The Ins and Outs of E-Commerce Business Licensing
The e-commerce industry in the US alone was worth over $374 billion in 2020. By 2024, that number is expected to climb to more than $474 billion. An e-commerce business offers a lot of opportunities, benefits, and conveniences that aren’t possible with a traditional brick-and-mortar business. That said, online store owners are still subject to certain legalities such as obtaining an e-commerce business license.
Even though you’re strictly selling online and not operating out of a physical store, you will still usually need a business license to sell online. “Virtually every online business will need a version of this license to operate legally,” explains Deborah Sweeney, CEO of online legal filing service MyCorporation.com. However, “The regulations surrounding these licenses and how to register for them vary by location.” The only time you would be exempt is if you’re based in a county that doesn’t require a business license.
Failing to have a business license can result in some significant fines and operational restrictions for the owner(s). And in most cases, the license will need to be renewed annually.
Table of Contents
Business License Definition
Simply put, a business license is “a legal document that grants you the right to operate a business in your city.” The primary reason behind it is so the government can keep track of businesses operating in a given area, and in turn, keep track of tax revenue. It also enables your city to identify businesses that are operating in the area, thereby protecting the local residents. For instance, it prevents certain products from being produced in a person’s home, such as explosives, fireworks, poisons, and so on.
The specific licensing requirements can also vary depending on the location and nature of a business. Some states, for example, have more rigorous licensing requirements for businesses that sell liquor or firearms.
How to Get a Business License Online
The exact process will vary, but here are the basic guidelines for how to get a business license online.
Research Regulations in Your Area
As mentioned earlier, different cities, counties, and states have their own regulations, which is why you’ll need to research the regulations in your area. The easiest way to get started is to visit the U.S. Small Business Administration’s website to learn about applying for licenses and permits. This page provides a breakdown of the federal licenses and permits, as well as the state licenses and permits you’ll need to obtain and where you can go to register.
From there, you’ll need to research the exact regulations of your state, county, and city to determine what the requirements are. The easiest way to do this is to visit your state’s website. Look at the “business” section of the site, then click on “licenses, permits, and registration.” This will provide you with an overview of what’s required in your area, along with examples. There should also be a business license FAQ section that will get you up to speed.
Some state sites will even include a county business license quick chart that will let you know things like:
- Whether or not there’s a downloadable business license application;
- If you can submit a business license application online;
- When a business license needs to be renewed each year;
- If you can submit a renewal application online.
You can also find important contact information, such as a local phone number where you can reach an expert.
When Do You Need to Apply?
In some places, you don’t have to apply for an e-commerce business license until you reach a certain threshold of revenue. In other areas, however, you must apply for one before you ever make your first dollar. So, even if you started your online business for free, you need to apply at the correct time to avoid penalties. You can find the requirements for when you must apply on your state’s website.
What Do You Need to Apply?
Again, the exact information you need will vary. But here’s a list of some common information you’ll need to provide:
- The date when you started your e-commerce business;
- A business address and phone number;
- The type of business you run (e.g. sole proprietorship, general partnership, LLC);
- The nature and purpose of your business;
- Your name and contact information.
In some cases, you may also need to give documentation showing you’ve registered your online business with your state. Other times, you may be required to provide your estimated gross revenue for the calendar year in which you’re applying for an e-commerce business license. And if you’re operating out of your home, you may need to fill out a home occupation application before applying.
Where to Get an Online Business License
The easiest way to get an online business license is to search for “business license [your county and state].” Look for your county’s website, and this will provide you with everything you need to get an online business license, including the cost, info on whether it needs to be renewed each year, and so on.
Look specifically for the business license application, which you may be able to fill out online. Or, if you’d prefer to file your application in person, you should be able to find the address of where you can do so.
How Long Does It Take to Get a Business License Online?
The length of time you have to wait to get a business license online can vary substantially. In some cases, you can get one within just 24 hours. In other cases, e-commerce business owners may have to wait as long as six months. But generally speaking, you can expect to wait about 10 to 15 days. Consult your state’s website for details on this.
Because there’s likely to be some lag time between applying for a business license and approval, it’s smart to complete the process before you launch your business. This will also prevent potential penalties if you’re located in a place that requires you to obtain a license before earning any money.
Image Source: https://depositphotos.com/