Every company needs a valid business license irrespective of whether they sell products online or offline. Businesses have to apply for a license. This enables the government to track all the enterprises that are working in that area and even monitor the revenue from taxes.
If you operate the business without a proper license, you can be fined for that. Apart from that, the state will ask you to stop your operations until the paperwork is complete. The renewal of your business is done annually. Here we will tell you all that you want to know about getting business licenses.
Business License For Selling Online: Basics Explained
When You Need To Apply For Business License
In a few places, you need not apply for a business license till you have achieved a particular level of revenue. But in other regions, you have to acquire the license before you start selling your product. You must check the local laws to know the exact specifications. Even if the business license is not mandatory, it is wise to acquire one. For example, the process helps in claiming tax deductions. Your business looks legit and trustworthy by getting a business license. This, in turn, helps you in obtaining further partnerships and finances.
Where To Get A Business License
For every state, the requirements set to get a business license are different. To explore what are the requirements for your state, you should visit the SBA. This will tell what licenses an entrepreneur needs to get and where they have to register for it. Business owners may also apply for the license online.
Requirements For Getting A Business License
Applying for a business license often requires:
- You have to find out the legal structure of your company – If you are a sole proprietor or a limited liability corporation
- Extensive details of your business
- Stage agency issued sales tax license
- Other permits and inspections like liquor license or fire code inspection.
Home Business Zoning
Before they issue a business license, the state or city agencies may conduct a zoning review of the business location. They could also ask for a zoning permit. For e-commerce business owners, this means that you need to confirm if you can run a business from your home. Ecommerce store owners may not face any issue with zoning, but still, it is better to keep this factor in consideration.
Some Of The Zoning Laws Restrict The Following:
- Any kind of physical appearance of the location like adding signage
- The number of employees or visitors allowed
- If you are creating any problem like odor etc
All business owners must get their licenses before they start selling. This will mean that you are following legal practices, and hence you will not be fined. It will also ensure that the eCommerce store is a legal and legit business.
6 Common Types Of Business Licenses And Permits
Apart from getting the ‘business license” document, there are other requirements also that you have to fulfill. Some of these requirements may not apply to you, but you should know about them. You can then ensure that you have all the papers needed before you start.
Business License (General License)
A business license or ‘business operating license’ is like a permit that allows you to run your company in a specific area-like your city, state, or country.
Nearly every business needs a license to operate. The requirements to get a license varies from one place to another. Also, the fees are different, and you have to renew the license after every few years.
If the company you own sells products that need to be taxed as per laws, then most states want you to get a seller’s permit. It is regardless of whether your store is physical or online in nature. You will also have to collect sales tax that your seller’s permit will allow you to do.
On the flip side, getting this license may allow you to buy certain products without actually paying the sales tax. For this, you need what is known as a “resale certificate.” This certificate shows that the products you are buying will be sold through the store, either retail or wholesale.
As we have mentioned before, this requirement will differ from state to state. Find out from your local agency if you need a seller’s permit. Also, if you are physically operating in many states, you will have to get multiple seller permits for each state separately.
An important thing to keep in mind: In states like Idaho and California, you can also get “Temporary seller’s permits.” These will allow you to sell the products online for a brief time.
Sales Tax License
Another crucial aspect of selling your products online is that you have to charge sales tax to the customers. This is mandatory, and if you do not do so, you might have to pay fees.
You will need a sales tax license also. As you might know, this varies from one state to another because the sales tax is different for each state. It will be better if you check with all the municipalities and areas in which you plan to do business.
The state may also need some sales tax permissions, so you will have to check that too with the regulations in the place you are operating from.
Employer Identification Number
The EIN is vital as it acts as a social security number for the business. It will act as an identification for your business and ensure that you follow all the taxes and other rules. If you want to start your business as an entity and not a sole proprietorship, you must get this number.
The EIN allows you to get a business bank account quickly. To you, it may look secondary, but if you want your earnings to go into a different business account, then you have to get this number.
“Doing Business As” License
Most of the businesses will register the business name when they are registering the business with the state. But all the business entities have to register. Mainly, it is sole proprietorships and general partnerships. Then your name, by default, becomes your legal name.
But if you do not want to operate the business under your name- or maybe you want to operate under a name different from the one you have registered- you will have to get a DBA license. This allows you to work under another Trade name. Apart from that, if you are using a new name, you will have to see that your DBA license executes contracts like opening a business bank accounts.
However, this will apply to some businesses only. You will have to check with the state agency to know what rules they have when it comes to getting DBA licenses. If you have used any other name before this and you want to change it, you should look into this matter now.
Home Occupation Permit
If you are running your business from your home, you will need a home occupation permit. This is pretty common, more so if the business is shipping products from home. Also, if you are hiring people, you will need this home occupation permit. Different counties, cities, and states are going to have different rules with regards to if a home occupation permit is wanted or not.
The permit will also help in avoiding breaking laws. For example, if you hang a commercial sign or get considerable foot traffic from shipping companies, you will not be prosecuted if you have the permit.
How To Know Which Business Licenses You Need To Sell Online
This may not surprise you at all. The local jurisdiction will decide what kind of licenses you require to sell online. Few may need licenses and permits that are not provided on the list and are specific to your area. You may have to check both federally and on the state, town, and county levels.
The licenses you want may be dependent on the type of products. For example, if you are selling fireworks, you will need a different license instead of selling cosmetics.
Whatever be the case, you must find out what will apply to you and your business specifically. It will be better if you consult the business attorney at this time so that you get all the appropriate licenses for selling your products online.
The Cost Of A Business License
Thankfully, you do not have to worry that you have to spend thousands of dollars just to get a business license. A basic business license will come with a small fee or just a few hundred dollars. Few permits are issued without any cost,
But remember that you may have to pay fees when you renew these licenses. In some cases, the renewal costs will be less.
The biggest problem here you can face is that you do not get a license at all. You may be charged a considerable fee if you are found to operate without a license or to have an expired license.