- Do I need a business address to start?
- How to Get a Business License Online
- Starting an Online Business
Q: Do I need a Business License to Sell Online?
A: No! You don’t necessarily need a business license to sell online. Selling a single item on Amazon or Ebay, for instance, wouldn’t require a business license. However, starting an online business like an Amazon store would require you to adhere to your state’s permit and licensing requirements.
If you’re launching an online business many cities require the bare minimum of a Doing Business As (DBA), but in some instances you won’t even need a DBA if you’re doing business under your own name.
It depends on the nature of your business and where your business is located.
We can help you nail down all of the permits and licensing you need for your specific business. Just go here to begin
Setting up an online business can be daunting
- Online business registration and licensing varies by location, business type, and legal structure.
- In some instances, you’ll be required to get a business address and a registered agent in order to be compliant.
- Your home address is not advised for many privacy and legal reasons.
- Figuring out which licenses and permits you need can be challenging.
Luckily! I’ve got you covered…
These online services will handle the setup for you. It’s as easy as answering a few online questions.
But If you’re still interested in doing it yourself… I can make it way easier.
I’ll walk you through Starting, Registering, and Licensing your online business; step-by-step.
Scroll down and let’s get you all set up!
Friends we’ve partnered with to simplify the business setup process – [Content continues below]
Starting a business is no easy feat…even online businesses. Once you come up with a viable business idea, there are plenty of steps you need to take before you can officially be up and running.
While the internet has made it look like anyone can open a business in the blink of an eye, the reality is far from that. There are legal requirements to consider, financial elements to take into account, and marketing strategies that need to be developed.
So before you start creating your social media page for your new online business, check out this comprehensive guide on how to start, register, and license your online business.
Section 1: Starting an Online Business
Refining Your Business Idea
First and foremost, you need to have a strong business idea.
More importantly, your online business idea should be validated by way of market research.
Depending on what product or service you want to sell, there could be a variety of options for you to start a business.
You could create a new company, you could partner with an existing one, or you can become a franchisee.
The most important thing, with an online business idea is that you’re clear on whom you want to target/service.
Before moving forward. Ask yourself the following:
- What’s the added value of what I’m offering?
- How will I deliver on my brand promise?
- What’s the purpose of my business idea?
When you’re refining your business idea, you need to make sure that you’re hashing out all the major details. Once all major details have been taken into account, you’re ready to start writing a business plan.
How to Write a Business Plan
Think of your business plan as the foundation of your online business.
“A good business plan guides you through each stage of starting and managing your business.sba.gov
You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.”
Beyond serving as a roadmap, business plans can help you attract investors and bring on strategic business partners.
A few things to keep in mind when writing a business plan:
- Do you want to write a traditional business plan or a lean startup plan?
- Keep it short and simple; afterall, you do want potential investors and partners to read through it.
- A business plan should be revisited and revised as your business grows and evolves.
- Keep the language simple and clear, avoid using slang, jargon, and acronyms unnecessarily.
- If you’re intimidated by the idea of writing a business plan, start with a one-pager plan and work from there.
Five key things to include in your business plan
There are various components that make up an effective online business plan.
1. Executive Summary
The executive summary should give readers a pretty short, yet concise idea of your business, it’s potential, and the strategies that you will implement to reach goals.
The executive summary includes:
- Mission statement
- Your product/service
- Information about your company’s leadership and structure
- Where the company will be based
- Financial information
- Growth plans.
2. Opportunity / Market Research
What problem or gap is your company hoping to solve or fill?
Why will the public be interested in such a service or product?
How much would people be willing to pay for such a service or product?
These are key questions that need to be addressed in your business plan.
Clearly define your business opportunity and provide information that supports why your business is likely to be successful.
In this sense, it’s crucial that you conduct thorough market research.
Some key elements to keep in mind when conducting market research for online businesses:
- Identify benchmarks
- Identify potential competitors
- Talk to people (i.e. create a landing page, reach out to your target market on social media, etc.).
- If applicable, include use cases for your product or service.
3. Target Market
If you want your online business to be successful, you need to clearly identify your target market.
These are only some of the questions that you will need to answer to identify your target market.
After honing in on your target market, determine its size. This will help you figure out your finances and opportunities for growth.
