Operating in the virtual space is no exemption from legal obligations. Obtaining ecommerce business licences not only makes you a legitimate entity, but protects you from possible federal lawsuits as well.
As discussed in our previous blog about Registering E-Commerce Businesses, there are various variables to go about when registering your online company in the US, such as the industry, business size, nexus state and others. Aside from the complex taxation system of different state areas, acquiring e-commerce licences and permits also abide by the same guidelines which initially ticks off your entrepreneurial zeal.
But there is no need to bury your head in the sand. Though the process may be tedious, adhering to the law yielding the e-commerce industry means you’re starting your business in the right foot.
What are the kinds of e-commerce business licenses?
- Federal business license
- State level business license
- Doing Business As (DBA) name license
What are the requirements to obtain these licences?
There are several prerequisites to accomplish to get your legal documents. Before heading to your designated federal government agency, make sure to finalize the following:
- Identifying your business’ legal structure. Determine whether you are a sole proprietor, limited liability corporation (LLC), corporation or forming a partnership.
- Breakdown of business activities. What is the nature of your business? Explain and elaborate all activities under your day-to-day operations.
- Sales tax license. A sales tax license gives the e-commerce business the right to collect and remit taxes on behalf of the state.
Related: Taxation 101: Quick Brief on the E-Commerce Sales Tax
What licences do you need?
Under the federal permits, it is best to check with the US Small Business Administration (SBA) where your business is categorized then head to the right federal agency to start the license acquisition process.
However, the state issued permits will be based on your business’ core operations and your location. These licences often come with a termination date so make sure to keep tabs on your due dates and renew these documents ahead of time if you don’t want to get troubled getting a new one.
The e-commerce license cost will depend on the nature of your business and the corresponding agency you are assigned.
Business Operation LicenseAside from the credibility it provides, a business operation license allows you to operate in any city, country or state legally.
Employer Identification Number (EIN)The EIN is a federal tax ID issued by the Internal Revenue Service (IRS) for your e-commerce business’ tax compliance. Getting an EIN helps owners separate their personal funds from the firm’s finances.
DBA LicenseOther than reasons of legality and financing, acquiring a DBA license gives you the permission to operate and receive income under a name different from your legal name.
Seller’s PermitThe seller’s permit varies from state to state. This license gives you the legal rights to sell products online, whether they are tangible or intangible.
Sales TaxIf you’re selling taxable products and services, it is a requirement to obtain a sales tax license to avoid tax penalties.
Home Occupation PermitMany e-commerce businesses do their operations at the comfort of their homes, which then requires a home occupation permit. This document is the proof that your online business is not causing any kind of harm or noise in the neighborhood.
Occupational LicenseOccupational license will depend on the industry you are under and the profession you belong to. Most likely, professional jobs such as accounting, are the ones needing this license since the work needs an established credibility to gain customers.
How much does an e-commerce license cost?
Licenses issued by the state are usually costing from $50 and $400, with an additional $25 for the processing fee. These business licences are usually terminated by September 30 which is the end of the fiscal year.
DBA, on the other hand, varies from every state. They normally cost between $10 and $50, though most are under the $20-$25 bracket. DBA licences last for 3-5 years.
Read Next: Finding the E-Commerce Accounting Partner for Your Business
There’s more than just the legality of obtaining an e-commerce business license. If you have a viable business to grow, these paperworks is going to be your starting point in growing the entity.