Marketing

Do you need a business license to sell on Shopify?

If you are wanting to open a Shopify store, you will know that Shopify is more than just pretty themes. Shopify has the ability to create powerful businesses. But what are the legalities that come with it?

Posted 5 months ago by Jonathan Kennedy

So, do you need a business license to sell on Shopify? As a potential business owner, this may be the first concern that crosses your mind. There are tons of big brands using Shopify, all of which definitely have business licenses. But surely a business license isn’t necessary if you don’t have a physical shop?

And if you do need one, how do you go about getting one? Is it going to stop you from opening up your Shopify store?

These may be some questions and thoughts running through your head at the moment.

But, don’t panic, we will answer all of your queries and worries in the article below.

What is a business license?

do i need a business license to sell on shopify

A business license is a legal document that is granted to you by your state or government. This legal document is also known as a license or permit. It grants you permission to operate your specific business in a particular area.

A business license is important for numerous reasons. Firstly, it actually protects the general public. When you apply for your business at a certain location, it is checked to make sure that you aren’t operating a firearm store next to a school, or fireworks or explosive business out of your house.

The business license will only be awarded after the government is happy with your location and ethos.

Business licenses also allow the government to keep track of the different businesses that are operating in certain areas, as well as tax revenues and what is owed to them by different businesses.

While the majority of businesses do need at least one business license, not all of them do. Whether you need one or not may also depend on what your revenue is, and where you live.

On the other hand, some businesses may not be allowed to trade at all if they don’t have a legal business license.

So, make sure to find out if your particular business does need one, and what type of business license, or licenses, you will need to operate.

Does Shopify require a business license?

To get straight to the point, no, you don’t need to have a business license to be able to sell on Shopify.

For the majority of cases, you are not required to have a business license when you first set up your Shopify account and start out your small business. But, there are a few instances where you do need to have one for your Shopify store.

do i need a sellers permit to sell on shopify

We will discuss the scenarios that necessitate a business license in detail below. But, it is important to note that if you do get a business license, it is only valid for the business that you register.

So, if you are looking into how many stores you can create on Shopify, you might need separate business licenses for each store.

If you earn over $20 000 per month

If your monthly income from your Shopify store is more than $20 000 per month, then you are required to apply for a business license.

You can get away with not having a business license even if you are making $19 999 of income per month. But, for tax purposes, it would be beneficial to get a business license even before you hit the $20 000 per month mark.

You will need to apply for this business license from the government of the state where you run your business.

If you use a Shopify payment gateway

If your Shopify store is making use of one of Shopify’s payment gateways, then you will need to have a business license.

Accepting payments on Shopify is not a simple process. It is taken very seriously, and Shopify needs to know that you are a legitimate company before it allows you to take people’s money.

do you need a business license for shopify

Having a business license will show Shopify that you are a legitimately registered company and that you are not just a scam that wants to take people’s money.

So if you plan on using one of Shopify’s patent gateways for your business, we would recommend applying for a business license as early as possible while you are still setting your shop up. This way you can start trading as soon as it arrives.

Local laws

While Shopify might not require you to have a business license to operate, your local laws, depending on where you live, might.

Business license requirements differ from state to state, and some states require that you have a business license before you can create your shop, even if it is an e-commerce business that you are building.

It is important that you do research before the time and see what your local laws state. If your state requires you to have a certain business license, even if Shopify doesn’t, you are legally required to abide by this, and can’t legally trade on Shopify until you do.

Storing certain inventory in your home

If you store your shop’s inventory in your home, and it needs certain health permits, you will need a business license to be able to store it legally.

This is a precaution that helps to protect you, and those who live in the same house as you.

If the type of business that you have requires one

For some businesses, it is mandatory to have a business license to operate. For example, if you are selling goods that are federally regulated, you will need to have a business license.

This includes things like alcohol, firearms, and animal products. Without a business license, you will not legally be allowed to sell any of these products.

