Wednesday, August 4, 2021

Do You Need A Business License To Start An Online Store?

Do You Need A Business License To Start An Online Store?

All companies that have an online platform require a business license because it is possible and easier for the government to keep track of all the operations in regard to tax revenue accountability. In case you happen to operate an online business without a license, there are heavy penalties that might be imposed when you are caught on the wrong side of the law. Ecommerce licences are the same as those of brick-and-mortar and to be on the safer side, proper paperwork and guidelines of acquiring the right license should be followed.

What Is A Business License?

One way every government monitors most of business and revenue collection is through the provision of business licenses to every operator. Not only does it benefit the government, but also those who operate the business and the potential buyers. A business license is meant to control business owners or operators to run businesses in a given locality with the approval of the local government. It is a law that you require a business license to sell online.

At What Point Should One Apply For A Business Licence To Start An Online Store?

Getting an online business license depends on which area you are running your business because each region has different rules on how to have one. Some areas of online store operation for example are much fair when it comes to owning an online business license. In certain areas, an online store owner has to attain a certain revenue threshold so that he acquires a business license. In other regions, the law demands that you acquire the license before you can begin any form of online business.

All these laws regarding on how to have a license to start running your online store and what law governs the region you want to start operating your business are found on the SBA website. Acquiring an online business license is important because you are entitled to claiming your tax deductions as stipulated by the Small Business Association. In addition, you earn a better reputation for your online business as conducting legitimate operations which is essential in creating a strong basis of financing and partnerships.

Where Should One Get A Business License?

All the required details about your region of operation by-laws and how to obtain an online business license can be found on the SBA website. Each region or state has its own requirements of achieving an online trading licence and SBA website has all the information an entrepreneur might need on what kind of license is required and where to register it. Most of the registration is done through an online portal.

What Is Required For An Online Business License?

Before applying for a license to start operating an online store, one should consider the following:

  • You should determine the legal structure of the business you want to operate, whether you want to run a sole proprietor store or a limited liability corporation and so on.
  • You should a vivid and detailed description of the business’s activities
  • You should obtain a sales tax license that you can get from your local state agency.
  • Inspections and other relevant permits depending on what you want to sell online. Example is the liquor license if you are operating a liquor business.

The licenses are issued at a federal, local government level or at state. Licenses that are issued at federal are for those business owners who sell products that have heavy regulations by the government agencies like drug administration and food products. Other products sold by entrepreneurs that require federal licensing include animal products, alcoholic drinks and explosives. This is because they deal directly with human and animal life and require close monitoring of the federal.

On the other hand, lottery tickets, alcohol and the likes all fall under the states licensing in most states. Almost all business licences require local government licensing. We have city and county licenses under local government too. Below are some of popular licenses that online businesses require:

General License

This kind of license allows the owner of the business to operate within a city or county of a given country. It clearly indicates that the business operates under the same jurisdiction and is renewed annually.

Home Occupation Permit

When you operate online businesses, this kind of government permit is suitable for your business. It is suitable especially if you are shipping products in your local home.

Is a seller’s permit required to run an online store?

Depending on the state you come from, your online business might require a seller’s permit or not. Certain states have a general in common that you qualify for a seller’s permit if you reach a set threshold for sales tax. This allows you to get sales tax from your potential clients. You can also be permitted to buy products from manufactures or suppliers tax-free but your supplier or manufacture gets a resale certificate if at all you purchase products that are going to wholesale or retail within your store. In case you want to temporarily sell online, you will require obtaining a temporal seller’s permit that can last you up to 90 days. 

In situations where you want to operate your business in different states, the seller’s permit will operate here but in terms of Nexus. This can include unimagined things like stored inventory. With kind of business in different states, you might require licenses and permits for the states the business is operating for the purposes of tax revenue collection and accountability.

A business license and a seller’s permit are not the same. A business license is one that allows you to operate your online stores in any location whereas a seller’s permit identifies you as one who collects sales tax. A seller’s permit is obtained freely while a business license is given on a fee. The cost of acquiring a business license also varies depending on every city, county, institution and state. In addition, what you are selling also determines the price of a business permit.

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