Starting An Online Business: Legal Licenses and Documentation

In addition to hosting, a domain name, etc., you may need the following legal licenses and documentation if your business is located in the United States. Please Note: ALWAYS contact a legal authority concerning your legal obligations, regardless of where you live.
1. Tax Identification Number – A federal tax identification number, also known as an Employer Identification Number (EIN) or Federal Employer Identification Number (FEIN), is a federal identification number issued by the Internal Revenue Service to identify a business entity. A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number. In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number.
2. Business License – A business license is a legal document issued by a local governmental authority that authorizes a person to conduct business within the boundaries of the municipality where s/he does business. Many states have established small business assistance agencies to help small businesses comply with state requirements. In most cases, businesses operating from the home do require a business license and must comply with the municipality’s zoning code.
3. Fictitious Name Certificate – A fictitious name certificate, also known as a DBA (Doing Business As) is a document, usually filed with a state agency, which is required to operate a business using an assumed name or trade name (essentially, any name other than the full, formal name of the individual or company).

4. Home Occupation Permit – A Home Occupation Permit is issued by a municipality to allow residents the opportunity to conduct a business and/or provide professional services out of their home, provided the use is clearly incidental or secondary to the use of the home for residential purposes.
5. Tax Registration – If the state a business is physically located in has a state income tax, a business owner must usually register and obtain an employer identification number from the state Department of Revenue or Treasury Department. If the business engages in retail sales, the owner usually must obtain a sales tax license. If a seller’s connection with a state involves clear physical presence, such as the presence of the business itself, then the seller can be required to collect sales tax and remit it to the state. In addition, you may be required to collect VAT (Value Added Tax) if you sell to countries in the EU.
6. Employer Registrations – As soon as you begin employing one or more people, you must register as an employer and must usually make unemployment insurance contributions as well as withhold taxes from your employee(s) pay check(s). Your workers may be your employees or they may be self-employed. In general, people working for you are employees if you are controlling how and when they do their work. If they are self-employed, you will not need to make unemployment insurance contributions or withhold taxes.