Yes, if you’re selling physical products online, you need a business license. Unfortunately, many people start an eCommerce business without considering the legal side of things. Keep in mind that this is not legal advice, though. Seeking the help of a business attorney is helpful if you’re unsure of where to start. Just know that you need to set up shop with the government before selling your goods online, even if you’re running your business from home. Besides, some goods are heavily regulated, so you need to make sure you’re complying with local and federal laws.
If you don’t go through the formalities to become a legit business, you could rack up hefty fines. A business license is only a step in the process. There are other registrations and permits you need before applying as well. To name a few, you’ll have to make sure you’re registered to charge sales tax. If you haven’t set up a fictitious or DBA name, add that to the list. It may all seem overwhelming. However, none of this takes long, and it’s very inexpensive. You can even do it all from the comfort of your own home.
Where Should you Start?
First of all, what do you want to sell? You need to be very clear about the type of product you’re selling online. Next, you’ll need to check with your county, city, and state to ensure you obtain every permit and license necessary to sell your goods legally. We’ll cover the most common things here, but every locality has different laws for business owners. If you operate in another country, the rules may not be the same. So keep that in mind as you read on.
Have you Registered your Business Entity?
Registering your business is the first thing you should do when establishing your shop. You can’t do anything else until you’ve done so. To start, you’ll need to choose a structure, which depends on the size of your business. Many create an LLC, as it’s most common for small businesses. Next, you’ll begin to separate your business from your personal life from here. The following steps will solidify that work-life boundary, which you’ll thank yourself for later. Plus, you’re more likely to bring in customers who respect your boundaries as a business owner if you are official and legal.
Your “DBA” and EIN
Once you’ve filed your LLC or other business structure, you should register your fictitious name, more commonly called “Doing Business As” or DBA. Unless your first and last name is in your actual business name, the law requires this. Once you’re done, the name becomes yours within your state. Nobody else can use it without facing legal implications. Most states also have an online tool you can use to check name availability. So be sure to check your proposed name before spending money on design and marketing.
Once you’ve gotten that taken care of, you can go on over to IRS.gov to obtain an Employer Identification Number. Your EIN acts as a social security number for your business so the government can make sure you’re paying your taxes. After this, you can open a business bank account to better separate business expenses from personal ones. It makes tax time so much easier because you’ll see how much you’ve spent on supplies. Many business expenses can be used as tax deductions, so this is an important step.
Sales Tax and Seller’s Permits
While requirements vary by jurisdiction, you are obligated to obtain a seller’s permit in most places, also known as a sales tax permit. The purpose is all in the name. It allows you to charge sales tax, which is required in most states. Many sell their products or art online without doing so, and you do not want to make the same mistake. By doing so, you can incur massive fines. Please, make your customers pay their sales tax, so you’re not spending your money on it later.
How Much Will All This Cost?
You can register and file for these things yourself to save the most money. It’s straightforward if you do the proper research. Overall, you shouldn’t spend more than a few hundred bucks, depending on where you live. You just have to ensure you’ve covered all your bases and haven’t missed any critical steps. There are also online services that complete everything for you at a cost. The most popular of these services in the United States is LegalZoom. All you have to do is answer some quick questions and then wait to receive your official paperwork.
You should also consider other protections for your business. For example, as you continue to grow, you may want to purchase e-commerce insurance, which often includes general liability, commercial auto and property, and workers’ compensation. To learn more about e-commerce insurance, click here. It’s required by most e-commerce platforms anyway, so you’ll need to check your site’s policy. Plus, you never know what could happen. You don’t want to be responsible for possible damages, and having that extra layer of protection will give you peace of mind and save thousands of dollars down the line.
So, Are you Ready for a Business License?
If your shop is still a budding idea, you can breathe a little. Create your products or art and show them off to the world. You’ll need to prove that your work is high quality before customers consider spending their money. So engage with your target audience without sounding like you’re trying to sell them something. Be helpful and considerate to build rapport. Once people become interested in buying your goods, you can start making your business official.
Keep in mind the many things that come with running a business, as you need more than just a business license to start. Once again, check the laws in your locality, as they’re not the same everywhere. If you’re overwhelmed, you could also hire an attorney to help. Having a professional do these things for you is one way to ensure you’re fully compliant with every rule and regulation.
