Mamapreneurs often wonder if they really need a business license to conduct their business. Last week I addressed whether or not you need a business license and the answer is in almost all cases “Yes, you do.” But there are some other frequently asked questions about business licenses that I want to address today.

Do I need a business license to sell on Etsy?

Yes. Etsy does not require you to have a business license to comply with their terms of service, but your local governing agencies typically require you to have a business license to do business in their jurisdiction. So even if you are only selling on Etsy and never in your city, you will likely be required by your local government to have a business license.

Do I need a business if I resell my own stuff (examples: eBay, Poshmark, etc)?

Reselling your own property for a loss potentially means that you don’t need a business license. But that changes if you start making a profit on your sales, purchase items with the sole intent to sell it on the platform, or resell property for a profit. In that case, you will typically need a business license.

Do I need a business license if I am only selling online?

Yes. While you may or may not need to set up sales tax reporting if you are only selling online, your local government most likely requires you to have a business license when you are operating a business in their jurisdiction whether or not you are selling in person to those in the area.

How much do business licenses usually cost?

Business license fees are determined by each governing authority so the cost can vary. Typical costs are usually no less than $50. Some areas have a flat business license fee regardless of what type of business you are running. Others will charge based on your revenue and the type of business you’re operating.

How soon should I get a business license when I start a business?

A business license is generally required as soon as you start selling products so it’s ideal that you purchase a business license within the month that you start your business. If you wait to purchase a license you might be responsible for fees back to the original start date of your business.

Do I need a business license to sell as part of a market or trade show?

For markets in the area where you live, you will most likely be required to have a business license. For markets and shows outside of your normally licensed area, you should check with the market organizer to find out the requirements. Sometimes these types of events procure a license for all out of area shops and include part of the cost of the license in your application fee for the show. Organizers will be able to answer those questions, and if they can’t then you shouldn’t be partnering with the organization because you can’t be sure that they are operating legally.

I don’t sell products but only provide a service, do I need a business license?

Yes, no matter what you’re selling, if you’re operating a business you need a business license. [Sales tax may be a different issue but that’s for another day.]

How long does a business license usually last?

In general, a business license will typically be good through the remainder of the governing body’s operating year and then will need to be renewed annually.

How long does it usually take to get a business license?

The actual process of getting a license will vary based on your location but, when I went down to my city offices, it only took about 15 minutes.

Do I need a Federal Employer Identification Number to get a business license?

If you are a sole proprietor then you won’t need an EIN to get a business license because you will be running your business off of your social security number. If you are a different type of entity, you are mostly likely required to have an EIN for operation which would make it required for a business license.

I conduct business in several cities, do I have to get a business license in each city?

Yes, if you have a physical place of business (brick and mortar store) or run a business in multiple municipalities regularly, then you will likely need a business license in each of those areas.

How could the city find my business if I only sell online?

Governing entities use multiple resources to find businesses that are not abiding by their laws. If you have identified yourself anywhere online (social media, Etsy, Facebook profile, etc.), it would be very easy for them to find your business and notify you that you are not in compliance. Most governing bodies don’t have the time, manpower, or money to search out every small business but, if they happen to run across yours, you could be in trouble. If that’s the case, not only may you be liable for back licenses fees but your could also be required to pay penalties and they could deny your request to get a business license.

Must I have a business license if I’m not turning a profit?

Yes, you’re running a business even if you’re not turning a profit so you will need a business license.

If I have multiple businesses but they are all run from one address, do I need a separate business license for each business?

You should check with your local governing agency but in some cases you might be able to only have one business license and be operating multiple DBAs (“doing business as” businesses) from the one business license.

** Please remember that I am not a financial or legal advisor. All information that I offer is based on my own experience and is not to be taken as a replacement for consulting a financial or legal professional. Remember that all advice, articles, and education that you see online pertains to a specific type of business in a specific environment and you should always consult with someone familiar with the laws, guidelines, and best practices of your industry as well as being familiar with your individual company and area.

“Do I need a business license?”

