The Internet has opened the door to a world of online sales activity for anyone who has a little money to put forth and the time to run a business. While many of these businesses may never amount to more than a minor hobby, some of them have the potential to earn a great deal. Deciding how to operate an online business is confusing. License laws vary by state regarding licensing of an online business.
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According to the IRS and many states, a business that earns a minimal amount of income is considered a hobby. As of 2011, this figure is £260 or less per year. An online auction website or a personal website selling items but making the minimal amount of money can legally be operated as a hobby and doesn't require a business license.
Local Business Licensing Laws
Laws regarding licensing for a business vary by state and in some cases even by municipality. To determine the laws regarding your particular state, you need to contact your county clerk or even state attorney general. Any online business that earns more than the allowed minimum is subject to licensing laws. Although some people operate a business online without obtaining a license, there can be fines imposed for doing so.
Federal License Laws
If your online business has employees, you are required by federal law to register your business and obtain an EIN (Employer Identification Number). Additionally, you will need to apply for a federal tax ID. The federal government will also require your business to be registered as a DBA (doing business as) if it is a sole proprietorship, unless your personal name is part of the business name.
In addition to a standard business license, many online businesses will require special licensing. Items that may apply, depending upon state laws, include food, medicine, firearms and alcohol. Federal business license requirements apply as well. Look to the state of origin of your business for the licensing requirements you must follow.
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