Do You Need A Business License To Sell On Amazon?

With the rapid growth of the ecommerce industry, online selling has become a very lucrative industry nowadays. In fact, it is predicted that the size of the online shopping market will reach 4 trillion by 2020. And if this is making you think about joining the 2.5 million sellers currently selling actively on Amazon, then you want to know do you need a business license to sell on Amazon. The truth is that you might want to learn more about what you need to get your business started and what you don't. Here are a few questions that you might ask about starting your own Amazon store, along with their answers.

Do You Need a Business License or a Company to Sell on Amazon?


Registering as a seller on Amazon does not require you to establish a company, especially if you are only selling a limited number of products and will only be selling seasonally. On the other hand, establishing your own company can be an ideal situation as it can offer you a number of benefits:

  • Apply Amazon brand management strategies and package your products better;
  • Help improve your marketing strategies;
  • Improve the trustworthiness of your store.

Do You Need to Register Your Online Business?


Given that there is no need for a seller to have their own company to sell on Amazon, then the same thing goes when it comes to having a business license. Most of the products sold on Amazon and other online marketplaces are consumer products that are not Federally regulated, so you won’t need the government’s approval to be an online seller on Amazon. But if you want to grow your business and start earning consistently from your online sales, then registering as a business will be a good idea.

If you ever decide to move forward with this, here are a number of licenses and permits that you might have to work on:

  • Federal business licenses. For businesses that are part of these 11 industries, along with the departments where you can get a license from:
  • Agriculture – visit the US Department of Agriculture
  • Alcoholic beverages – go to the Alcohol and Tobacco Tax and Trade Bureau and the Local Alcohol Beverage Control Board
  • Aviation – visit the Federal Aviation Administration
  • Firearms, ammunition, and explosives – consult the Bureau of Alcohol, Tobacco, Firearms and Explosives
  • Fish and wildlife – go to the US Fish and Wildlife Service
  • Commercial fisheries – visit the National Oceanic and Atmospheric Administration Fisheries Service
  • Maritime transportation – check with the Federal Maritime Commission
  • Mining and drilling – seek advice from the Bureau of Safety and Environmental Enforcement
  • Nuclear energy – talk to the US Nuclear Regulatory Commission
  • Radio and television broadcasting – consult the Federal Communications Commission
  • Transportation and logistics – go to the US Department of Transportation
  • State and local business licenses. If you are in a city or state that requires even home-based businesses to register as a business, then here are some licenses that you may have to acquire:
  • Legal
  • Medicine
  • Plumbing
  • Accounting
  • Construction
  • Food production
  • Restaurants and bars

Do You Need An LLC To Sell On Amazon?


The short answer is no, you don’t. But depending on how you want to be taxed, you might want to consider registering your business as an LLC or a Limited Liability Company. You should also keep in mind that forming an LLC is different from getting a business license.

A good way to look at it is that when you establish an LLC, you get to provide your business with a legal foundation. On the other hand, obtaining a business license will give you the right to operate and have the ability to protect your business from any possible lawsuits that might arise. If your brand’s reach and sales are starting to grow, then the probability of getting entangled with a lawsuit also increases.

Of course, as much as possible, you should avoid any lawsuits from occurring, But by forming an LLC, you get to protect your name from any legal actions attempted against your company. Instead, when someone decides to sue your business, they will instead sue the LLC, not you directly. You might not need one to establish your online business, but forming an LLC is the best legal entity for Amazon seller. It is a better and smarter way of managing risks and may well be the best legal entity for Amazon sellers. And if you ever decide to switch up to an LLC, you can always update your Amazon seller account.

Can You Change Legal Entity in Amazon Seller Account?


If you already have an existing Amazon store and decided to establish an LLC, you will need to update your seller information. However, there might come a time when a seller might want to change the legal entity they’ve registered on Amazon Seller Central. There are worries that by changing their legal entity, their customers’ feedback and other online store history will disappear and that their account might get suspended. But this isn’t exactly the case - so what happens if I change legal entity on Amazon Seller Central, for instance and what are the steps?

First, to change your legal entity or name, you will need to retake Amazon’s Tax Interview. This interview process is designed to obtain the information required to complete your respective tax form and fulfill IRS tax requirements correctly and efficiently.

Once you have accomplished the interview, you will then have the ability to update your legal name. On the other hand, to update your address, you can simply go to your Account Info tab and under the Business Information section, select Business Address and you can Add a new address.

Do I Need a Tax ID to Sell on Amazon?


Once you have accomplished the interview, you will then have the ability to update your legal name. On the other hand, to update your address, you can simply go to your Account Info tab and under the Business Information section, select Business Address and you can Add a new address.

In fact, on Amazon, once you have reached 50 transactions in a calendar year, you will be required to update your Amazon FBA income tax information, otherwise, your account will be suspended until you update your seller information and provide your tax information.

How to Register as an Amazon Seller: Professional vs Individual Plans?


Aside from your concerns on if you have to have a business license and tax ID information to sell on Amazon, you should also take into account the type of selling plan to choose if you want to be a seller. Will you register as an individual or professional seller? But how do you choose between a professional or an individual selling plan? Let’s break down the differences.

For the Individual account type, a seller is charged a closing fee of $0.99 per sale, in addition to other selling fees and can list products under 20+ open categories. On the other hand, with the Professional account type, a seller is charged a monthly subscription fee of $39.99. With this monthly fee, a Professional seller can take advantage of the following perks:

  • Load inventory using feeds, spreadsheets and other tools
  • Earn top placement on product detail pages
  • Access to order-related feeds and reports
  • Sell in 20+ open categories and apply to sell in 10+ additional categories
  • Customize shipping rates

The moment you decide to sign up for a seller account on Amazon, be it as an individual or as a professional seller, it’s important to think about all the important aspects for your registration. See to it that you have decided whether or not to register as an LLC and have a business license, choose what address to use, and make sure that you incorporate your tax information. This way, you get to make sure that the moment you put up your online store and start having customers visit your shop, everything will go smooth sailing.


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