Some people might tell you that you don’t need to get a business license (also referred to as a state sales tax number or resale certificate) for your online business, but they’re dead wrong. Even if you plan to maintain it solely as a side hustle, you should make your business official. It is, after all, the law. Failing to do so can have pretty serious consequences.
The good news is, it’s super easy and fairly inexpensive (if not free) to do. Unfortunately, there are a few exceptions to this, as some states have more have a more convoluted process and charge higher fees. If you’re located in one of these states, all I can say is that I’m sorry and don’t let it deter you from pursuing entrepreneurial success.
Steps to Apply for Your Business License
- Research – Before you make your business official, you’ll need to read up on your particular state’s regulations and determine which county your license will be associated with and what regulations you’ll need to abide by. Even home-run businesses must apply for licenses.
- Find the right forms – When I applied for my license, I did a quick search online for “getting a business license in South Carolina.” This took me right where I needed to be. Do take note that there are a lot of companies out there that will file your paperwork for you (for a fee,) but it’s typically simple enough that you can do it by yourself.
- Submit your completed paperwork – Typically, you can fill out the forms online after creating an account with your state. Some states may require that the forms be mailed in, but I’m pretty sure most are moving to electronic systems at this point.
- Plan to provide information like: business type, business address (your home address), your name, contact information, and number of employees. Also, have a company name in mind – my husband “helped” me fill out my forms and accidentally registered my company as “Business Home.” Needless to say, I had to get that changed…
- Pay associated fees. My husband got a license in North Carolina a couple years ago for free and I paid a total of $50 for my license in South Carolina. The cost is usually pretty minimal, but it can be higher depending on where you live.
- Wait for your license to arrive. Each state has different license delivery methods. I had access to my license information online right after I applied in South Carolina and they sent me my paper copy within a week. You should be able to find specifics about your state online during the application process.
You Also Need an EIN
To make your business official, you’ll also want to get an EIN, or Employer Identification Number. This number serves as a substitute for your social security number on official documents and account registrations. Using an EIN does a lot to protect your personal information while running your online business, especially if you’re doing freelance work and filing multiple W-9 forms with employers.
It’s free and won’t take long at all. I recommend writing the number down right away, as you don’t want a computer glitch to cause you to have to call or wait. You’ll get a paper copy within a few weeks, but you might need it sooner than that.
What About Becoming an LLC?
Please remember that I am not a financial advisor and I don’t have a business degree. Know that all of my advice is purely based on my own personal experiences and what I’ve learned from others.
Really want to make your business official? Make it an LLC.
If you’re like me, you’re probably like, “What’s an LLC?” I had no idea until I was filing my taxes for my business the first year. Our accountant asked me if I was an LLC and I just stared at her blankly for a second. Obviously, I wasn’t.
LLC stands for Limited Liability Company. You’ve probably seen a lot of businesses put “LLC” at the end of their names. You can do this too and, in fact, if you want to make your business official it should be a serious consideration.
When I told my accountant that I wasn’t an LLC, her immediate response what that I should be. So, after muddling through my first year of taxes, I started looking into it and found that I really should have been.
LLCs protect you. A lot. If, say, someone tries to sue your business, for whatever reason, right now (without an LLC), your business is you. Meaning that a lawsuit wouldn’t just impact your business assets, it would impact everything, personal accounts included. An LLC, on the other hand, provides personal liability protection. This protection means that creditors couldn’t look beyond the assets of your business to satisfy claims.
Another thing to consider is that many customers prefer working with businesses that are LLCs. There is definitely an increased trust factor, as customers often see LLC as more legitimate businesses.
Becoming an LLC doesn’t change that much in terms of your daily activities, but it could make a big difference in the long run.
When and How to Become an LLC
The when is important. I waited a year, but that was because I didn’t know any better. If I had, I would have done it sooner. Looking back, I would have become an LLC when I started doing eBay full time.
For me, there was a distinct moment when my eBay business became my livelihood. That may not be the case for you, but if it is, going full-time can be a good indicator that it’s time to start looking into making your business an LLC. I definitely recommend trying to get it done before you file taxes for the first time.
If it’s so important, why aren’t I telling you to get it right now?
Because it can be pricey, depending on what state you live in. You’ll have to pay a series of fees when you file (which vary per state) and I know that can be difficult for people just starting out.
As for how to file, you can do it on your own or have a company do it for you. I’m usually a big DIY proponent because it saves money, but I actually opted to have someone else file for me when the time came. I could have looked up, filled out, and filed the forms for my state all by myself, but I knew that having someone else do it for me would be more time-efficient – I’m terrible at filling out forms; they make me so anxious and take me forever!
Consider Using RocketLaywer
So, I paid for a year’s subscription to RocketLawyer and had them file for me. RocketLawyer is a really neat company that gives you direct access to both lawyers and business-related documents. They have an almost unlimited library of forms available at your fingertips and, as a member, you can have them fill out and file just about anything for you for free. I use this feature to create contracts for my children’s book illustrators.
At the time, I was able to get a deal on my membership. I paid $249.95 for my subscription and I worked with a representative to fill out the documents for my LLC. Being a member covered any filing expenses with RocketLawyer, but I still had to pay another $110 to the state of South Carolina. RocketLawyer did, however, file my business change of name form for me at the same time for free.
I like the security of RocketLawyer and the fact that whenever I call them to file a form for my business they will do it for free (excluding the cost of filing itself). I realize that’s a hefty investment when you’re just starting out, but if you don’t plan to get your LLC for another six to twelve months, it may be something worth looking into.
If you want your LLC but feel unable to swing the monthly or yearly RocketLawyer subscription, you can look online for your state’s specific forms and guidelines for filing. Unfortunately, there aren’t nation-wide steps I can provide you for this process, but a quick Google search and some reading should do the the trick!
Don’t Wait, Make Your Business Official Today!
If you’re planning on selling goods or services, it’s really important to make your business official. Even if your side hustle is exclusively online, it should still be a priority. That said, it’s understandable if the filing fees required to make your business official are daunting. If this is the case for you, consider completing the process in baby steps. Save up the money you need gradually so the shock of paying it isn’t so difficult to handle.
Ready to make your business official? Sign up for my email course, Starting a Business for Beginners. It’s a FREE, 7-day course intended for entrepreneurs just starting out and offers loads of helpful business advice!