Do You Need A Business License to Sell on Shopify?

Do You Need A Business License to Sell on Shopify?

The short answer is no, and you don’t need a business license for your Shopify store or Shopify Business.

However, specific rules must be followed to operate a Shopify store legally, including maintaining proper inventory levels and taxes owed.

If you’re considering setting up a shop on Shopify, you’ll need to know several essential rules.

One of these is that you will need a business license if you intend to sell anything that falls under the category of goods and services. This includes things like clothes, cosmetics, and furniture.

If you don’t have a business license, you could be fined or shut down completely.

Understanding your rights and responsibilities is essential before getting started, so check out our business licensing guide on Shopify.

This post will explain a business license and why you might need one. We’ll also provide tips on getting started if you need one. 

What Is A Business License?

A business license is a document the government issues to a business entity. It usually contains information like the business name, the owner’s name and address, the type of business, the authorized capital, and the authorized number of employees.

It is required by law in most jurisdictions to operate legally. This may be mandatory or optional, depending on the jurisdiction.

The business license number is essential for various tax purposes. That can also be used to track the business’ activity.

Do You Need A Business License for Your Shopify Store?

The short answer is no, and you don’t need a business license for your Shopify store or Shopify Business.

However, specific rules must be followed to operate a Shopify store legally, including maintaining proper inventory levels and taxes owed.

If you sell products requiring additional regulatory compliance, such as food, drugs, or cosmetics, you will likely need to comply with the relevant laws.

However, if you sell products that require additional regulation (for example, alcohol), you may need to obtain a liquor license.

Additionally, if you operate a physical store and offer services such as hair or makeup styling or babysitting, you will likely need a commercial permit from the local government.

Remember to consult with the relevant authorities whenever making changes to your storefront or expanding your operations. Doing so ensures everything is in order and complies with local regulations.

When do I need a business license to sell on Shopify?

If you’re selling items subject to government regulation, such as food and beverage, health & beauty, or nursery & children’s items.

However, suppose you are selling goods requiring additional regulatory approval, such as food, home products, and health and wellness items. In that case, you may need to contact your local government authorities.

This is not the case for most businesses running on Shopify. However, certain exceptions may vary depending on your location and product type.

If you have products that fall into one of these categories, it’s essential to research the requirements in your area before starting your store. Check out our article on Shopify Competitors here.

Additionally, make sure to get all required licenses and registrations in order so that any regulatory issues can be avoided down the road.

You do not need a business license when you start selling on Shopify.

However, if your total sales reach $10,000 or more in 12 months, you will be required to obtain a business license from the state of your store.

Additionally, if you sell goods subject to Canadian import restrictions (for example, alcohol), you must have an appropriate permit.

And suppose you plan to make more than $2,000 from your sales activities in any calendar year. In that case, getting a merchant account and reporting your sales activity to the IRS is recommended.

Remember: anything sold through a Shopify store must comply with local laws!

What Different Kinds of Business Licenses Do Online Stores Need?

The main business licenses you may need for an online store include a merchant account, a payment gateway, and an e-commerce platform.

Merchant account: This is the most basic type of business license, allowing you to accept credit cards and other forms of payment from your customers.

It also grants you access to specific marketing tools, such as promo codes or affiliate programs.

Payment gateway: A payment gateway enables you to process transactions on behalf of your customers so that they can shop without having to contact you directly.

It allows you to charge sales taxes, fees for using debit or credit cards, and shipping costs.

E-commerce platform: An e-commerce platform provides all the features needed for running an online business, including design templates, product descriptions, Shopping Carts/Browser support, etc.

Some various kinds of Business Licence that are mainly used for online stores are as follows:-

Seller’s Permit

A seller’s permit is a document that allows someone to sell tangible personal property (items that can be touched or seen).

1. A seller’s permit is required to sell goods and services in California.
2. It is a requirement for anyone who wants to sell goods through the internet or any other mode of retail sale.
3. The seller must furnish information like name, address, business purpose, etc.
4. The permit is valid for one year and needs to be renewed yearly.

