Business Licensing Requirements for Online Sellers
The short answer is yes. You do need to apply for a business license regardless of where you plan to host your site. For example, if you’re planning to use Shopify as a platform for your online shop, you won’t need a separate business license because they provide one for you automatically when you sign up.
Starting an Online Business
Hence, can I just start selling online? If you haven’t gotten a license yet, you can still set up your online store and sell a few products. The hassle of filing expensive legally binding paperwork doesn’t make sense unless you have a viable business. Be aware that as an online seller, you will need to comply with certain legal requirements, such as obtaining business licenses and permits from the relevant local, state, and federal authorities.
If your local jurisdiction requires a business license, it usually applies to any type of business, regardless of its nature or location. This means if you operate an online business from your home, you must still adhere to the local licensing laws. Local requirements vary widely, so it’s essential to consult your city or county government to understand the specific requirements that apply to your online business.
You can usually find the licensing form by visiting the website of your local agency that regulates businesses. However, state and local laws can differ significantly on permitting and licensing requirements. This may mean that if you only occasionally create something and sell it to someone under your own name, you aren’t violating any laws or ordinances by not having a license or permit to do so.
Taxation Considerations for Online Sales
Do companies like Shopify take care of licensing for you? Shopify doesn’t require sellers to have a business license to sell products via its platform. Sales tax registration is required when a seller has either economic nexus or a physical presence in the state.
How do taxes work if I sell stuff online? If you’re not making a profit, the IRS is not interested in you or your business. But once you start to make money, it’s important that you report all of your income come tax time. Here are steps to register your online business once profitable:
- Choose a Business Structure
- Obtain a Federal Tax ID Number
- Register for State Taxes
- Get Necessary Licenses and Permits
Informal Selling Online
Can I sell stuff without officially being a registered business? Yes, you can buy and sell on sites like eBay, Etsy, Amazon without forming a business or having a license. This allows you to test ideas before registering a formal business.
So in summary – you technically can sell online without formal business registration, but once profitable, you need to take steps to legally register your business for tax and licensing purposes. Requirements vary by location, so check your local laws.