Some concepts to help you figure out the size of your target market:
- TAM – total available market; everyone you would ideally reach with your product or service.
- SAM – segmented available market; the portion of your TAM that you will focus on targeting.
- SOM – your share of the market; the portion of your SAM that you can realistically reach.
Pro tip: the size of your market should be estimated in dollars, not number of people (e.g. a $3 billion dollar market).
Bear in mind that you may have a few different buyer or customer personas; your marketing should be tailored to their specific needs and preferences.
This part of your business plan defines the actionable steps you will take to achieve your business’ goals.
The execution portion of your business plan includes:
- Marketing and sales strategy
- This will include everything from your website, emails, and social media presence, to landing pages, the customer journey, and customer reviews.
- Pricing strategy
- Strategic alliances
- Communication and public relations.
The goal of this section is to have a clear roadmap of how you will make your online business work, what steps you will need to take, determine key milestones that you wish to achieve, and how you will measure success.
A business plan cannot be complete without a financial plan and forecast!
For this, you will need a clear estimate of your:
- Initial Investment
- Sales Forecast
- Cash Flow
- … and Balance Sheet.
Remember: most business plans typically have monthly sales and revenue forecasts for the first twelve months of operation, as well as annual projections for at least 3 years.
For more detailed information and example templates, check out the SBA’s page on developing a business plan.
Figuring out the Nitty Gritty: How Much Does It Cost to Start and Run a Business
So by this point you might be wondering:
How much does it cost to start a business?
It’s a valid question.
Let’s crunch some numbers!
Some things to keep in mind when calculating the cost of starting a business:
- Will you need to make any significant initial investments?
- Will you need real estate to support your business (i.e. office space, storage space)?
- Will you need to register your business with local and federal authorities? – Yes
- Will you need to pay for any licenses in order to operate? – Yes
- What are some constant expenses you need to take into account (i.e. office space, equipment and supplies, communication, insurance, utilities, marketing, inventory, etc.)?
Once you have answers to these questions, you can add up the numbers to get a full financial picture of how much money you will need initially to start your business.
You also need to include extra cash flow to keep your business going while you reach your break even point.
Here’s a useful worksheet developed by the SBA can help you get started with calculating your business costs.
Figuring out Your Business Legal Structure
The legal structure of your business can impact:
- your taxes
- your registration and licensing process
- your personal liability
- your ability to raise funds and get capital
- your control over the company.
Figuring out which legal structure is best for your business is no easy task.
To complicate matters further, once you’ve registered your business, switching legal structures can be very difficult.
So slow down, and get it right from the start.
The Most Common Legal Structures for Online Businesses
This is the simplest and most common legal structure when starting a business, according to the SBA.
Basically, a sole proprietorship is a business owned and run by one person.
This legal structure does not provide any distinction between you and your business; this means that you are entitled to and responsible for the company’s profits and debts.
While it’s the most simple structure to set up, it comes with plenty of risks as you will be responsible for all of your business debts, losses, and liabilities.
This means your personal assets are not protected.
While the above may not seem like a problem when you’re starting your business, it can become one once your business grows.
A partnership is an entity that is owned and managed by two or more parties or individuals.
There are two main types of partnerships:
- Limited partnership
- General partnership
Regardless of the partnership you chose, it means that you and your business partners will share liabilities and profits.
In the general partnership, all is shared equally.
In a limited partnership, one partner retains control of the business while the other simply receives part of the profits.
This type of legal structure is typically used by those who will go into business with friends, family members, or a trusted business partner.
A limited liability company (LLC) is a legal entity that allows owners, partners, and shareholders to limit their personal liabilities… With the added benefit that they can enjoy certain tax benefits.
An LLC is the simplest way to structure your business while protecting your personal assets.
A corporation is a business entity that is completely separate from its owners.
Corporations offer limited liability to shareholders.
This means that they benefit from the corporation’s profits but they are not liable for a company’s debts or other liabilities.
While corporations offer the most protection to owners, they do have to pay income tax on their profits. While individuals also have to pay income tax, in the case of corporations, taxes can be higher (almost double that of personal income tax if your company reports over $500,000 in profits).
