a brilliant idea of your own, you could be joining an existing business or you could be taking one over from a family member.

Alternatively, you could be in the market to buy an existing business, and that’s where Latona’s can help.

We have thousands of businesses listed with new ones being added every day, in a huge range of different areas. 

See the eCommerce businesses we are selling here. New listings are added every day.