Business Licenses: Do You Need One to Sell Online?

Written on June 18, 2024 by Julia Lozanov

Estimated read time 5 minutes

Business Licenses: Do You Need One to Sell Online?

Online retail has introduced many new opportunities for doing business.

In 2023, the global e-commerce sales reached an estimated $5.8 trillion, which is a significant increase from the $4.9 trillion recorded in 2021.

But with new opportunities come new rules as well.

This article will cover just that, i.e., you’ll learn about the rules and regulations of ecommerce, including the cost of obtaining a license, and much more.

eCommerce Regulations

It's important to note that online business laws vary by country and state.

We'll outline some common regulations here, but be aware that additional rules may apply based on your location and business operations.

The UK General Data Protection Regulation (GDPR): enacted through the Data Protection Act of 2018, governs how personal data is processed, stored, and transferred in the UK. It requires that all personal data be handled fairly, lawfully, and transparently.

The Electronic Commerce Regulations: based on a 2002 EC Directive, set legal standards for online retailers in EU member countries. These rules dictate how retailers should communicate with customers online and require specific information and features on their websites, like:
- showing the terms and conditions of the website
- showing clear information about the prices and delivery fees
- identifying the users that send any type of business communication

The Consumer Protection (Distance Selling) Regulations: introduced in the UK in 2000, aim to protect consumers who make purchases from online businesses without face-to-face contact with the retailer.

The Privacy and Electronic Communications Regulations (PECR): established in the UK in 2003, prohibit sending automated or recorded marketing messages by phone without prior consent from the recipient. They also regulate the use of cookies and other direct marketing techniques.

The California Consumer Privacy Act (CCPA): introduced in 2018, applies globally to any business handling data of California residents. It gives consumers more control over the personal information they share with online retailers.

Online Business Regulations by Country/Region

United Kingdom

1. The UK General Data Protection Regulation (GDPR)

Enacted through the Data Protection Act of 2018, the GDPR governs how personal data is processed, stored, and transferred in the UK.

It requires that all personal data be handled fairly, lawfully, and transparently.

Key provisions include:

Ensuring data is collected for specified, explicit, and legitimate purposes.
Limiting data collection to what is necessary in relation to the purposes for which it is processed.
Maintaining data accuracy and ensuring it is kept up to date.
Implementing appropriate security measures to protect data from unauthorized access, alteration, or disclosure.
Allowing individuals to access, rectify, erase, or restrict the processing of their data.

2. The Electronic Commerce Regulations

Based on a 2002 EC Directive, these regulations set legal standards for online retailers in EU member countries.

They dictate how retailers should communicate with customers online and require specific information and features on their websites, such as:

Displaying the terms and conditions of the website.
Providing clear information about prices and delivery fees.
Identifying the users that send any type of business communication.

3. The Consumer Protection (Distance Selling) Regulations

Introduced in the UK in 2000, these regulations aim to protect consumers who make purchases from online businesses without face-to-face contact with the retailer.

They ensure consumers receive:

Clear information about the goods or services before purchase.
Written confirmation of this information.
A cooling-off period of 14 days to cancel an order and receive a refund.
Protection against fraudulent use of payment cards.

4. The Privacy and Electronic Communications Regulations (PECR)

Established in the UK in 2003, PECR prohibits sending automated or recorded marketing messages by phone without prior consent from the recipient.

They also regulate the use of cookies and other direct marketing techniques. Key points include:

Requiring consent for most types of cookies and similar technologies.
Allowing individuals to opt-out of receiving marketing communications.
Ensuring communications include clear identification of the sender and an easy way to opt-out.

United States

1. The California Consumer Privacy Act (CCPA)

Introduced in 2018, the CCPA applies globally to any business handling data of California residents.

It gives consumers more control over the personal information they share with online retailers. Key rights under CCPA include:

The right to know what personal data is being collected about them.
The right to delete personal data held by businesses.
The right to opt-out of the sale of their personal data.
The right to non-discrimination for exercising their CCPA rights.
Requiring businesses to provide a "Do Not Sell My Personal Information" link on their websites.

2. The Federal Trade Commission (FTC) Act

The FTC enforces laws to protect consumers from unfair or deceptive practices in eCommerce. This includes:

Prohibiting false or misleading advertising.
Requiring truthful information about products and services.
Enforcing compliance with privacy and data security standards.
Regulating endorsement and testimonial practices.

3. The CAN-SPAM Act

Enacted in 2003, this law sets the rules for commercial email, establishing requirements for commercial messages, giving recipients the right to stop receiving emails, and outlining penalties for violations.