Moreover, depending on their location and line of business, some corporations may have to pay taxes to the federal government, as well as states and local municipalities. Which means that their tax liabilities could be higher.
In addition to that, corporations are taxed twice in some instances, when the company makes a profit and then when dividends are paid.
There are a few different types of corporations:
- C Corp – they file corporate tax
- S Corp – they file personal tax
- B Corp – they file corporate tax
- Nonprofit Corporation – they are tax-exempt.
Do You Need to Register Your Business?
Do you need to register your business?
It depends on your line of business and your location.
However, there are various benefits to registering your business even if state and federal regulations don’t require you to.
If you decide you don’t want to register your online business, you could miss out on personal liability protection, as well as legal and tax benefits.
If your business is an LLC, Corporation, Partnership, or Nonprofit, then you will need to register with your state in order to do business.
If, on the other hand, you plan to do business online using your legal name, you don’t really need to register with your local or federal government.
You’ll only need to file to get a federal tax ID.
This means that in some cases, you can start a business online without registering it.
Depending on your line of business, you might still need to obtain certain licenses and permits, either from your local or the federal government.
More on business license for online business in the following sections. I promise!
Keeping Your Business and Personal Taxes Separate
Even if you can do business under your legal name, you might want to consider registering your business as a separate legal entity.
It’ll allow you to keep your business and personal taxes separate.
It can also help protect your personal assets from business related issues, like debt, losses, or lawsuits.
Below are some ways you can keep your business and personal finances separate.
- Register your business as a C Corp, LLC, or S Corp; this will allow you to file taxes separately.
- Get an EIN (Employer Identification Number).
- Open a business bank account, and get a business credit or debit card.
- Pay yourself a salary.
- Keep personal vs business receipts separate.
- Be very organized with your business vs personal expenses.
One common question many online business founders have is…
“Do I need a business license to sell online?”
The answers is:
It depends on where you will do business and what type of business you will run.
Truth be told, it can be challenging to navigate and figure out which license you need. The same can be said about filling out and filing the right paperwork.
For example, if you are hoping to start an eCommerce business in Los Angeles, CA here are some questions you’ll need to answer before you know which licenses you need to apply for:
- What type of entity will your business operate under?
- Depending on whether you operate as a sole proprietorship, general partnership, limited partnership, corporation, or LLC, licensing requirements will vary.
- Will you register your business under an FBN or DBA?
- Will you use your residential address for business purposes or will you have a commercial address?
- How are you planning to employ people? As full-time employees, as freelancers?
Because licensing requirements vary by state, county, city, business type, and type of legal entity, many organizations (small, mid-size, and large) have opted to use tools and resources, like our Business License Software and Services, to figure out their licensing needs.
Rather than searching separate websites for relevant and accurate information, platforms like our business licensing software make it easy for entrepreneurs and founders to figure out which licenses they need.
It really can be as simple as answering a few questions… that is, if you go to the right place.
You can figure out your licensing requirements and online business license cost with our tool here.
Business Setup Checklist
The Difference Between a Business License and Business Permit
Although the terms are often used interchangeably, there is a subtle difference between business licenses and business permits.
A business license grants a company or individual permission to do, use, or sell something; for example a business license to sell liquor. Sometimes, to get a business license, individuals will require a test. For example, a doctor needs to have a medical license in order to practice medicine. Licenses can be granted by government agencies, some by the local government (which is often the case) and some by the federal government.
Business permits, on the other hand, regulate the safety of a business; these are often granted after an inspection has taken place. A common example is if you want to open a restaurant or bar, you will need a health permit in order to open your restaurant, which then also has a business license to sell liquor. Other common permits include fire department permits and zoning permits. As with business licenses, business permits are granted by government agencies
Section 2: How to Get a Business License Online
Let’s officially launch your online business!
For those of you operating out of your home, you might want to consider safeguarding your privacy by using a virtual business address instead of your home address.
The address you use on your business license will become publicly available information. Additionally, you’ll need to post a business address on your website or Amazon seller’s account for your new and existing customers.
If you’re not comfortable making your home address available to the world, then read on.
The Infographic below shows how easy it is to claim a business address in your city and get all of the state and local permits & licenses you’ll need to do business the right way.