Shopify doesn’t require a business license to sell, but local regulations, state business licenses, and federal law might. Whether you need one depends on your business structure, business activities, and the products you sell.
If your shopify business operates in heavily regulated industries, you may need appropriate business licenses. To collect sales tax, a sales tax permit may be required by your local government. Even sole proprietors benefit from a general business license to enhance business credibility and protect personal assets.
Understanding business license requirements for selling on Shopify helps shopify store owners operate legally, minimize legal risks, and stay compliant with federal agencies and local authorities. Let’s explore what’s required to start selling on Shopify while meeting legal obligations.
Understanding Business Licenses
A business license is an official legal document that allows a business entity to operate legally within a specific jurisdiction. While Shopify itself doesn’t require one, local laws, state business licenses, and federal license requirements may apply depending on your business activities.
There are different types of necessary business licenses based on where your online business operates:
- General Business License – Required by most local governments for any business, including shopify sellers.
- State Business Licenses – Necessary for businesses operating in specific states with unique licensing requirements.
- Federal Business License – Required for businesses in heavily regulated industries, such as selling firearms, alcohol, or financial services.
- Seller’s Permit – Needed to collect sales tax and meet state tax laws when selling taxable goods.
- Professional License – Required for businesses offering personal services, like legal or medical consulting.
For shopify store owners, having the right business operating license is crucial for legal compliance. Businesses that fail to obtain the appropriate business licenses risk fines, penalties, or being shut down by government agencies.
Your business structure also affects licensing. A sole proprietorship may only need a general business license, while a limited liability company (LLC) might require separate business licenses depending on its activities. Additionally, businesses with employees need an employer identification number (EIN) to handle payroll and taxes.
Before you start selling, check with your local authorities or the Small Business Administration to determine what business license requirements for selling on Shopify apply to your shopify business.
Do You Need a Business License to Sell on Shopify?
Not all Shopify sellers need a business license to sell, but many Shopify store owners must obtain necessary business licenses to operate legally. Whether you need one depends on your business structure, location, and the type of products or services you offer.
When a Business License is Required
A business license application is often required in the following cases:
- Your online store operates in a location where local authorities require a general business license.
- You plan to collect sales tax, which requires a sales tax permit or sales tax ID from your state.
- Your business operates in heavily regulated industries, such as selling alcohol, tobacco, or health products, which require a federal license or state business licenses.
- You register as a limited liability company (LLC) or another business entity, which may require separate business licenses.
- You sell products in multiple states, each with different licensing requirements and state tax laws.
When You May Not Need a Business License
Some small business owners might not need a business license immediately. For example:
- Sole proprietors selling under their legal name without a business structure.
- Dropshipping businesses that don’t store or ship inventory themselves.
- Shopify stores selling digital products, which may not require a seller’s permit or business license cost in certain states.
However, even if a business license to sell isn’t legally required, having one can boost business credibility and protect personal assets.
How to Check Your Licensing Requirements
To determine if your Shopify business needs a business operating license, check with:
- Local government offices for local regulations.
- State tax laws to confirm whether you need a sales tax permit.
- The Small Business Administration (SBA) for guidance on business license requirements for selling on Shopify.
- Federal agencies if your business requires a federal business license.
Staying compliant with legal obligations ensures that Shopify store owners avoid fines and keep their business credible.
Now, let’s move on to the next section: Types of Business Licenses for Shopify Sellers.
Types of Business Licenses for Shopify Sellers
Understanding the different business license requirements for selling on Shopify is key to keeping your online business compliant. Depending on your business structure, location, and what you sell, you may need multiple necessary licenses to operate legally.
1. General Business License
Most local governments require a general business license to track and regulate businesses within their jurisdiction. This applies to Shopify store owners operating as a sole proprietorship, limited liability company (LLC), or another business entity.
2. Seller’s Permit
A seller’s permit is required for businesses that collect sales tax on physical goods. If your business operates in a state with state tax laws requiring sales tax collection, you must apply for a sales tax permit or sales tax ID.
3. Federal Business License
Some businesses must comply with federal law and obtain a federal business license. This applies to heavily regulated industries, such as:
- Alcohol and tobacco sales (regulated by the federal government)
- Firearms (regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives)
- Financial services (regulated by the U.S. Securities and Exchange Commission)
4. State Business Licenses
Certain states require specific state business licenses based on the industry. Businesses in healthcare, construction, or personal services (such as beauty salons) often need additional licensing requirements.
