Shopify platform counts around 1.75 million sellers, making it one of the most popular ecommerce tools available to business owners. In case you are already making use of Shopify or still planning to use it once you launch your own business, you might probably be wondering if you need a business license for Shopify. Generally, you do not need a business License to sell on Shopify, but there are a few situations where you might need it.
In this article, we have answered all questions to help you determine whether you need a business License for Shopify, how to get one and what it all means for your online store.
Table of Contents
What is a Business License?
A business license is a legal permit that allows you to operate a business in a specific location. It's essentially a permission slip from the government to run your business legally and follow the rules.
Here's a breakdown of what you need to know about business licenses:
Why You Need a Business License:
- Legality: Operating without a license is illegal and can result in fines, penalties, or even business closure.
- Trust and Credibility: A license demonstrates legitimacy to customers and potential partners, building trust.
- Access to Resources: Some licenses are required to access certain resources, like financing or government contracts.
- Compliance: Licenses often require you to follow specific rules and regulations, ensuring you operate safely and ethically.
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Business Licenses and Shopify
It is of no doubt that now you have an idea as regard to what a Business License is, and what it is used for, you may still be asking yourself; Do I Need to get a business License for my Shopify business? Well the answer here is no, you generally do not need a business License to use Shopify.
Nevertheless, there are few situations where you might need to have a business License, including:
- If you are earning more than $20,000 per month through Shopify.
- If you store regulated inventory in your home (anything that requires a health permit, such as some foods, plants, supplements, or cosmetics).
- If you need a professional or government License based on the type of business you operate or the items you sell.
If you do not fall in any of these situations, then you are free to run your business on Shopify without a Business License. More to that, its essential that you check requirements at all levels to be certain you are are in compliance with local, state and Federal law.
Do You Need to Have a Business License to Dropship on Shopify?
You don't need a business license to start dropshipping on Shopify. Unlike other Shopify stores, you only require a license if your monthly revenue exceeds $20,000, you manage inventory from home, or specific professional or government regulations apply.
Dropshipping is an attractive business model because it requires minimal upfront capital. Additionally, dropshippers often avoid the hassle of licensing and permits. This is because suppliers, who store and ship products, are responsible for complying with regulations and obtaining necessary licenses.
Do You Need a Seller's Permit to Sell On Shopify?
Whether you need a seller's permit to sell on Shopify depends on your business's connection, or "nexus," to a particular state. If you have a significant presence in a state, you'll likely need to collect and remit sales tax, and this usually requires a seller's permit.
The specific rules, forms, and fees for seller's permits vary widely by state. It's essential to research the requirements for each state where you have customers to ensure compliance.
Do I Need a Sales Tax ID or Tax Identification Number to Sell on Shopify?
The need for a sales tax ID on Shopify depends on whether you're selling taxable products and if your business has a tax presence in a particular state. If you must collect sales tax, you'll need a sales tax permit from the state and must provide this number to Shopify.
Your sales tax ID is usually an Employer Identification Number (EIN), a unique identifier for your business. If you're a sole proprietor without a formal business structure, your Social Security number can serve as your tax ID.
Closing Remark: Do I Need a Business License to Sell On Shopify
While Shopify does not require you to have a business license to set up an online store, local laws and regulations may mandate that you obtain one. The need for a business license depends on your location, the type of products you sell, and your business structure.
Conduct thorough research, consult local authorities, and consider seeking professional advice to ensure you comply with all necessary legal requirements. Having a business license not only ensures legal compliance but also enhances your credibility and can provide various financial benefits.