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Do I Need a License for an Online Business?

Even if your business has no physical presence and exists solely as an Internet storefront, all regulations that apply to offline businesses also apply to your business. Your business may require licenses based on the type of products you sell or even the state in which you live, regardless of whether the business is in a physical building or an online venture.

Types

The federal government does not issue business licenses, but most states and many counties and cities do. The majority of states require that anyone doing business in the state register for a statewide general business license. Additional licensing requirements apply based on your industry or the products you sell. For example, selling cars over the Internet still requires an auto dealer license, and selling food online may still require a food handler's license.

Misconceptions

Even if you never apply for a business license or register your business, you are still considered a business by default if you earn income from self-employment, such as an online business venture. The default business type is called a sole proprietorship.

Geography

Not all state laws have caught up to the current state of technology. Some states, such as New York, require that any online business who sells to a New York resident collect and remit New York sales tax, no matter where that online business is based. California state law requires anyone advertising real estate properties to have a valid California real estate agent's license, but it considers any website that a California resident can load to have an active California presence. You may need to consult an attorney depending on the industry in which your online business operates.

Warning

Operating a business without first securing all the necessary licenses can result in a fine. For example, running an online business from Huntington Beach, California without a license results in a fine of 10 percent of your tax bill.

Benefits

Obtaining the proper business licenses can do more than just protect you from fines. Filing an assumed name certificate allows you to do business under a name other than your own, so you can open a bank account and accept payments in your online business name. Registering your online business as a separate entity, such as an LLC or a corporation, limits your personal liability if your online business goes into debt or becomes the target of a lawsuit.


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Article Written By Marina Martin

Marina Martin is a business efficiency consultant based out of Seattle, helping low-tech businesses save time and money by adopting new technologies. In addition to consulting, she has a particular passion for creating how-to, educational and training materials.