How to get a business license for Shopify

Step 1: Choose your business structure

The first step is to establish whether you will be classified as a sole proprietorship or a limited liability company (LLC).

Two standard differences between the two are that with a sole proprietorship, you and the business are seen as one. You are responsible for all of the businesses’ debt, and there is no separation between business and personal assets. You also can’t have more than one owner.

An LLC, on the other hand, is an entity that is completely on its own. It is separate from you and your assets and liabilities. An LCC can also have one owner, or it can have many owners, there is no limit.

do i need a business license for shopify

Once you have established which entity is best for you and your business, follow through with the steps to base your business on this.

Step 2: Register for an employer identification number

The next thing that you need to do is register for an employer identification number (EIN).

Your EIN is seen as the federal tax ID of your business. It is more necessary if you go down the LCC route, as sole proprietors can use their Social Security numbers.

Your EIN is very important and will be used to file for your business license and any permits that are needed.

Step 3: Research what type of licenses and permits you will need

Just like each state differs in what licenses they require you to have, different businesses need different licenses too.

So, don’t only focus on what licenses and permits are necessary for your state, but keep in mind that the products or services that you are selling will also need a specific business license.

You want to ensure that you look into the licensing agencies that are in charge of registering businesses in your hometown.

A helpful website that will lead you in the right direction is the U.S. Small Business Development Centers.

Step 4: Apply for your business license

The last step is to apply for your business license.

do you need a sellers permit to sell on shopify

By now you should know exactly what licenses and permits you will be needing to run your successful e-commerce store. All that is left is filling them in correctly and sending them through to your local government.

Some forms may be able to be filled in online, while others may still make use of the more old-school methods and need to be handed in in person.

Try and get these forms filled in correctly and sent off as quickly as possible in order to get your business license and start trading as soon as possible.

Do you need a business license to sell on Shopify (FAQs)

Should I register for a business license even if my Shopify store does not necessitate one?

Even if you can get away with selling on Shopify without a business license, we would still suggest applying for one.

Having a business license can help you when it comes to tax, it makes your business credible, it keeps you accountable, it is better for the public’s health and safety, and it may offer you legal protection.

The nice thing is that even if you decide to delete your Shopify account, your business will still be legitimate, and you can still trade separately from Shopify if you have a business license.

Do I need a new business license if I change my Shopify store name?

The answer to this question is no. You can change the name of your Shopify store without needing to apply for a new business license.

But, you will need to notify the correct officials of your business’ name change and find out if you need to apply for a new EIN.

Luckily, businesses have registration numbers, which is how they are identified legally. So, name changes aren’t a massive setback, but it is still recommended that you inform the correct people.

Also, remember to change your Shopify-managed domain name if you change your business name. This is a detail a lot of people tend to overlook.

Will a business license for a Shopify store be cheaper than one for a physical store?

Unfortunately not. The cost of a business license normally depends on three things. These three things include what state you are in, what type of business you run, and how many employees you have.

Sadly, whether your business is online or not is not a factor that is looked at when you apply for a business license. Business licenses are not discounted for e-commerce businesses like those that are solely running through Shopify.

And, while you may think it is a hefty fee to pay, especially if you technically don’t need one, it will definitely be worth it to take the plunge and get a business license.

Conclusion

As it is evident, it is not always necessary to have a business license to sell on Shopify.

But, please remember that even if Shopify doesn’t require one, your state might. Make sure you do adequate and thorough research before you start selling on Shopify, and take note of the scenarios that do require you to have a business license.
Shopify is a great way to grow your business, so don’t let the fear of needing a business license stop you from using it to grow your business. Having a business on Shopify is not at all as daunting as it may seem. There are plenty of professionals out there who can help you with your Shopify store design, and give you a better chance at success.

Did you find our blog helpful? Then consider checking other guides:

Jonathan Kennedy

Jonathan is the founder at HeyCarson. He loves building communities, working on digital products and helping others reach new heights in their businesses and careers.

Check all articles from Jonathan Kennedy