Resale Certificate (aka Reseller’s Permit)

A Resale Certificate (aka Sales Permit) is an official document that the government confirms that you are authorized to sell items within your designated sales territory.

1. It allows an individual who does not own the original product or service to sell it to someone else. For a reseller’s permit to be valid, both the seller and buyer must comply with all applicable state and local regulations.
2. It is issued by the government and is usually valid for three years.
3. It usually requires a small fee, which can be helpful if you want to start or grow your business.
4. It confirms that the seller has authorized the sale and provides relevant information, such as the purchaser’s name and product description.
5. It allows you to interact more freely with potential buyers and avoid misunderstandings or legal issues. Additionally, it can increase your sales volume and revenue.

Limited Liability Company (LLC)

Anyone with the necessary paperwork and attorney’s fees can run this business.

1. LLCs are not required to file annual reports but are responsible for their tax bill.
2. They also can enter into contracts and sue other members in court without risk of personal financial ruin.

General Business License

To open a business in the United States, you need a general business license.

1. This license is required to open a sole proprietorship, partnership, or corporation.
2. It also allows you to conduct any business, including retail, wholesale, and service businesses.
3. The license is valid for one year and can be renewed once.
4. The license costs $50 and can be obtained through the Texas Department of State Business Services website.

To apply for a general business license, contact the Department of Taxation and Finance at (518) 474-3407.

Employer Identification Number (EIN)

The Employer Identification Number (EIN) is a nine-digit tax identification number assigned by the Internal Revenue Service (IRS) and is a social security number for your business.

1. It identifies your company and helps to keep financial records accurate. EIN also allows you to receive tax reporting and other government services related to your business.
2. It’s also crucial for companies that are in the business of self-employment, such as freelance writers and consultants. The
3. It’s essential to keep your EIN up-to-date to file your taxes yearly.

If you don’t have an EIN, contact the IRS online or by phone at 1-800-829-3676 to apply for an EIN. 

Please visit www.irs.gov/businesses for more information on how to get one.

Doing Business As (DBA) License

A business that conducts business under a different name from its registered name.

1. This can be done to conceal the business’s identity or evade taxes.
2. It is illegal in most countries and can lead to fines and penalties.

Federal Business License

You will need a federal business license if you intend to conduct business in the United States as a sole proprietor, partner, or employee.

It is mandatory for businesses that conduct more than $10,000 in business activities in a single calendar year

This license can be required for businesses that fall under the following categories:

• Transportation and warehousing
• Financial institutions
• Professional services
• Wholesale trade
• Retail trade

Do You Need A Business License If You Run A Business From Home?

Assuming that you are not operating a business out of your home for financial gain or professional services, you do not need a business license.

However, suppose you are a business owner, and the purpose of your business is to make an income from renting out space in your home or selling goods and services made available through the premises (such as hosting wedding ceremonies). In that case, you may need a commercial permit for your home business.

In any case, it’s important to contact local authorities or small business administration (SBA) before starting your venture so that all necessary paperwork is completed and there are no misunderstandings.

And lastly, always consult with an attorney when making any decisions related to legal matters, and be sure to keep abreast of changes in licensing requirements so that everything runs smoothly from day one!

So, why would it be advisable to obtain a business license first?

A business license can be a good idea if you’re planning to open an online store or start a new business.

1. A business license is mandatory to operate a business in the United States.
2. It is proof of identity and ownership of the business.
3. It also ensures that you follow all the necessary rules and regulations.
4. A business license also helps get tax benefits and reduces fraud risk.
5. It also gives you the legal protection you need in case of any disputes or problems.

Following are the three primary reasons explained briefly:

Taxes 

A business must be registered with the relevant tax authority and pay taxes on its income. This includes self-employment tax (social security), payroll taxes (federal and state), corporate income tax, capital gains tax, inventory taxation, etc.

