Do you need a business license to sell on ebay?

When starting out any business, there are a few key things you need to do in order to give yourself the best chance of success. In this article, we’re going to take a look at how to register an eBay business.

eBay itself does not require that merchants on its platform hold a particular business license. However, depending on the type of business you plan to operate on eBay, the government may require you to register for specific permits or licenses.

Do eBay Sellers Need a Business License?

No, an eBay seller does not need to acquire a business license. However, for certain types of businesses, the government may require certain types of registration for taxation purposes or for restricted goods.

If you intend to operate your eBay business as a reseller or retail operation, then you must acquire a sales tax permit (also known as a resale certificate) to collect sales tax. This seller’s permit will allow you to avoid paying sales tax on wholesale purchases, thereby avoiding a needless tax expense upfront. 

Additionally, in rare instances, the state government may require that you acquire an auctioneer’s license based on whether your business sells items on behalf of others on eBay. Consult an attorney for more information about this rare situation, as well as the legalities around operating auctions on an online marketplace.

How to Register Your eBay Business

To register a business, you should consider the following steps:

  • Determine the type of entity under which you plan to operate your eBay store. Options include sole proprietorships/partnerships, LLCs, S corps, and C corps among several other common types.
  • If you plan to operate a sole proprietor or partnership, you may want to register a business name or trade name known as a DBA (doing business as). A DBA will allow you to operate with your chosen name in the eyes of the government. 
  • Tax IDs: If you plan to hire employees, you should acquire an Employer Identification Number (EIN) from the IRS. This identifier allows the IRS to identify your business as a separate taxation entity. 

For certain types of goods, state and federal governments may require that you apply for separate permits. Your local government may also have additional restrictions that involve permits or other types of registration. 

In addition to the above documentation, you may also want to acquire a Home Occupation Permit. This permit, for a fee, allows you to establish operations from your own home. Many professionals will want to acquire one of these permits, including entrepreneurs, dentists, lawyers, architects, writers, and more. Some municipalities may have additional restrictions on the types of businesses that entrepreneurs may operate from their own homes.

Also see: Licensing requirements for home-based businesses

Common eBay Business Entity Types 

Many eBay business owners operate informally as sole proprietorships. One common business model involves finding goods at steep discounts at various markets or thrift stores and then reselling those goods at a markup on eBay. 

In essence, this process involves taking goods from a local market level to a national or even global market in a type of arbitrage. Other business models exist on eBay in addition to this common type. 

As your business grows, you may want to consider formalizing your business through the formation of a new entity separate from your personal assets and liabilities. The most common types of entities include:

  • Sole Proprietorships and Partnerships: These businesses lack the formality and liability separation which organized entities have. However, for entrepreneurs just starting out on eBay, they offer a cheap and easy way to test the waters. 
  • Limited Liability Company (LLCs): LLCs provide an easy and affordable way by which to separate yourself from your company for liability protection. Additionally, LLCs offer pass-through taxation, meaning that your year-end tax bill will flow directly from the earnings or losses of your business. 
  • S Corporations: An S corporation offers some of the benefits of an LLC with the additional benefit of offering easier ownership transfer. S corporations may carry additional regulatory and legal burdens for owners, however. 
  • C Corporations: For most small business entrepreneurs on eBay, a C corporation poses too much complexity to act as an ideal entity. C corporations do, however, offer entrepreneurs easy ownership transfer through common stock, a reputable way to raise equity and debt funds from outside investors, and may also establish credibility for the business as it grows. 

Advice for New eBay Business Owners

As a new business owner on eBay, you should prioritize identifying product-market fit before you go down the rabbit hole of entity formation and other back-office concerns. eBay also recommends that new sellers on the platform consider the following pieces of advice:

  • Optimize your listings for Best Match. This allows you to achieve a higher placement when a buyer uses a Best Match screen on the platform. 
  • Ensure you adequately identify the condition of your item to avoid misrepresenting its quality post-sale. 
  • eBay has recently released a new unified listing tool to help sellers more efficiently deploy new listings. 
  • Be sure to block buyers who have previously caused issues with your listings. eBay offers the ability for sellers to block bidders and buyers from all of your business’s listings. 

Additional Requirements for Starting an eBay Business

To register as a seller on eBay, you will need to fulfill the following requirements:

  • Individuals: Full name, address, date of birth, and social security number (SSN). 
  • Registered Businesses: Identification for all owners or account managers, legal business name, DBA or fictitious business name if relevant, EIN, business address, and phone number. 

You will also need proof of identification. This proof can come in the form of a driver’s license, a government-issued ID card at either the state or federal level, or a valid, non-expired passport. 

On the banking side, eBay wants to ensure that your name matches the name on your checking account. If registering as a business, you should ensure that the business name and the business bank account match in this regard.

eBay will also require you to provide the routing number and account number for your bank account.