This is a question that I get asked a lot and so I wanted to put together some information for you mamapreneurs who might be asking the same question. While no one sets out to do the wrong thing, sometimes if you don’t research a topic you can inadvertently end up making a mistake. I think this is what happens with business licenses because mamapreneurs make some assumptions about them such as they’re only selling online so they don’t need one or since they’re only offering services they don’t need one.  But those assumptions are often incorrect and not checking out the real answers could leave you in legal trouble and with large back payments and penalties to pay. None of us want that so let’s find out the real answer.

The easy answer is “YES. You do need a business license.”

In almost all cases, a business license is required to legally do business in your city and county. There is a chance that your business could be the exception from the rule but that would vary on a city by city (or state by state, etc) basis.

There are a variety of types of business licenses and not all will apply to your business. You should check with your local governing bodies to clarify exactly which licenses you need or don’t need.

• Local Business License – this is a license that you get from your city and shows that you can legally operate a business in the city; contact your City Clerk or License Commissioner to obtain; renewed annually; if it is required it in your city it is required regardless of where you sell (online only, in person, markets, etc).

• County Business License – This license often is included with a city license or a state license but you should check in your area; contact your County Clerk.

• State Business License/Privilege License – a license required by the state for the privilege to do business in the state; this license in Alabama is issued by the COUNTY Probate Judge or License Commissioner; renewed annually; if you only sell at craft shows that collect and remit the sales tax for you or you are only selling through another store or website that collects and remits tax, there’s a chance that you might not need this type of license;  licenses could vary or be required based on your specific occupation (accountants, etc) or based on the goods sold (lottery, gas, alcohol, etc); contact your Department of Revenue; more information and links to each states’ office is available on state business licenses is available on the SBA website.

• Federal Business License – this license only applies to a limited number of markets, namely maritime transportation, agriculture, alcoholic beverage manufacturer, and firearm and explosive sales; most other business types do not require a federal license; more information on federal business licenses is available on the SBA website.

• Resale Certificate – a certificate showing that you resale items to customers in your state; this is what qualifies you to buy at wholesale prices; can also be called a “Sales Tax License,” “Resellers Permit,” or “Certificate of Authority”; contact your Department of Revenue; typically obtained once and lasts throughout the lifetime of a business.

• Professional/Occupational License – a license used to regulate the practice of a particular group of professionals (i.e. license to practice medicine or license to practice accounting); contact professional licensing organizations about requirements.

• Miscellaneous Licenses – There are a variety of other licenses and permits that you might be required to have. Your local License Commissioner should be able to advise you on which of these pertain to your business. Some examples are: Alarm Permit, Building Permit, Home Occupancy Permit, Signage License, Food Handlers License, Weights and Measures Registration, etc.

“Which of those do I need?”

Depending on the laws of your city, county, and state, you could need a variety of these licenses, all of them, or none of them. The fact is, if you are running a business then you must be doing it legally and that requires letting the governing bodies know about the existence of your company. Good resources to check to find out exactly what your area requires are your local Chamber of Commerce, your local License Commissioner, or consult with a local lawyer.

Why do you need a business license?

There are a variety of reasons why you need a business license, the most important being that it keeps your business legal. But having a business license also protects the public health and safety by regulating what businesses operate in the state. Just as you can appreciate this as a consumer, you should appreciate this as a business owner.

A business license also protects you legally from lawsuits that might claim that you aren’t a legal entity. Business licenses keep track of your business for tax purposes and makes sure your business (and other businesses throughout the state) are held accountable for following the laws. Not having a business license could also leave you with very large penalties due when you are found by the governing authorities or you could be responsible for back licenses that you didn’t purchase from your business inception until present day. You could also jeopardize your ability to continue your business if you operate without a business license.

I’ll address some frequently asked questions involving business licenses in a different post but this post should give you the idea that, in general, yes you do need a business license. There are links throughout the post as well to direct you to locations where you can get more information about your particular city/county/state requirements. Or you can always contact your local License Commissioner or Secretary of State.

Please remember that I am not a financial or legal advisor. All information that I offer is based on my own experience and is not to be taken as a replacement for consulting a financial or legal professional. Remember that all advice, articles, and education that you see online pertains to a specific type of business in a specific environment and you should always consult with someone familiar with the laws, guidelines, and best practices of your industry as well as being familiar with your individual company and area.