Liability

A business license ensures that you are protected from possible liabilities in case of negligence or wrongdoing by your employees or customers. 

This can include personal injury and product liability claims from defective products sold through your business.

Legitimacy 

A valid business license gives your company an official stamp of approval, which can help increase sales and attract new clients.

Business Licenses Rules and Regulations vary from state to state.

This is undoubtedly true, as the rules and regulations apply to businesses vary from state to state.

Some of the most common licensing rules and regulations include business registration requirements, zoning restrictions, occupational licenses, and insurance requirements.

Before beginning any business activities, check with your local government to understand the required licensing rules. This will help you avoid potential headaches down the road.

It is also wise to keep up-to-date on changes in these guidelines to adjust your operations accordingly.

In addition to regulatory matters, other factors need to be taken into consideration when starting or running a business:

1. taxation rates,
2. workplace safety concerns,
3. workers’ compensation laws,
4. data privacy legislation,
5. marketing considerations (such as preventing discrimination),
6. product liability laws,
7. copyright law concerns,
8. contract negotiation skills,
9. human resources management techniques,
10. Networking opportunities.

So make sure you have your ducks in a row before taking action!

How Much Does A Business License Cost?

The cost of a business license can vary depending on the following:

1. the location (State),
2. the type of business, and
3. several employees.

Generally speaking, you will need a business license to operate a for-profit enterprise.

The fee may be based on factors such as the size or nature of your company, whether it is an online or brick-and-mortar operation, and your number of employees.

However, the average cost for a business license in the United States ranges from $200-$400.

Additionally, some states require an entity to be registered before they are allowed to operate, and these fees can range from $50-$500+.

For example, a food service establishment will likely cost more than a retail shop.

Additionally, businesses that generate more than $5000 in annual revenue may need to apply for an additional tax license.

So make sure you do your research before making any investment decisions!

Check out our Best Shopify Apps blog here.

US State-wise Business License Cost in $ 

As you know, Costs vary depending on the state and business activity. We have compiled a list for you of how much each state will cost to obtain a business license Now.

State Name	Business License Cost in $
Alabama	Alabama requires 37$ to 77/per year for a business license.
Alaska	50$/year
Arizona	1$ to 50$
Arkansas	50$ to 1000$
California	To find out about specific license requirements and fees, use the CalGold permit assistance tool.
Colorado	25$/ two year
Connecticut	10$ to 5000$
Delaware	75$ for the first-year
Florida	Florida requires 87.50$ to 1000$ for a business license.
Georgia	50$ to 1000$
Hawaii	20$ (one-time fee)
Idaho	Idaho doesn’t have a state-wide business license. Jurisdiction requires their local license.
Illinois	125$/year
Indiana	It’s necessary to submit a form BT – 1 application for taxes. 25$ fee for the retail merchant certificate is taken.
Kansas	does not need to pay for a business license.
Kentucky	doesn’t have state-wide business licenses, but some business types need one or more special permits.
Louisiana	doesn’t have a state-wide business license.
Lowa	below 10$
Maine	45$ is the business license application fee, and the renewal cost is 35$/year
Maryland	30$ to 150$/year
Massachusetts	based on the type of industry or business
Michigan	based on the type of industry or business
Minnesota	50$ to 220$
Mississippi	75$/year
Missouri	58$ to 143$
Montana	the application fee is 25$ plus a fee depending on the type of business.
Nebraska	doesn’t have a state-wide business license. Jurisdiction requires their local license.
Nevada	200$ to 500$
New Hampshire	It doesn’t have a state-wide business license. Jurisdiction requires their local license.
New Jersey	75$ to 125$
New Mexico	It doesn’t have a state-wide business license. Jurisdiction requires their local license.
New York	100$ to 120$
North Carolina	125$ to 200$
North Dakota	0$ to 5000$
Ohio	25$ to 30$
Oklahoma	It doesn’t have a state-wide business license. An additional license may require for some businesses.
Oregon	doesn’t have a state-wide business license. An additional license may require for some businesses.
Pennsylvania	195$
Rhoda Island	150$ to 230$
South Carolina	It doesn’t have a state-wide business license. Jurisdiction requires their local license.
South Dakota	South Dakota doesn’t have a state-wide business license. An additional license may require for some businesses.
Tennessee	15$ fee
Texas	It doesn’t have a state-wide business license.
Utah	doesn’t have a state-wide business license. An additional license may require for some businesses.
Vermont	170$
Virginia	20$
Washington	0$ to 90$
West Virginia	It doesn’t have a state-wide business license. An additional license may require for some businesses.
Wisconsin	doesn’t have a state-wide business license.
Wyoming	25$/year

