Do You Need a Business License to Sell on Shopify? (2025 Guide)

Starting a Shopify store but freaked out about legal stuff?

You’re not alone.

Good news: Shopify doesn’t care about your business license.

Bad news: Your city, state, and the IRS do.

This 2025 guide cuts through the noise — no lawyer-speak, just what you actually need to sell legally.

Quick Answer: Do you need a business license for Shopify?

No — Shopify lets you sell without one.

You only need:

• EIN (for businesses)
• Last 4 of SSN (for individuals)
• → To activate Shopify Payments

BUT: Local laws may require:

• Seller’s permit (for taxable sales)
• Business license (city/county)
• Home occupation permit (if from home)

IRS 1099-K trigger: $600 in gross payments (some states: $0)

Shopify’s Rule vs. Real-World Law

Requirement	Shopify	Local Law
Business License	Not required	Maybe (city/county)
EIN / SSN	Required for Payments	Required for taxes
Seller’s Permit	Not required	Required for taxable goods
LLC	Not required	Optional (protection)

Shopify won’t shut you down. Your state will fine you.

When You Actually Need a License (2025 Rules)

Scenario	License Needed?	Why
Selling physical goods	Seller’s Permit	Collect sales tax
Running from home	Home Occupation Permit	Zoning compliance
Using a brand name	DBA License	Register “MyCoolStore”
Hiring employees	EIN + Payroll Permits	IRS & labor laws
Selling digital products	Usually NO	No sales tax in most states

8 Types of Licenses You Might Need

License	Cost	Who Needs It	Get It From
EIN	Free	All businesses	IRS.gov
Business Operation License	$50–$400	Most cities	City Hall
Seller’s Permit	Free–$100	Taxable sales	State Tax Board
Sales Tax License	Free	Same as above	State
DBA (“Doing Business As”)	$10–$100	Brand names	County Clerk
Home Occupation Permit	$25–$200	Home-based	City Zoning
Occupational License	$15–$300	General ops	City/County
Federal License	Varies	Alcohol, firearms	Federal Agency

Pro Tip: Use the SBA License Finder — enter ZIP + business type → instant list.

5 Steps to Get Legally Set Up (2025)

1. Choose Structure

   • Sole Prop → Easiest (use SSN)
   • LLC → $50–$800 (liability shield)

2. Get EIN (Free)

   • Go to IRS EIN Application
   • Fill form → Instant PDF

3. Check Local Rules

   • Google: [your city] + business license
   • Call City Hall or SBA Local Office

4. Apply for Permits

   • Most online (e.g. California: CDTFA.ca.gov)
   • Pay fee → PDF license in 1–7 days

5. Update Shopify

   • Settings > Payments
   • Add EIN + Business Address
   • Enable Shopify Payments

Done in under 2 hours.

What Happens If You Skip Licenses?

Risk	Consequence
No Seller’s Permit	Back taxes + penalties
No Business License	Fines ($100–$1,000)
No EIN	Can’t open business bank
Over $600 sales	1099-K → IRS audit risk

2025 IRS Rule: Some states report at $0 → file taxes from day 1.

Do You Need an LLC?

Factor	Sole Prop	LLC
Cost	$0	$50–$800
Liability	Personal assets at risk	Protected
Taxes	Simple (Schedule C)	Same (pass-through)
Required?	No	No

Start as sole prop. Form LLC when you hit $5K/month.

2025 Cost Breakdown (Average US)

Item	Low	High
EIN	$0	$0
DBA	$15	$100
Seller’s Permit	$0	$100
Business License	$50	$400
LLC	$50	$800
Total Start	$65	$1,400

Ready to Launch Legally?

1. Get EIN (Free)
2. Shopify $1/month trial
3. Check your city license portal
4. Add tax info in Shopify Settings

FAQ - Real Answers

Do I need a business license to sell on Shopify?

No — Shopify only requires tax info (EIN or last 4 SSN digits) for Payments. But local laws may require a seller’s permit or business license.

When does Shopify report to the IRS?

At $600 in gross payments (1099-K). Some states report at $0. You must file taxes either way.

Do I need an LLC to sell on Shopify?

No — sole proprietorship works. LLC adds liability protection but isn’t required.

How much does a business license cost?

$15–$500/year depending on state, city, and business type. EIN is free.

Can I sell without a seller’s permit?

Only if you sell non-taxable items (e.g. digital) or under your state’s sales threshold. Most physical goods require it.

Can I sell on Shopify with just my SSN?

Yes — for sole proprietors under $600/year (but file taxes anyway).

Does Shopify report sales tax for me?

No — you collect & remit. Use TaxJar or Avalara.

What if I’m outside the US?

Check VAT (EU), GST (Canada), ATO (Australia). Shopify handles VAT MOSS for digital.

Do dropshippers need a license?

Yes — same as any retailer. Supplier location doesn’t matter.

Key Takeaways

• Shopify does not require a business license to start selling
• You need EIN or SSN for Shopify Payments activation
• Local laws may require seller’s permit for taxable goods
• IRS reports income at $600+ (some states at $0)
• LLC is optional but provides liability protection
• Total startup costs range from $65 to $1,400
• EIN is free and takes minutes to get online
• Seller’s permit required for most physical goods
• Home-based stores may need occupation permit

Start legally in under 2 hours. Get your EIN today.

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• Scale Shopify Dropshipping to $10k/mo
• Dropshipping Europe 2025: VAT, GDPR & Shipping
• Shopify vs Wix 2025
• How To Find Dropshipping Suppliers 2025

Last updated: January 4, 2025 Sources: IRS.gov, SBA.gov, Shopify Help Center, state tax boards, internal compliance data 2025