Compared to starting a brick-and-mortar business, launching an Internet-based business is generally a faster and easier process. However, it’s not as simple as just registering a domain name and designing your website. Most web-based businesses still need to obtain certain licenses and permits before beginning operations. For many types of businesses, the requirements are the same, whether your business has one or more physical locations or is operated entirely online.
This article outlines some of the most common business and permit requirements for online businesses, and includes an overview of other factors entrepreneurs should consider and plan for when launching a new business.
No matter what industry you are in or where you plan to operate your business, you will need to start by officially registering to do business with your state or local government authorities. In most cases, these business registrations will need to be renewed every year.
If your business will operate under an assumed name (or a “Doing Business As” name), you will need to make additional filings with your state. This requirement affects owners establishing sole proprietorships and any other type of business that will conduct business under a different name than what is registered with the state.
If your business involves alcoholic beverages, firearms, agriculture, or is in one of several other industries, you may also need to obtain one or more federal permits. Most online businesses will not be subject to such permit requirements.
Many people who decide to start web-based businesses operate almost entirely, if not exclusively, from their homes. In some situations, you may need to obtain a permit to do so from local or state authorities, or both.
A web-based business is unlikely to create significant disruptions to the neighborhood, which is what these types of permits – and local zoning ordinances – are designed to prevent. However, if your city, county, or state government requires you to obtain such a permit, be sure to do so.
If your business does not require a special home-based business permit and is not affected by local zoning requirements, one other possible roadblock to operating out of your home is potential restrictions in homeowners’ association agreements. Such agreements may contain limitations and restrictions on conducting a business from your home, regardless of whether that business is web-based or not.
Primarily required for businesses whose products or services involve the sale or distribution of food products, state health inspection certifications help protect consumers by ensuring businesses adhere to certain standards.
While most web-based business owners will not need to obtain specific occupational licenses or register their businesses with a state professional board or association, there are a few exceptions. If your business involves a profession that is state-regulated (insurance, law, financial services, and certain other industries), contact the appropriate state agency or division to determine whether you need to take additional steps to register or license your new online business.
Certain cities and states require businesses to obtain additional requirements, including weights and measures registration (required for business that weigh objects they are selling). If your business may be affected, you should contact your state or local government to determine how to proceed.
Every business owner should understand the potential tax landscape and obligations of their new business venture before starting operations.
Most business owners should also consider obtaining an Employer Identification Number (EIN) from the IRS. While it is not specifically required for sole proprietorships or single-member LLCs with no employees, business owners will likely need this number to open a bank account in the name of the business. Corporations, partnerships, and LLCs with more than one member (or single-member LLCs with employees) will also need an EIN for federal tax forms and filings.
If your for-profit business sells tangible goods, or offers certain types of services in some states, you will need to register with your state and local tax authorities before making your first sale. This sales tax registration is separate and distinct from the general business registration discussed above.
While calculating, collecting, and remitting sales taxes for traditional businesses with physical locations is fairly straightforward, online businesses’ requirements may be more complex – particularly for businesses offering goods and services to residents of other states. Therefore, entrepreneurs would be well-served to work with a competent tax professional to ensure they are not running afoul of state and local tax rules.
Some online business owners will also need to register for their states’ unemployment insurance and workers’ compensation programs, even if the business doesn’t have any employees. These requirements vary from state-to-state, so be sure to understand your state’s rules for businesses.
As a business owner, the onus is on you to fully understand how the federal, state, and local legal framework affect your new online venture. Claiming ignorance of the law is never a valid defense, so it is critical to identify and meet all applicable requirements from the start.
Certain laws that are applicable to all businesses tend to impact online businesses to a greater extent. These include rules about ensuring consumer privacy, copyright laws, and regulations about marketing and advertising your products or services.
When you launch your online business in a deliberate and thoughtful manner, you can have the confidence that comes from knowing your regulatory obligations are covered. This will free you up to work on what matters most: focusing on your goals and dreams for your company.