A Comprehensive Guide – Understanding the Need for a Business License for Selling Online

Before you start an online business, it is imperative to take exceptional care of a few crucial things, such as getting a business license issued. While the process of getting the license issued can be a little overwhelming, you should not let it deter you from reaching the goal of making money online. Continue reading to understand the process of getting a business license for online businesses and other essential permits you will need.

What is a business license? 

Irrespective of the business type, every business owner must have the proper licenses and permits needed to start a business and operate legally. There’s no significant difference between an online store and a regular brick-and-mortar store in the eyes of the government. In simple words, a business license is a certificate that allows people to own businesses. It is issued by the government, usually for a fee, which might vary depending on a few things. This way, the government can supervise the enterprises within a specified authority. Having a license to sell online or offline would protect your business from fines and other legal penalties. Without a business license, your city or state may halt your business until you achieve the requirements to own one. However, you may not need a business license in several areas until you hit the pre-decided or specific revenue threshold. Therefore, it is highly recommended to keep yourself informed on the local laws. Having a business license for your ecommerce business is fundamental and imperative to your business’s growth. Moreover, it will help you in acquiring partnerships and loans more easily and enable you to claim a few expenses such as tax deductions. Besides a business license, you may also need a seller’s permit to sell online or offline. This would depend on the nature of the business and the applicable regulations in the jurisdiction.

Business License vs. Seller’s Permit: What’s the difference?

While a business license allows you to operate a business within a specific jurisdiction, ensuring compliance with local regulations and requirements, a seller’s permit (also known as a sales tax permit) authorizes a business to collect sales tax from customers on behalf of the state. Here are the major differences between a business license and a seller’s permit:

	Business License	Seller’s Permit
Purpose	Allows you to operate a business within a specific jurisdiction, ensuring compliance with local regulations and requirements.	Authorizes a business to collect sales tax from customers on behalf of the state.
Issued By	Local government or municipality where the business is located.	State government.
Coverage	Covers overall business operations, including zoning laws, safety regulations, and tax compliance.	Specifically pertains to sales tax collection and remittance.
Required For	All businesses operating within a specific jurisdiction.	Businesses involved in retail or wholesale activities that sell tangible goods or services are subject to sales tax.
Compliance	Ensures compliance with local regulations and requirements for operating a business.	Ensures compliance with state sales tax laws and proper collection, reporting, and remittance of sales tax.

 

Which business licenses and permits do you need for your online business?

Regardless of whether you are providing services or selling products online, it is necessary to have the required licenses and permits. It is important to check the taxation rules in your state to determine if taxes apply to the services or products you offer. In most cases, you will also need a seller’s permit to legally sell products. Depending on the location, nature, and size of your online business, you require all or some of the following licenses:

1. Federal Business Licenses 

If you sell anything under government agencies’ supervision such as Food and Drug Administration (FDA), this license would be compulsory.

2. State Business Licenses 

Usually, the state requires licenses for a few specific industries, such as an accountant’s license or a contractor’s license.

3. Local Business Licenses 

These include occupancy permits, zoning permits and other licenses which are regulated by the country or city. (Note: The business license requirements are not limited to the business selling only at physical locations. Even if you are running a home-based online business, there are a few rules you must comply with) A few more business license types you may need to sell your products or services online are:

• Business Operation License
• Employer Permit and Licenses
• DBA (Doing Business As) License
• Occupational License

How to apply for a business license?

For applying for a business license for an online business or offline business, you’ll have to get in touch with your city planning representatives and ask them for a zoning permit. The relevant branches of your city and state will then perform your business location’s review. The cases of more complex licenses (like the situations of combined brick-and-mortar and online businesses) may require an in-depth inspection.  You’ll need to ensure that you operate your business without violating any local zoning restrictions. There are numerous requirements to meet before you commence your business. These include a legal structure – limited liability corporation or sole proprietorship, a sales tax permit, a detailed record of business activities and other necessary licenses. After you finish filling out the form, you will have to send them to a relevant department. Ideally, your license will be issued and ready in a couple of days or weeks.

Business license – An indispensable part of most businesses

Licensing a business is critical to your ecommerce business’s success as it prevents you from unexpected and unwanted legal problems. Other business permits that you will need for your online business are a reseller permit, a seller license, a tax license and so on. And, if you own a home-based business, you need to necessarily get a home occupation permit. Besides getting a business license and relevant permits, do not miss out on choosing the right WordPress Hosting. It is one of the foundational aspects on which the performance of your online business largely depends. Therefore, it is highly recommended to choose Bluehost’s web hosting as it offers a myriad of benefits, services, and tools to make your online business successful.