Popular online store Etsy sells handmade goods and other items. Etsy is well known for being a location to start a side business, as well as a place to purchase products manufactured from recycled and repurposed materials, as well as less priced or unique variations of mass-produced commodities.
It’s one of the biggest online marketplaces, with more than 2.1 million registered merchants. Many Etsy merchants are uncertain, meanwhile, about whether they require a business license in order to sell on the website. This question is completely unanswered on Etsy’s own policy page, and the responses that are offered elsewhere are at best ambiguous. Fortunately, we can assist you.
Are Business Licenses Required For Etsy Sellers?
Whether you treat your Etsy store like a real business or just a hobby will determine whether you need a business license to sell on Etsy. You can decide if you need a business license by asking yourself the following questions. If the answer to any of the following is “yes,” you’ll probably need a business license in order to conduct business legally.
Do you Run your Etsy Shop as a Company or as a Hobby?
The IRS provides ambiguous rules on how to determine if your store is a for-profit business or a hobby, but the gist is as follows: It is a business, not a pastime if you are doing it for financial gain. To function legally, businesses will need to obtain the necessary business licenses.
Are you profitable on Etsy? You must inform the IRS of any profits you make from your Etsy store if you want to keep your account open. Your gross income will be reported to the IRS by Etsy, but you must also include your revenues on your individual tax return.
What Permits Do I Require To Sell On Etsy?
You must follow the same regulations as other online vendors if you are running your Etsy store as a business and making a profit. You still need to obtain the necessary permits even if you’re selling on Etsy rather than your own website. Below is a quick list of the licenses that Etsy sellers most frequently require:
The Three Business Licenses That Etsy Vendors Most Frequently Require Are:
A Fundamental Business License
This is a license that enables you to run your company inside the boundaries of the local government’s administrative territory. The license requirements for running a business differ by state and by city, so your best chance is to get in touch with your regional Small Business Administration office and inquire about the licenses needed in your community.
The licensing requirements are typically not very strict for e-commerce companies, and application fees are typically between $50 and $100.
A Number Used For Employers (Ein)
You’ll report your taxes to the IRS using an Employer Identification Number. An EIN is required if you’ve established an LLC or partnership.
Permits For Home Occupation.
You might need a home occupation permit if you run your business from your residence. For the majority of online businesses, this isn’t a big concern, but if you produce your goods at home, as many Etsy sellers do, you might require this permit. To find out the specific criteria in your city, contact the city hall or the local SBA.
Is It Safe To Conduct Business Without A Company License On Etsy?
If you’re only doing it for fun and not for financial gain. Many of the top Etsy sellers continue to run their businesses without the necessary business or tax licenses, running the risk of being discovered by the IRS and may be facing municipal or state fines as well. If you’re serious about turning your Etsy store into a legitimate business, our advice is to make sure you have the necessary licenses. This is primarily due to the fact that we don’t know many people who have successfully dealt with the IRS.
You don’t need to worry about getting a business license as long as you aren’t running your Etsy store as a real business and aren’t making any money. In other words, casual users like crafters, hobbyists, and other Etsy users don’t require a business license. You must file tax returns and acquire business permits if you intend to operate your Etsy shop like a respectable, successful business. The five-year exemption might be used to put off making a decision if your business is just getting started and you’re not sure if it will be lucrative just yet.
Etsy is an online shop for selling handmade and other products.
Buying and selling products.
Hobby or Business.
For selling it depends.
If your Etsy store is an LLC or partnership, you must obtain the necessary business license and an EIN for your company.