How to get a business license?

There are a few different methods that you can use to get your business license, depending on the province or state in which you wish to operate. You can apply online, by email, or in person. It is also important to remember that getting a business license does not guarantee approval; it only entitles you to take specific steps toward obtaining this approval.

When applying online, include all the requested information, such as your company name and contact details, financial statements (if applicable), and proof of insurance for yourself and any employees.

If applying by email or in person, make copies of all required documents and bring them with you when meeting with the appropriate officials.

Be sure also to ask about any fees associated with obtaining a business license; these may vary from jurisdiction to jurisdiction.

Here is a step-by-step guide on how to get your business license:

1. Speak with your local Chamber of Commerce or other organization representing businesses in your area and find out the procedure for obtaining a business license.

2. Complete an application form and submit it with the required documentation, such as proof of ownership, financial statements, proposed location map, etc.

3. Meet with the licensing authority to discuss the details of your application and hopefully receive an approval within a few weeks or months after submission.

4 . Once approved, execute all necessary documents (such as zoning permits) and open for business!

Once all the necessary documentation has been submitted, processing typically takes around two weeks. Still, it can sometimes take longer, depending on the volume of applications received by the bureau in question.

When all is set and done,

Congratulations! 

You now have a valid Business License that helps protect both you and those who work for or are affiliated with your business from potential legal action!

FAQs about Do you need a Business License to sell on Shopify

Do you need a Licence to sell on Shopify?

No, you do not need a license to sell on Shopify if you follow the company’s terms of service.

• You will need a Seller Account and a Sales Tax ID to start selling.

• You will also need a valid merchant account with a reputable Shopify payment gateway.

• However, if you want to make extra money by selling products not within the Shopify marketplace, you will need to get an Etsy seller’s license.

• However, if you plan on selling products that fall under the category of pharmacy, medical device, or food, you might need to get a license from the government.

What are the requirements to sell on Shopify?

• A Shopify store must have at least two products for sale.
• You will also need to have a shipping address in the US.
• The store must have a custom domain name, a valid tax ID number, and a business location accessible to the internet.
• You must be registered with the Canadian Revenue Agency (CRA) and the Merchant Services Provider (MSP).
• The store must have a valid SSL certificate.
• The store must have a valid business license.
• The store must have a valid bank account.
• The store must have an active Paypal account.

Can you sell on Shopify without LLC?

Yes, you can sell on Shopify without an LLC.

However, you must comply with the Merchant Agreement and Terms of Service.

As Shopify is an eCommerce platform, you can technically start and sell your products without an LLC. However, it is advisable to form an LLC for better legal protection and compliance.

Does Shopify require business registration?

No, Shopify does not require business registration.

It is a platform that allows you to start and run your online store without prior experience or technical knowledge.

You only need to create an account and then set up your store.

Conclusion

Now that you have read the whole blog, we hope you have got some clear guidelines now on whether it’s necessary for you to apply for a business license or not.

We have listed the steps you need to follow if you do not have the required permits yet. 

​Just follow their terms and conditions, and everything will be fine.

And once everything is set up, you will have to worry about promoting your new e-commerce store and increasing sales!