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Is a Business Licence Required to Sell Online?

Your internet business will most likely require a licence in your native city or state. Permits may also be required in other states.

To operate an internet business, you must have a business licence. The licence allows you to legally sell items and establish your e-commerce firm as a taxpaying organisation. However, the name of that business licence and the fee of it will differ. For further information, go to the websites of your local and state governments.  

As your company expands, you may need to obtain more licences, including those from neighbouring states. For example, if you sell items that are subject to sales tax, you may require seller’s permits or vendor’s licences in the states where your consumers reside. 

Here’s everything you need to know about online business licences.

What is the definition of an e-commerce business licence?

A business licence demonstrates that you have received official authority to conduct your firm in a certain location. There is no one licence designed just for e-commerce enterprises; the licence required will differ per jurisdiction.

A “general licence,” “business operating licence,” or “business privilege licence” are all terms used to describe a business licence. Almost every firm, whether online and offline, will require a business licence to function. The procedures for acquiring a business licence vary by state and locality, and annual costs can go into the hundreds of dollars.

General business licences are not required in Texas, however specialised industry licences may be necessary.

Do physical retailers require a separate business licence to sell online?

No, a separate online business licence is not required to grow a brick-and-mortar enterprise into e-commerce. Your company licence allows you to sell your products and registers you to pay the taxes for which you are accountable, but it does not differentiate between online and in-person sales.

Other forms of online selling licences

Aside from a company licence, there are other criteria for selling online. Some of them will not immediately relate to your online business — at least not right now — but it’s critical to be aware of them all so you can ensure you have the proper operating documentation before you begin selling online.

A vendor’s licence or a seller’s permit

If your firm sells taxable goods, most states need you to get a seller’s permit or vendor’s licence, regardless of whether your online store has a physical presence or is entirely online. You must collect sales tax, which a seller’s permit permits you to accomplish.

Simultaneously, a seller’s permit may allow you to buy specific items from suppliers without paying sales tax. This is accomplished through the use of a “resale certificate,” which certifies that the things you’re purchasing will be sold through your shop, either wholesale or retail.

Again, this need differs by state, so you should check with your local authority to see whether you need a seller’s permission or vendor’s licence. Furthermore, if you operate in many jurisdictions, including maintaining inventory in multiple states, you may be needed to get seller’s permits in each state.

Some jurisdictions provide “temporary seller’s permits,” which allow you to sell for a limited time without having to apply for a complete seller’s permit. 

Licence for sales tax

Charging customers sales tax is an important aspect of selling things online. It is needed to collect sales tax and pay it to the appropriate state government, and failure to do so might result in a punishment.

As a result, you will require a sales tax licence. In certain areas, such as California and Ohio, your seller’s permit may enough to meet this criterion. Even if you don’t require a general business licence in Texas, you’ll need a sales and use tax permit.

Many e-commerce website builders include solutions to assist you in collecting sales tax from your clients and remitting it to the appropriate state agencies. 

If you sell on a marketplace like Amazon or Etsy, you may not require a seller’s permission or a sales tax licence since these platforms collect and remit sales tax on their sellers’ behalf. Consult your state’s rules for further information. 

Identification number for the employer

An employer identification number (EIN) functions similarly to a Social Security number for your company: It’s a code that the IRS uses to identify your company. An EIN is required if you want to organise as a business entity other than a sole proprietorship.

Aside from that, an EIN allows you to create a company bank account. According to NerdWallet, every company owner should open a business checking account to help keep their business and personal funds separate. 

The IRS website allows you to obtain an EIN in a matter of minutes. 

Registration of “doing business as” 

When most business owners register their company with their state, they give it a name. Not all business organisations, however, are needed to register in every state. If you’re a lone proprietor, for example, the name of your company will be your legal name.

If you don’t want to conduct your business under your own name — or if you want to use a name other than the one you registered with your state — you might consider creating a DBA. This will allow you to operate under a trade name. 

Permit for Home Occupation

If you run a home-based business, as many internet vendors do, you may require a home occupation permit. If your business performs things like install a commercial sign, receive a lot of foot traffic, or hire staff, this permit can help you avoid breaching local or state restrictions.

Cities, not states, often award home-based business permits.

Choosing which business licences to sell on the internet

The types of licences required to sell online are determined by your city and state. Some may need licences and permits not listed here.

The licences you require may also be determined by the sort of items you offer. For example, if you sell pyrotechnics, you will almost certainly require a separate licence than if you sell jewellery. If your company engages in a federally controlled industry, such as weapons, alcohol, commercial fishing, or agriculture, you may also require federal licences. 

A company attorney can assist you in navigating your state and local rules to guarantee you have the right licence. Your local Small Business Development Centre could also be able to assist.

How to Obtain an Online Business Licence

After you’ve determined the online business licences and permits you require, you’ll need to follow the instructions for each licence. Some states and municipalities may enable you to apply online, whilst others may need you to send in documents or appear in person.

In any case, you’ll most likely require:

  • The names of the owners or registered agents of your company.
  • Your company’s structure.
  • If you have one, enter it here.
  • If you have one, this is your DBA. 
  • Revenue information for your company in a certain state.

Keep in mind that many company licences expire after a set period of time. You should mark their expiration dates in your calendar so you don’t lose your licences.

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