When you’re thinking about starting an online business selling products through the likes of Amazon, it’s only natural that you’d want to make every effort to ensure that all your business activities are perfectly legal and above board.
But when you start looking into such matters things start to look a little complicated. There’s business and VAT registration. Then there are federal business licenses, state ones, and local ones. Not to mention sales permits which aren’t the same thing.
That’s why we’ve put together this article. In this article we’re going to explore the benefits of a business license and when it is required, before looking specifically at whether you need a business license to sell on Amazon.
Then we’re going to take a closer look at what the requirements are to be a seller on Amazon before exploring just how to sell on Amazon. We will then wrap up with a brief conclusion.
Please feel free to scroll ahead if you wish.
Benefits Of A Business License
There are several important benefits of a business license, and we’re just going to run through them briefly…
Legal Protection
Most cities legally require businesses to be licensed, and if you don’t have a license this could be considered illegal in some cities.
Credibility
Having a business license ensures customers that you are in fact a legal business and not some kind of scam artist.
To Receive Funding
Often to qualify for funding from certain sources, you must demonstrate that you have a business license.
Tax Compliance
Business licenses are important because they allow you to easily keep up with taxes owed to the city, keeping you out of legal and financial trouble.
Wholesale License Benefits
Once you have a business license you can purchase merchandise at wholesale prices.
When Is A Business License Required?
Federal Licenses And Permits
Whether or not you need a federal license or permit for your business depends on whether or not your business activities are regulated by a federal agency.
You will need to check whether your business activities are regulated by a federal agency by clicking on this link to the SBA’s webpage on applying for licenses and permits.
And then if it is regulated, you can check with the issuing agency about business license details and costs.
State Licenses And Permits
The licenses and permits you need from the state, county, or city will depend on your business activities and business location.
States tend to regulate a broader range of activities than the federal government. You’ll have to research your own state, county, and city regulations. Simply visit your state’s website to find out which permits and licenses you need.
Do I Need A Business License To Sell Online?
As you may already know, there are several online platforms where people can sell their goods without requiring a sales permit or business license. Prime examples of this include eBay, Facebook, Craigslist and Etsy.
And with this seeming to be such a cross-the-board phenomenon, it begs the question whether business licenses are really needed to sell goods on Amazon.
Do I Need A Business License To Sell On Amazon?
And since we’re looking specifically at selling through Amazon, it makes sense to check out what Amazon has to say about such matters…
Now, it turns out that on Amazon’s web page describing how to start selling on Amazon, there is no mention of business licenses.
There could be several reasons why this is not mentioned here…
A business is not necessarily required to own a license to sell on Amazon in all instances. Sometimes it is and sometimes it isn’t. So, let me expand on that…
We mentioned this earlier, but it bears repeating here. There are several forms of licenses and permits that are required for different business activities. These include federal licenses and permits and state, county, and city licenses and permits.
In other words, whether or not you need a business license to sell on Amazon depends entirely on whether the products that you are going to be selling are federally regulated.
If you are unsure about whether your products are federally regulated, please refer to this link to the SBA’s webpage on applying for licenses and permits.
And you also need to check whether your particular state, county or city regulates the selling of these products also.
What Are The Requirements To Be A Seller On Amazon?
As we mentioned earlier, Amazon’s web page describing how to start selling on Amazon makes no mention of business licenses.
However, that is not to say that it doesn’t have set requirements for sellers. In order to create an Amazon seller account and sell through Amazon, you will need the following:
- A valid passport or national ID
- A business email address or Amazon customer account
- Company registration details, with VAT number if applicable
- A bank account for proceeds of sales
- A chargeable credit card
- A phone number
So this does require some business setup and paperwork, and you can’t just start selling on Amazon as a business if there is no business.
That doesn’t mean that you can’t sell as a sole proprietor and have an individual selling account rather than a professional one.
But for the purposes of this article, we’re concentrating on professional Amazon seller accounts. You will need a professional Amazon seller account if you sell more than 35 items per month.
What Do I Need To Do Before I Can Create A Professional Amazon Seller Account?
Presuming that you already have a contactable phone number and a valid national ID, that just leaves the following:
- A business email address or Amazon customer account
- Company registration details, with VAT number if applicable
- A bank account for proceeds of sales
- A chargeable credit card
This means that you need to register a DBA, a “Doing Business As” name. Every state has a different way to do this. Check with your local government agency to register.
As for setting up a business bank account, You can’t open a business bank account without a Federal Tax ID also known as an EIN. This is free to apply for. And once you have your business bank account set up you can also apply for a business credit card.
And while we’re on the subject of tax, you may also need to get a sales tax permit for your state.
Then all you need to do paperwork wise is to set up your business email address.
How To Sell On Amazon
Amazon has put together a wonderful beginners guide to selling on Amazon, which is available on this link. This should help to explain everything you need to know to get started. It’s an excellent resource which is very thorough and covers everything that you might need to know.
Wrap Up
So, the answer to “Do I Need A Business License To Sell On Amazon?” is that it depends on what you are selling and how much you are selling.
Unfortunately this article could only go so far to explaining when a business license is and isn’t required. You will have to do your own research to find out whether any specific federal or state licenses or permits.
But regardless of that there are certain things you do have to put into place regarding tax and VAT. But the good news is that this is relatively easy to sort out, and before long you could be making real money selling through Amazon.
