Some of the most common questions about opening an online store involve licensing, but do you need a business license to sell on Shopify?
Understanding the national, local and industry regulations that apply to online businesses can help you to determine whether to get a business license or form a limited liability company for your Shopify storefront.
Does Shopify Require a Business License for Sellers?
Shopify does not require business licenses for all sellers. The location of your business and where you sell products will determine whether you need a business license for a specific municipality, state, territory or country. You may need a business license to legally operate your online store under the following conditions:
- Your sales total $20,000 or more per month.
- You sell regulated inventory from your home.
- Your business operates in an industry subject to regulations.
The profitability of your online store can require a business license to streamline tax requirements. The owner of a store that sells regulated inventory, such as health products or other types of inventory subject to federal laws, will need to have a business license.
Do You Need an LLC To Sell on Shopify?
You do not need to form an LLC to sell on Shopify, though this business structure can have some advantages. A sole proprietor claims business revenue on personal tax returns but is subject to liability. An LLC can protect your assets and help you avoid double taxation on business and personal income.
Once you have a legal business structure, you can obtain an employer identification number from the Internal Revenue Service. This number can be useful for obtaining permits or licenses from a municipality or state to sell physical products or gaining federal approval to sell regulated items.
What Are the Requirements To Sell on Shopify?
Check the terms of service and requirements for operating a business in your country, state or territory and municipality to determine if you do need a business license to sell on Shopify in your area.
Shopify does not require all sellers to have business licenses, but you may need a seller’s permit or business license based on the location of your business and the type of products you sell. The sales nexus of your business, or the location of most of your sales, can also necessitate a permit or license to sell taxable goods.
Do You Need a Tax ID To Sell on Shopify?
You will need a tax ID for selling taxable goods or if you have nexus in a state that requires sales tax. As a sole proprietor, you can use your Social Security Number as a tax ID.
If you plan to start selling on Shopify as a sole proprietor, you may want to file a Doing Business As application to operate under a business name. A store owner who forms an LLC, S corporation or another legal business organization can apply for an EIN from the IRS.
Sell More on Shopify With ADG
Whether or not you need a business license to sell on Shopify in your area, once you can legally operate on Shopify, we offer solutions for automatically managing discounts and gifts.
Contact us to learn more about how the ADG app can help you increase revenue.