Business Licenses: Do You Need One to Sell Online?

Online retail has introduced many new opportunities for doing business. In 2021 alone, eCommerce sales made up 18% of all retail sales globally. It has become a massive industry, weighing $4.9 trillion in 2021.

But with new opportunities come new rules as well. This article will cover just that, i.e., we'll list the rules and regulations of eCommerce and talk about how much a license will cost you, among other things.

It's important to note that each country and state has different laws that can affect your online business. Here, we will list some regulations that could potentially apply to your business. However, know that there may be additional laws and regulations that you may have to follow, depending on where and how you do business.

• The UK General Data Protection Regulation – or the GDPR is the law in the UK that regulates the protection of personal data used online. It's implemented through The Data Protection Act that was introduced in 2018. It regulates the processing, storing, and transferring of personal data and imposes on the parties involved that the data has to be fairly, lawfully, and transparently used
  
  
• The Electronic Commerce Regulations – is an EC Directive established in 2002. It regulates and defines the legal rules that online retailers must follow if their businesses are located in countries that are EU members. Its rules define the way retailers must communicate with their online customers and includes some required information and features that affected retailers must have 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
    
    
• Consumer Protection (Distance Selling) Regulations – were introduced in 2000 in the UK. Their goal is to protect the right of the customer and the general public when they make transactions with online businesses, and no face-to-face contact between them and the retailer exists
  
  
• Privacy and Electronic Communications Regulations – or PECR were introduced in the UK in 2003. These regulations make it clear that transmitting automated and previously recorded messages as a method for direct marketing via a phone is illegal if the subscriber hasn't given their prior consent. They also regulate the use of cookies and other methods of direct marketing
  
  
• California Consumer Privacy Act – or CCPA, was introduced in 2018. It's applicable for all businesses globally, and it regulates how businesses are to handle consumer data for California residents. It gives consumers more control over the personal information they share with online retailers

Here are some rules that all online businesses have to follow regarding different online business aspects. The specifics of each rule are different depending on your location and type of business.

• Taxes – there are multiple taxes that you must pay even as an online business. The rates differ based on the country your business is registered in and the countries you do business with. As an online retailer, the taxes that you will probably encounter are sales taxes, import duties, export taxes, etc. However, if you do not import any products, you will not have to pay those fees. So, make sure to be informed about the taxes your business is specifically subject to and the rates of the relevant country, and talk to local authorities that can help you. Also, inform yourself about the tax deductions or exemptions that apply to you, if any
  
  
• Payment gateways – are critical because customers will not trust your site if it doesn't offer secure payment methods. Otherwise, your site will be vulnerable to hackers and data leaks, which can result in regulatory fines and customers leaving. Around 19% of customers will not return to a business if it experiences a data breach. So, to make sure this doesn't happen to you, make sure to use payment gateways that have:
  • DCI-PSS compliance
  • GDPR compliance for selling in European countries
  • HTTPS connection (SSL certificate) for all payments
  • Integrated security and anti-fraud protection
    
    
• Trademarks, patents, and copyrights – and their registration isn't required for eCommerce business owners, but it can provide additional protection. However, you must ensure that you are not infringing on the intellectual property rights of others. Consult relevant copyright, patent, and trademark bodies, such as the United States Patent and Trademark Office if you operate in the US. 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.
    
    
• Shipping restrictions – if you work with products that can be shipped internationally, you have to know the different rates, rules, and restrictions that shipping companies have for different products. You also need to be informed of the shipping taxes, duties, and customs laws. So, you need to research the different rules that apply 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

However, even if a product is commonly restricted, you can get special licenses to be able to sell them. Of course, these products come with different shipping rates and regulations than regular products

• Inventory – your business may be too large to keep your inventory at home. All countries have different rules regarding the amount of inventory you can keep and how you should store it. You should also check your real estate lease, deed, or zoning rules to see if running a business like the one you're considering out of your house is allowed. Additionally, you must check if your business requires you to have any specific licenses, like zoning restrictions, safety permits, etc.
  
  
• Age restrictions – all US websites must comply with COPPA or the Children's Online Privacy Protection Act. Of course, different countries have different age restrictions, so make sure to research the rules for the country you operate in and follow them if they apply to your products. Otherwise, you will have to pay regulatory fines, which in the US can be up to $43000 per child
  
  
• Business insurance – isn't compulsory for all eCommerce stores. Still, if your business is registered as an LLC, you should consult an expert to see the specifics of the insurance you can get. Also, it can be beneficial for you to get insured for general, product, professional, and other types of liabilities so that you protect yourself against possible legal action in the future
  
  
• Licenses and permits – all countries and states have different rules regarding licenses and permits. The ones you require depend on your products and the country you operate from and sell in. 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, a small eCommerce store may not require any other particular business licenses in most cases. However, to avoid any future concerns, you should double-check with the proper local regulators or speak with an attorney to ensure that no business licenses are necessary to operate in the jurisdictions you operate or deal with

• Customer privacy - violations of customer privacy can result in legal and regulatory action. Compliance, however, requires caution and diligence. Several eCommerce and marketing apps have features that ensure compliance with data gathering rules, such as the CCPA and GDPR. In addition, some states and countries require online retailers to ask customers expressly for permission before collecting, storing or processing their data. So, make sure you follow the laws on customer privacy that apply to you in detail. Otherwise, if you violate GDPR rules, for example, you may have to pay up to $20 million in fines. The GDPR is considered the most rigid data protection law that exists right now, so if it applies to you, make sure you know every detail and follow every rule

Getting a business license for online stores is not significantly different from getting one for brick-and-mortar stores. The process and requirements are the same for both in most countries and if you have the appropriate licenses for a brick-and-mortar store, you do not need additional ones if you take your business online. However, this differs and depends on the country you operate in.

For example, a state-issued or general business license in the US can cost between $50 to $400, depending on the state that is issuing it. They are renewed annually, either via email, phone, or in person. DBAs or Doing Business as Name licenses can cost between $10 to $50, depending on the state or county. They are renewed every three to five years.

Generally, the cost of a license depends on the application fees and other costs associated with it, and business licenses usually cost a couple of hundred dollars. Also, there are renewals fees that you need to pay when your license expires. The prices vary depending on the type of license you need and the country you get it in.

The short answer is yes; you do need a license for doing online business. The most important thing when it comes to business licenses for online stores is your location. The type of license, how much it costs, how to apply for it and get it all depends on the way your country or state regulates online business.

This article lists the most common rules and regulations that most countries include in their laws in one way or another. So, before starting your online business, make sure to research the specific requirements and contact a lawyer that can help you figure out what your business needs explicitly.