Key provisions include:

Banning false or misleading header information.
Prohibiting deceptive subject lines.
Requiring that commercial emails be identified as advertisements.
Including a valid physical postal address in emails.
Providing a clear and conspicuous way to opt-out of receiving future emails.

European Union

1. The General Data Protection Regulation (GDPR)

Adopted in 2016 and enforced from 2018, the GDPR applies to all EU member states and sets a high standard for data protection and privacy. Key aspects include:

Requiring clear consent from individuals before processing their data.
Allowing individuals to access, correct, delete, or restrict the processing of their data.
Mandating data breach notifications within 72 hours.
Ensuring data protection by design and by default in all business processes.
Establishing strict penalties for non-compliance.

2. The Consumer Rights Directive (CRD)

Implemented in 2014, the CRD strengthens consumer rights across the EU by:

Extending the cooling-off period for online purchases to 14 days.
Requiring clear and comprehensive information about products and services before purchase.
Mandating transparent pricing and delivery information.
Allowing consumers to withdraw from contracts without penalty.

Canada

1. The Personal Information Protection and Electronic Documents Act (PIPEDA)

This law governs how private sector organizations collect, use, and disclose personal information in the course of commercial activities.

Key principles include:

Obtaining meaningful consent from individuals for the collection, use, and disclosure of their personal information.
Providing individuals with access to their personal information and the ability to correct inaccuracies.
Ensuring that personal information is protected by appropriate security measures.
Allowing individuals to withdraw consent at any time.

2. Canada's Anti-Spam Legislation (CASL)

Enacted in 2014, CASL aims to protect consumers and businesses from unwanted commercial electronic messages (CEMs). Key requirements include:

Obtaining express consent before sending CEMs.
Including an unsubscribe mechanism in all CEMs.
Providing clear identification of the sender and contact information.
Maintaining records of consent.

Australia

1. The Privacy Act 1988

This act regulates the handling of personal information by government agencies and private sector organizations. Key elements include:

Collection of personal information must be lawful and fair.
Individuals must be informed about the purpose of data collection.
Organizations must take reasonable steps to protect personal information from misuse, loss, and unauthorized access.
Individuals have the right to access and correct their personal information.

2. The Spam Act 2003

This law aims to reduce unsolicited commercial electronic messages. Key provisions include:

Prohibiting the sending of commercial emails without consent.
Requiring accurate sender identification in messages.
Providing a functional unsubscribe option in all commercial communications.

Japan

1. The Act on the Protection of Personal Information (APPI)

Revised in 2017, APPI regulates the use and protection of personal data. Key aspects include:

Requiring clear purposes for data collection and use.
Obtaining consent from individuals before collecting sensitive information.
Implementing security measures to protect personal data.
Allowing individuals to request access to, correction, or deletion of their data.

2. The Act on Specified Commercial Transactions

This law sets rules for commercial transactions to protect consumers. It includes:

Clear disclosure of seller information.
Providing detailed descriptions of products and services.
Ensuring fair and transparent terms and conditions.
Implementing measures to prevent fraud and deceptive practices.

Brazil

The General Data Protection Law (LGPD)

Effective from 2020, LGPD regulates the processing of personal data. Key principles include:

Ensuring data processing is conducted with clear and specific purposes.
Obtaining consent from data subjects before collecting their information.
Providing data subjects with rights to access, correct, and delete their information.
Implementing security measures to protect personal data.

India

The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011

These rules, part of the Information Technology Act, regulate the handling of sensitive personal data. Key points include:

Requiring businesses to obtain consent before collecting sensitive data.
Implementing reasonable security practices to protect data.
Providing individuals with rights to access, correct, and withdraw consent for data processing.

China

1. The Personal Information Protection Law (PIPL)

Effective from 2021, this law regulates personal data protection. Key features include:

Requiring clear and specific purposes for data collection.
Obtaining explicit consent from individuals before processing their data.
Providing data subjects with rights to access, correct, and delete their information.
Mandating data breach notifications and security measures.

2. The E-commerce Law

Implemented in 2019, this law aims to promote fair competition and protect consumer rights in online transactions. Key aspects include:

Requiring eCommerce platforms to verify the identity of sellers.
Ensuring clear and accurate product information and pricing.
Protecting consumer rights to return products and receive refunds.
Implementing measures to prevent counterfeit goods and false advertising.

