An some say you have to have a reseller's license, so many since I'm selling on a platform that handles everything I don't need the license. If you're a home-based business owner, then, you may still be wondering: "Do I need a business license?" If youve already obtained your local business license, then you know the general gist of what a state small business operating license is. The, is something like a social security number for your business: It identifies you as a business and enables you to stay compliant with taxes and other regulations. Our ratings take into account a product's cost, features, ease of use, customer service and other category-specific attributes. In fact, filing for a small business license or permit can be one of the most important steps in getting your business set up. Luckily, you dont have to worry about shelling out thousands of dollars for a business license. Consultants or freelancers might. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free. Many other states require licenses for specific types of businesses, although retail or online sales arent usually listed among them. As an example, to apply for business licensing in Alaska, it will cost $50 for your one- or two-year license, and once that license expires, you'll have to pay the same $50 fee to renew. They also consider if you operate the activity like a business and depend on the income for your livelihood. The process is simple and youll receive your number right away. . Randa Kriss is a lead writer and small-business specialist at NerdWallet. Following are the main license types youll need to consider when operating an online business. Company Information 4. Pre-qualified offers are not binding. As we mentioned, licenses you need to start a business vary from state-by-state, and not all states require a state-specific license. Therefore, you may want to consult asmall business attorneyto guide you in the right direction. by Elizabeth Gonzalez | If the business name is available, you want to secure it for your business. Whether youre looking for vintage vinyl or a better way to handle your taxes, theres a good chance youll shop for it online. If you have a corporate entity, you file for anEmployment Identification Number (EIN). Corporations tend to have a more fixed operating structure and may be better than LLCs for attracting outside investors. Do I Need a Business License for My Company? The Foreign Account Tax Compliance Act (FATCA) requires certain foreign (non US) financial institutions to report all United States account holders that are specified as United States persons. In most states, forming an LLC doesn't require a business license, but you'll need to follow your state's procedures. The time it takes to process your license will vary, depending on the type of business entity you are creating. With over 2.1 million registered sellers, it's one of the largest online marketplaces; however, many Etsy sellers are left wondering whether they need a business license to sell on Etsy.Etsy's own policies page doesn't offer any help with this question at all, and the answers . Jane Haskins practiced law for 20 years, representing small businesses in startup, dissolution, business transactions and litigation. A permit from your fire department is especially necessary if your business uses flammable materials. Starting 2022 the threshold drops to $600. You really don't need much to sell on Mercari, but here is what I recommend: Postage scale: I use this one that's under $20. Do you need a business license to sell online? Youll need to fill out a substitute W-9 form for your account to sell $600 or more in gross sales on Mercari. If you dont submit your substitute W-9 form when requested, your account and selling experience may be restricted. A federal trademark is important if your business will do business across state lines. Alcohol: You need a business license from the federal government along with your state business license if youre selling alcohol as a part of your business. Once you have fully registered, you should have an EIN that allows the IRS to identify your business for tax purposes. Ultimately, many home-based businesses have to go through the same process to get the licenses needed to start any kind of business. So, for example, if you spend $200 to make an item and sell it for $150, you can't write off the $50 loss. You need to apply for a business license from the Federal Marine Commission. Determining which business licenses you need to sell online, How to apply for an online business license. and several other required permits give your business credibility, but its also required to operate legally and establish your company. Before joining NerdWallet, he served as senior editorial manager of QuinStreet's insurance sites and managing editor of Insure.com. Her work has been featured in The Washington Post, The Associated Press and Nasdaq, among other publications. However, not all business entities are required to register namely, sole proprietorships and general partnerships. All rights reserved. Once you settle on a name, be sure no one else is using it. Consultants or freelancers might only need a Home Occupation Permit as their small business license. The SBA's list of state-by-state small business licenses can help you find and apply for a Home Occupation Permit specific to your state. We believe everyone should be able to make financial decisions with confidence. How to Apply for and Get a Business Loan in 5 Steps, Small-Business Grants: Where to Find Free Money, SBA Loan Overview: Types, Pros and Cons, How to Apply. Remember that 10% so you charge enough to make an effort worthwhile. Depending on the type of business you run, and where, you may need to apply for one or more business licenses. You may also enter your business, trade, or doing business as (DBA) as well. The U.S. Census Bureau reports that more than $600 billion in goods were sold online in the U.S. in 2019, an increase of almost 15% over 2018, while traditional retail sales grew by only 3.4%. If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience. In most cases, you will need a business license to sell crafts. The Forbes Advisor editorial team is independent and objective. If youre not eligible for a social security number, you can provide an Individual Tax ID Number (ITIN). Your financial situation is unique and the products and services we review may not be right for your circumstances. Outliers are Oklahoma, which has a threshold of just $10,000, and Kansas, which requires all remote sellers, from the first sale and the first dollar, to register. Alcohol: You need a business license from the federal government along with your state business license if youre selling alcohol as a part of your business. Marketplaces like Mercari are required to collect W-9 identification information from sellers who gross $600 or more in sales in a calendar year. Join. Especially if selling online, you want your name to stand out among your competition. To get an EIN, youll go through the IRS website. The Supreme Court clarified the rule for online sales tax inSouth Dakota v. Wayfair. Disclaimer: NerdWallet strives to keep its information accurate and up to date. Please note that the IRS encourages that you use your SSN. With the growth of e-commerce, more and more sales transactions were left untaxed. When evaluating offers, please review the financial institutions Terms and Conditions. Business license is a broad term that refers to any kind of license or permit required to operate your business and provide your services in your location. This might seem secondary, but youll need your earnings to go into a separate business account, since its crucial to separate your business and personal assets. Check to see if any of your business activities are listed here, and then check with the right federal agency to see how to apply. Do I file as self employed, business owner, reseller. The majority casual / clean out my closet seller are likely operating at a loss anyway; making it moot. You obtain these licenses through the relevant licensing board in your state. A business license is a requirement for online. Most states dont actually require a general business licensea.k.a. Mercari requests and collects Form W-9s in order to file Form 1099-Ks, for those users who meet filing requirements. Although there is a document called a business license, there are also several requirements for selling online that youll need to go through in order to begin your e-commerce business. However, it is hard to follow the IRS guidelines to determine whether you have a business or a hobby. Some states do not issue a separate resellers permit, but rely on your sales tax identification number instead. 2.Allows users to bring their products to Mercari's more than 19 million active users. I useally buy retail an resell if I can get a good enough deal. When investigating license requirements, look for specific stipulations that apply to your business type. We're here to help. If you operate an oversized vehicle or truck, you need to have a permit for any oversize or overweight vehicles. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. One additional thing to note: In some states, such as California and Idaho, there are whats called temporary sellers permits, which enable you to sell online temporarily if thats all you need. That is, whether you own a large eCommerce business where you sell over 100 items every month, or you are a small-scale seller who sells less than 100 items per month. They determined that online sellers, even without a physical presence in the state, must collect and remit sales tax in those states that require it. In fact, this card is so good that our experts even use it personally. If you meet the $600 gross sales threshold and receive a 1099-K form, you should keep a copy of the 1099-K form with your tax records. For example, they look at the time and effort you spend on the activity. 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