Editor’s note: ScienceSoft is not a legal consultancy, and the article is intended for informational purposes only. We’ve researched the topic of ecommerce business licensing to introduce you to its basics and help at the step of business launch. We also cover many aspects of a successful market entry within our ecommerce consulting services. Don’t hesitate to ask us for details!
Ecommerce is the evolution of retail, and its rapid expansion won’t stop in the near future. As of the second quarter of 2020, the share of online sales in the US retail amounted for 16.1%, representing an increase by 5.3% from the corresponding period last year. Steady industry growth sounds like a good reason to consider joining the ecommerce market.
Why to start with an online business license
Whether you are planning an e-business or a traditional brick-and-mortar store, you need a business license. This way, the government is enabled to control the operation of your business and tax payment.
Depending on the location, the requirements for business licensing differ. In some states, you may not even need a business license for an online store until your sales reach a certain threshold. In other states, you need to obtain a license before you start selling products. Apart from the state of business operation, the main factors determining the licensing requirements include legal structure of your business and a product line. Some products require a federal business license to be sold online – this applies for instance to alcohol and tobacco since the government keeps track of the sales of these products.
The best way to do the federal licensing right is to study the knowledge directory of SBA (U.S. Small Business Administration) and hire a professional counselor.
Types of licenses for ecommerce business
In most cases, in addition to a general license for online business, you will also need a local license issued by your state or city. To find out what you need to do to apply, visit the website of your local government (can be found from the directory of the USAGov). In case you offer professional services (e.g., accountancy or marketing), a professional license is required. And if you are hiring a team, you will need an employment license issued by a correspondent department.
One more document you need to sell online is a seller’s permit that puts the state in control of your collecting and reporting sales taxes. If you work with manufacturers or wholesalers, you need to obtain a resale certificate to inform the state that you buy products for resale purposes and the sale is not taxable.
Fees for business licenses vary from around $50 to several hundred dollars.
Examples of online business license requirements around the United States
In California, all businesses have to register, including those operating online. To obtain a general online business license, you must create a business plan, choose a company’s name, and provide the authorities with contact information, address, the number of employees, and a federal tax ID number. You will also need to decide on a business type, and be sure to choose wisely as this will define the amount of taxes to be paid. The registration process costs $20-150 depending on a business type. If you work from home, you may also be subject to certain inspections. The authorities will need to make sure you can operate from home or set some rules regarding the number of visitors or physical changes to the building allowed.
In Florida, you need a Business Tax Receipt and a Certificate of Use (except for self-employed and a few other situations). Working from home in Florida requires taking extra steps such as providing the government with the plan of home parts used for business purposes, submitting a notarized letter of approval from the property owner or property manager, and paying an additional one-time fee of $50.
Start your online business with success
In a way, paperwork is the easiest part of starting an online business. The real challenge begins with elaborating the right market entry strategy, choosing technologies and implementing them in line with business requirements and with high ROI. Feel free to ask for our help if you are looking for expert ecommerce consultants and developers to partner up with.
Our consultants will help to shape an optimal ecommerce solution for your business.