Singapore

1. The Personal Data Protection Act (PDPA)

This law governs the collection, use, and disclosure of personal data by organizations. Key principles include:

Obtaining consent before collecting personal data.
Ensuring data is accurate and complete.
Implementing reasonable security measures to protect data.
Allowing individuals to access and correct their personal data.

2. The Spam Control Act

This act regulates the sending of unsolicited commercial electronic messages. Key provisions include:

Prohibiting the sending of unsolicited messages without consent.
Requiring accurate sender identification.
Providing an unsubscribe mechanism in all messages.

Online Business Licensing: Key Rules

Let’s quickly review some universal rules for online businesses.

Keep in mind, however, that the details may vary based on your location and business type.

1. Taxes

As an online business, you must pay various taxes, which vary depending on where your business is registered and the countries you serve.

Common taxes include sales taxes, import duties, and export taxes, though you won't face import fees if you don't import products.

It's crucial to understand the specific taxes and rates applicable to your business.

Consult local authorities and educate yourself about any potential tax deductions or exemptions available to you.

2. Payment gateways

Payment gateways are crucial for customer trust, as insecure payment methods can lead to hacking, data leaks, regulatory fines, and loss of customers.

In fact, about 19% of customers will not return to a business after a data breach.

To avoid these issues, ensure your payment gateways offer robust security with features like:

DCI-PSS compliance
GDPR compliance for selling in European countries
HTTPS connection (SSL certificate) for all payments
Integrated security and anti-fraud protection

3. Trademarks, patents, and copyrights

Trademarks, patents, and copyrights aren't mandatory for eCommerce businesses, but registering them can offer added protection.

It's important to ensure you're not violating anyone else's intellectual property rights.

If you're operating in the US, consider consulting with bodies like the United States Patent and Trademark Office.

Some laws that apply to online retailer businesses are:

you can protect any unique aspect of your online store with patents and copyrights, depending on the regulation in your country
The Digital Millennium Copyright Act or DMCA can protect logos, custom illustrations, visual content, etc.

4. Shipping restrictions

If you ship products internationally, it's important to understand the varying rates, rules, and restrictions that shipping companies impose on different products.

You should also be aware of shipping taxes, duties, and customs laws. Research the specific regulations relevant to the countries you do business with and the products you sell.

Most shipping companies restrict the same products, like:

Alcoholic beverages
Ammunition
Animals
Cigarettes
CBD products
Dry ice
Explosives

Even if a product is typically restricted, obtaining special licenses may allow you to sell it. Keep in mind that these products often have different shipping rates and regulations.

5. Inventory

Inventory management may require more space than your home offers.

Different countries have varying rules on inventory storage.

Check your real estate lease, deed, or zoning rules to ensure that operating your business from home is permissible.

Also, verify if specific licenses or permits, such as zoning or safety permits, are necessary for your business.

6. Age restrictions

All US websites must comply with the Children's Online Privacy Protection Act (COPPA).

Be sure to research and follow the specific age restriction rules for the country in which you operate.

Non-compliance can lead to substantial fines, up to $43,000 per child in the US.

7. Business insurance

Business insurance isn't mandatory for all eCommerce stores, but it's advisable, especially if your business is an LLC.

Consult with an expert to understand the specific insurance options available.

It's beneficial to consider insurance for general, product, professional, and other liabilities to protect against potential legal issues in the future.

8. Licenses and permits

Different countries and states have varied rules for licenses and permits.

The specific ones you need depend on your products and the locations where you operate and sell.

Some licenses that US-based online retailers usually have are: .

State-issued (or 'general') business licenses
Federal licenses and permits
Doing business As name (DBA)

Aside from a sales tax ID, most small eCommerce stores typically don't need additional business licenses.

However, to avoid future issues, it makes sense to confirm with local regulators or consult an attorney to ensure you meet all licensing requirements for the areas you operate in.

9. Customer privacy

Violating customer privacy can lead to legal and regulatory consequences.

Many eCommerce and marketing apps have features that help comply with data protection regulations like CCPA and GDPR.

Some regions also require explicit customer consent for data collection and processing.

It’s crucial to thoroughly understand and adhere to the privacy laws applicable to your business.

Non-compliance with GDPR, for instance, could result in fines up to $20 million.

As one of the strictest data protection laws, if GDPR applies to you, ensure you know and follow all its requirements.

How Much Does a Business License Cost?

Obtaining a business license for an online store is similar to getting one for a physical store.

In most countries, if you already have licenses for a brick-and-mortar store, you typically don't need additional ones for going online, although this can vary by country.