Do You Need a Business License to Sell Online? Everything You Must Know in 2021

Do You Need a Business License to Sell Online? Everything You Must Know in 2021

Selling online is popular since the development of the Internet. As e-commerce grows, most entrepreneurs are wondering whether they need a business license to sell online or not. “Yes” is the quick answer to “Do I need a business license to sell online?”. But there are many things that you should take into consideration before starting your online business.

You need to have a business license for online selling. It’s critical to business development and growth. A business license is a piece of evidence proving to your customers that your online business is legitimate and compliant with the law. Let’s figure out reasons to obtain a business license and how to get a business license to sell online:

Firstly, we should learn what a business license is.

What Is a Business License

Before learning why a business license is necessary and the types of permits and business licenses, let’s start with what a business license is.

business licenses

A business license is a permit given by the government allowing a company to operate within its jurisdiction. Sometimes, you may need more than one business licenses for your online business. How many types of business licenses you will need depends on what your online business does or sells.

Moreover, the specific business licenses or permits that your business needs vary according to the location of your business. However, their purpose is the same: They indicate that you have approval and permission from the government to operate your business in a certain area.

💡 TIP: You have to make some research about what you need for your business since there will be different laws and regulations in different locations, especially if you are planning to sell online.

Why I Need a Business License to Sell Online

To ensure everything runs smoothly, you are required to have a business license or permit to sell online. A business license is a way of showing your customer you are selling something legal and legitimate.

You may need business licenses or permits for three main purposes. First of all, they are legal documents proving that your business is compliant with the law. You, the product owner, are responsible for all the occurrences and related consequences of the selling process. Besides, these documents can be a way of protecting and guaranteeing the rights and benefits of your employees, partners, and customers. Lastly, it will record all your financial obligations for tax purposes with a business license.

Thus, you need to pay more attention to apply a business license to ensure you can start your online business smoothly and legally.

💡 TIP: There is something new about dropshipping - the well-known business model. If you are doing dropshipping, there is no need to apply for a business license. But it doesn’t mean that it’s a good idea to operate without one. It’s the same as some small businesses, such as second-hand books sale, hand-made crafts, and if you are independent contractors providing services like freelance writing and web designing.

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Examples of Licenses and Permits You Need to Sell Online

After learning what a business license is and why you need one for your online business. Let’s see some main types of licenses and permits you might need for your online business:

examples of business licenses

  • Seller’s permits: You may need it if you’re planning to sell in a place requiring sales tax, such as California in US, Britain in the United Kingdom (exceptions are food, books and children's clothes) and so on.
  • Reseller’s permit: You usually need to apply for one when you buy materials or products for resale to your customers. It’s also called a resale certificate, helping you to avoid paying sales tax on those purchases.
  • General business license: It may be required by the local law. It might be various since in some places, you not only need a general business license, you also need a specific business licenses for special industries.
  • Professional and industries licenses: You may need license at one or more levels of government if your business is involved in regulated activities. For example, if the business is about professions like accounting, and real estate; trades like transportation, and food preparation; and regulated goods such as alcohol, tobacco, and gambling.

💡 TIP: When evaluating your licensing needs, you need to analyze all the factors in any special licensing needs that might apply to your business.

When you start your e-commerce business, remember to figure out which one you need to apply for and keep reading to learn how to apply for a business license to sell online.

How Can I Apply for a Business License

After you’ve figured out examples of business licenses, which online business licenses and permits you need, the next thing is to follow the directions for each specific license to apply for one. These licenses or permits may have different requirements. Some may allow you to apply for them online, such as mailing in forms, and others may require you to show up in person.

Most importantly, some business licenses expire after a certain period. You’d better take a note to remind you of their dates of expiry so you don’t operate an e-commerce business with an expired business license. But, before applying for one, you also need to know answers to the following questions:

business license renewal

1. When Should You Apply

When you should apply for a business license to sell online depends on where you plan to sell. In some cases, you need to apply before selling. In other areas, you may need to grow to a certain size before obtaining licenses and permits. Thus, it might be an excellent way to consult your legal resources and local business resources to determine your exact timeline.

2. How Much Would It Be

Luckily, the cost might not be a big problem when applying for a business license. A basic business license will charge a nominal fee, or cost a few hundred dollars. However, there are still some permits you can get without costing anything.

💡 TIP: In some cases, some fees may also occur when you want to renew your licenses. However, for some instances, it will be less when you renew.

The truth is that getting a business license itself is not a big expense at all. However, you might be faced with huge fees when you are found to be operating without a proper license or an expired license.

3. What Do You Need to Apply

It’s crucial to check the specific requirements of the local jurisdiction. These requirements can help you to figure out what exactly you need to apply for a license to sell online. However, you’d better pull some documents in advance to make the process easier.

That’s to say you should make sure you have information about your business entity type. Also any required inspections or specific permits of the products you’re selling, the name you’ll be operating under should be clear.

Conclusion

As a new online store owner, you have several things to consider for your online start-up business, such as choosing products, e-commerce platforms, the marketplace, inventory, and also preparing for financial resources, web designing, branding, or marketing. When you are experiencing the excitement of starting a business, you tend to forget the legal procedures and never really consider them.

Thus, you should know owning an online business is beyond having an e-commerce website. The online store is just like the traditional physical stores, requiring the same level of compliance. It means business licenses or permits are necessary. From the public's point of view, companies with appropriate licenses appear to be more legitimate.

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