All companies require a business license, whether they sell online or from a brick-and-mortar storefront. Businesses are required to apply for a business license because it provides a way for the government to keep track of enterprises operating in the area and keep track of tax revenue. When you operate a business without the proper licenses, you risk heavy fines. In addition, the city or state may require you to cease operations until you complete the required paperwork. You will typically need to renew your business license annually. Ecommerce licenses don't differ significantly from brick-and-mortar business licenses. Here's a closer look at what you need to know:

At what point do you need to apply?

In some areas, you may not need to apply for a business license until you reach a specific revenue threshold. In other regions, you may need to obtain a license before you sell anything. To determine your local laws, visit the SBA website. However, regardless of whether a business license is required, there are benefits to registering your business. For instance, this process also allows you to claim tax deductions, according to the Small Business Association. It also gives your business a greater appearance of legitimacy, which can be crucial to obtain financing and partnerships.

Where to get a business license

The requirements for business licenses may differ by state. To find out what licenses and permits are required in your state, visit the SBA. This resource can tell entrepreneurs what licenses they need to obtain and where they should go to register. In many cases, business owners can apply for their licenses online.

What you need to obtain a business license

Applying for a business license often requires:

  • Determining legal structure - for instance, whether you are a sole proprietor or limited liability corporation
  • A detailed description of your business's activities
  • A sales tax license, which you can obtain from your state agency
  • Inspections and other permits, such as a liquor license or fire code inspection

Home business zoning

Before issuing a business license, the state or city agency may conduct a zoning review of your business location or require a zoning permit. For most ecommerce business owners, that means you need to make sure you can operate a business out of your home. It's unlikely that ecommerce store owners will face many issues with zoning, as most areas have relaxed zoning laws for home businesses, but there are some things to keep in mind.

Some zoning laws restrict the following:

  • Physical changes to the home's appearance, such as signage
  • Number of visitors and/or employees
  • Nuisances such as noise or odor

It's important for all business owners to obtain the proper licenses before starting their operations. This ensures you are operating legally from the beginning and prevents you from facing fines. It is also one step to making your ecommerce store a legitimate business entity.

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