3 Different Types Of Business Licenses for Online Businesses

So, you’ve got this brilliant idea for an online venture and you’re itching to get started, right? That’s wonderful! Just hold on for one second–have you got these must-have licenses yet? Find out what they are below!

The world has gone digital, opening up an entirely new world of possibilities for entrepreneurs. You can now start a small business from the comfort of your home and go on to be the creme-de-la-crème in that industry. Exciting, right?

But there’s a catch! No matter where you set up shop, be it a physical store or in the cloud, there are certain legal MUST-HAVEs you can’t do away with. Key among them include business licenses and permits.

Just because your online biz lives in the cloud doesn’t mean it’s exempt from the rules and regulations of the physical world. Running any kind of business without the necessary registrations and licenses can land you in hot water legally. This may range from fines and penalties to, in some worst-case scenarios, criminal charges.

I’m here to help you steer clear of such muddy waters. So today, I’ll be sharing a round-up of business licenses that online business owners should be aware of. Let’s dig in!

3 Different Types Of Business Licenses for Online Businesses

Depending on your type of business, location, and operations, you might need one or all three types. Below are the most common types of registrations or licenses you might need to apply for:

General Business License

A Business License is a local requirement and varies by city and county. Many areas require this for any business, online or offline, so it’s important to check with your local city or county clerk’s office to see what is needed and if you can apply for a business license online. To obtain this license, you will usually need to provide basic information about your business and pay a fee.

Professional License

Depending on your area of expertise. You may also need a professional license to prove you’re qualified to offer certain professional services. This is particularly true for online businesses that offer services in areas like accounting, legal, therapy, or the medical field. You will want to pay close attention to your professional license if you are going into the online coaching business as often times there are specific rules that apply to things like the area in which you are able to practice your professional services and the scope under which you can work with clients. The requirements to apply for this license vary by profession and state. So, check with your state’s professional licensing board for specifics.

Sales Tax Permit

Uncle Sam wants his cut, even in cyberspace. If you are an online entrepreneur who sells physical goods or provides certain services, you are expected to pay sales tax. And using platforms like Etsy or Amazon won’t exempt you. You will need a sales and use tax permit. You may even need a collection sales tax license depending on your type of business. To find out what is required for your business and apply, contact your state’s Department of Revenue.

How to Get a Business License for an Online Business

While the exact process might vary depending on your location and type of business, here’s the general roadmap to getting a business license:

Step 1: Determine Your Business Location.

Even if your biz is 100% online, the government still cares about where your physical self is planted. Most people register their business in the state or location where they live. The location where you register will determine which local and state regulations apply to you. If you are running an online business, but you don’t want to use your home address for your business address, you can use virtual office services or P.O. boxes that can receive business mail instead

Step 2: Register Your Business

If you haven’t already, you will need to choose a type of business entity and register your business. Choosing the right entity type can be a difficult decision, but each option has different benefits. A sole proprietorship is the most basic form of business entity and doesn’t come with any personal liability protection. On the other hand, a Limited Liability Company (LLC) grants members limited personal liability protection.  This is a crucial step for every business and is not the same as a business license. While you MAY be required to have certain licenses, EVERY business is required to register in order to be considered a legitimate business.

Step 3: Research Required Licenses

Once you have your business legally established and registered. You need to do your due diligence and see what licenses are also required. Ignorance about what licenses your state or location demands won’t hold in court when troubles come. Prevention, they say, is better than cure. 

So, put on your detective hat and visit your city and local county websites. Once there, gather information on all the required local business licenses. 

Then, head over to your state’s Secretary of State or Department of Commerce website for state-level licensing requirements. You can go a step further and look into federal licenses if your industry requires them.

But, don’t just scroll through all these web pages. Instead, make a list of all the licenses that might apply to you. Most importantly, don’t shy away from picking up the phone and calling the relevant offices. After all, sometimes a quick chat can save hours of confusion.

Step 4: Gather the Necessary Documents

Now that you know the licenses and permits you need to get started, the next step is gathering all the documents you might need. Keep everything in order before you start filling out applications. The last thing you want is to scramble for your high school diploma, with the submission deadline drawing to a close.

To make obtaining a business license a much smoother process, get the following documents ready:

• Your business plan (yes, you should have one, even if it’s just a few pages)
• Proof of identity (driver’s license, passport)
• Proof of address (utility bill, lease agreement)
• EIN (this is your federal ID number for your business and will be required for registering your business)
• Business bank account information
• Any other relevant professional certifications or degrees

Step 5: Apply for Your Licenses 

It’s finally time for the moment of truth!

With your research done and the documents in hand, it’s time to start filling out those applications. It’s even faster and less stressful now since many jurisdictions now offer online application processes. Unfortunately, some applications may require you to be physically present, while others may proceed at a snail’s pace.

Either way, be sure to do the following when applying:

• Read everything carefully. (I know it’s tempting to skim, but resist!)
• Double-check all your information.
• Pay attention to fees; they can add up, so budget accordingly.
• Note down any processing times or expiration dates. 

And here’s a bonus tip: don’t just abandon your licenses somewhere as soon as you get them. Instead, create a spreadsheet or use a business management tool to keep track of all your licenses, their expiration dates, and renewal requirements. It may sound inconsequential now, but this organizational foresight will surely prove hugely beneficial in the future.

You can also check out how to get a copy of your business license online here.

Getting your business licenses isn’t just a legal hoop to jump through; it’s a rite of passage for serious entrepreneurs.

It shows you’re committed to doing things the right way from the get-go. Discarding or ignoring the legal aspects of business is like programming a website without a single security feature. On the surface, you might think that things are going well for a while, but you and I both know that it will not have a happy ending. Also, having your business legally tightened up and protected can open doors to business partnerships that can take your online business to the next level.

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Want to get ALL your legal stuff 100% handled? You can. The Ultimate Bundle® hooks you up with 13 core templates every online business needs, video walk-throughs of each one, plus a quick-n-dirty legal education so you actually know what you’re doing. Join it here.