Business License for Online Businesses: Do you need one and how to get one?

Written by Wesley Henderson

December 14, 2022

board with word licensing

Your online business had never needed anything official because you were just selling off of various social media platforms. However, now, your fun hobby turned Instagram business has taken off and all of a sudden you realize this could be your full-time job. You are excited about this new journey and what it brings, but you have no idea how to even make your business official. Well, there are a few things you need to startup your online business.

Form Your Business Entity

Every business needs a business structure and name. Popular small business structures include limited liability companies, sole proprietorships, corporations, etc. Each business structure has its own benefits. You can learn about each type of business structure and which one best suits your needs here. When picking a name, you will need to make sure your business name is available to use under whatever business structure you decide. 

Business License

Next, you need to get a business license. A business license is issued by the government stating that your business is legitimate. If you plan to operate your business from your home, you will need to get a special business license called a home occupation license. Each state, county and sometimes city are different and will have you meet different requirements. You will need to do independent research on what your particular area requires. 

You can call your local county administrator, state secretary or see if your local clerk’s website has an application for this type of business license. 

Seller’s Permit & Sales Tax License

You’ve heard the term “sales tax” but as a business owner you also need to know what that entails. With a seller’s permit, you as a business have the right to collect taxes from buyers.  This requires you to register within the state you are doing business. You as the business are then responsible for taxing customers for their purchases. Since each state has a different sales tax rate, depending on how many out of state buyers you have, your business may need to collect taxes from out of state customers as well. Therefore, your business might need to obtain multiple seller’s permits for different states. 

When you obtain a seller’s permit, this might also enable you to retain a resale certificate. A resale certificate is you, a purchaser of goods, intend to resell the goods bought, usually through the final product you are going to sell. With a resale certificate, a business owner may be able to be exempt from taxes on purchases for their business. This is state specific and business owners can check with the Department of Revenue for their state. 

Apply for a Employer Tax Identification Number (EIN)

EINs are issued by the IRS and are used to identify a business entity. You can apply for an EIN online. EINs are issued for tax purposes. The IRS website will also have documents to educate business owners on which taxes they must now file as business owners. 

EIN’s enable business owners to acquire a business bank account. So, your personal financials and business financials are separated. Certain business structures also require the business to have its own separate bank account.

Create a Website

Though this step is not required by law, it is probably a good idea for your business. As an online business, you will want a strong online presence. While having an Instagram or other social media account to promote your business is great, a website can help with orders, product organization and description, and showcase your business’s story. Websites also help the older generations who may not have social media. 

If you need an attorney to help you with legalities of obtaining the documents needed to start an online business, contact a lawyer here.

Drafted Legal will file the LLC for you without the hourly rates of a lawyer. At Drafted Legal, we help clients accelerate the creation process without unnecessary errors. File now to start your online business journey.


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