5. Professional License
A professional license is necessary for Shopify businesses providing specialized personal services, such as legal, accounting, or healthcare-related services. The licensing agency overseeing your industry determines the requirements.
6. Home Occupation Permit
If you run your Shopify business from home, some local laws require a home occupation permit. This ensures that residential businesses follow zoning regulations.
7. Employer Identification Number (EIN)
While not a license, an employer identification number (EIN) is essential for businesses with employees. It’s issued by the federal government and is necessary for tax purposes, payroll, and protecting personal assets from legal liability.
How to Apply for the Right Business Licenses
- Visit your local authorities to check local regulations and permit fees vary by location.
- Use the Small Business Administration to find federal and state business license application details.
- Ensure compliance with government agencies before you start selling.
Having the appropriate business licenses protects your business credibility, prevents fines, and keeps your Shopify business legally secure.
How to Get a Business License for Your Shopify Store
Once you determine the business license requirements for selling on Shopify, the next step is applying for the right necessary licenses to operate legally. The process varies by location and business structure, but here’s a step-by-step guide to help Shopify sellers get started.
1. Choose Your Business Structure
Your business entity impacts the business license application process. Common structures for Shopify store owners include:
- Sole proprietorship – Easiest to set up but offers no protection for personal assets.
- Limited Liability Company (LLC) – Helps separate business and personal finances while reducing legal liability.
- Corporation – More complex but necessary for larger businesses.
2. Register Your Business Name
If you’re operating under a name different from your legal name, you may need to register a business identity or “Doing Business As” (DBA) with your local government.
3. Apply for a General Business License
Most small business owners must apply for a general business license through their local authorities. This allows your online business to legally conduct sales transactions.
4. Get a Seller’s Permit (If Required)
If your business operates in a state that requires sales tax collection, you must obtain a seller’s permit or sales tax permit. This ensures you can legally collect sales tax and comply with state tax laws.
5. Check for Additional Licensing Requirements
Some businesses need multiple separate business licenses depending on their industry and location. These may include:
- Federal business license (for heavily regulated industries)
- State business licenses (for professional services)
- Business operating license (for home-based businesses)
6. Obtain an Employer Identification Number (EIN)
An employer identification number (EIN) is required if your business has employees. It’s issued by the federal government and helps with tax filings.
7. Pay Any Required Fees
Permit fees vary based on your state and local laws. Check with your local government for details on business license cost.
8. Maintain Compliance
After securing the appropriate business licenses, stay compliant by renewing them as required by government agencies and keeping up with legal obligations.
Applying for the right business licenses ensures your Shopify business runs smoothly while avoiding legal risks.
Conclusion
While Shopify doesn’t require a business license to sell, many Shopify store owners must comply with local laws, state business licenses, and federal law to operate legally. The need for a business operating license depends on your business structure, location, and industry.
To avoid legal risks, ensure your business license application is complete, register for a sales tax permit if required, and check with local authorities about any separate business licenses. Having the right business licenses protects your business credibility, keeps you compliant with government agencies, and helps you scale your Shopify business with confidence.
Frequently Asked Questions (FAQs)
1. Do I need a business license to sell on Shopify?
It depends on your business activities and location. Some states require a general business license, while others only mandate a seller’s permit if you collect sales tax.
2. How much does a business license cost for Shopify sellers?
The business license cost varies by state and industry. Permit fees vary, but most business operating licenses cost between $50 and $500.
3. What happens if I sell on Shopify without a business license?
Selling without the appropriate business licenses can result in fines, legal action, and possible business closure by local government or federal agencies.
4. Do I need an EIN for my Shopify store?
An employer identification number (EIN) is required if you hire employees or register as an LLC or corporation. Sole proprietors without employees may not need one.
5. How do I apply for a business license for my Shopify store?
Register your business identity and choose a legal business structure.
Apply for a business license to sell through your local government or licensing agency.
Get a sales tax ID if you need to collect sales tax.
6. Do digital product sellers on Shopify need a business license?
Some states exempt digital products from sales tax, but it depends on state tax laws. Even if not required, a general business license can help establish business credibility.
