Most businesses need a business license or permit when being run from the home.
ComplianceJanuary 25, 2023

Home and online business license requirements

Home-based and ecommerce businesses often have the same level of business license requirements as traditional brick-and-mortar commercial establishments.

This article will explore some of the obvious — and not-so-obvious — rules and regulations that are frequently imposed on home-based or online businesses. It will also touch on considerations that are specific to operating a commercial enterprise in a residential area, such as zoning restrictions.

Do you need a business license to sell online?

Because online businesses (as well as home-based businesses) operate with the goal of generating revenue by selling goods or services to the public, most of the rules designed to guard the public and collect tax revenue apply. This includes obtaining required business licenses, permits, and zoning approvals, as well as incorporating or forming an LLC to operate your business legally, protect your personal assets, avoid fines and penalties, and boost your business credibility. 

If you are considering an online or home-based business, then it is important to do your research. Obtaining business licenses, permits, and zoning approvals can be a time-consuming process. If you don't allow enough lead time, you may have to delay your business launch.

CT Corporation can assemble all the licensing applications and instructions you need to operate your online business legally Business Licenses Application Package.

Licenses specific to home-based businesses

There are licensing rules that are triggered when a business is operated from a home (or in an area zoned as residential) and special considerations that come into play for the general type of permits.

Home occupation permit

Many city or county governments require home-based businesses to have a “home occupation permit”. These permits are designed to prevent a business from adding significant traffic, noise, or other environmental conditions such as dust or odors that would interfere with the surrounding homeowners’ use and enjoyment of their property.

As a result, most local ordinances describe the types of home-based occupations or businesses that are permitted and the limitations imposed on the operations. These restrictions often include:

  • Amount of space that can be used within the home
  • Number of clients or customers that can visit the home each day
  • Number of vehicles that can be at the home
  • Modifications that can be made to the property
  • Number of employees the business can have

Remote employee license

A local jurisdiction may impose licensing and other requirements for an employee that is working from home. You may need to conduct license research at the city, town, or county level to determine if a home occupation or remote employee license and/or permit is required. For more information, see Remote employees and the regulatory implications for your business.


Most localities have signage restrictions. However, if your business is in a residential area, you are likely to face very strict limits on the size, number, and placement of signs on your property. You need to verify what you can and cannot display before ordering any type of signage.

Zoning restrictions and variances

If you plan to operate a business in an area that is zoned “residential”, you need to become familiar with the zoning ordinances. Certain business activities are prohibited completely in residential areas. For example, operating a website design company is likely to be permitted, but an auto repair shop may be prohibited.

Your first step is to contact your zoning office. It may be possible to comply with the restrictions with only minor tweaks to your business plan.

However, if your business doesn’t fall within the zoning laws, then you may need to obtain a variance before you can open your doors. Although there are some arguments you can make if you feel you must go the variance route, keep in mind that it might be better to tweak your business plan to fit the zoning requirements because it can be a time-consuming, expensive, and difficult process.

CT tip: Be sure you are not violating the terms of your Homeowner’s Association (HOA) agreement, if applicable. Originally confined to condominiums and cooperatives, many single-family communities now have HOAs that govern what residents can, and cannot, do on or to their property. It may be necessary to get an exception or waiver of the rules.

Business License services

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General business license and registration requirements (home-based, ecommerce, brick-and-mortar)

Your license, permit, and registration requirements depend upon several factors: type of business, business structure, whether you have employees, and geographic location of the business. The following licenses and registrations are not home-business or ecommerce specific — they are just part of the process of opening any business. (While few businesses will require all the permits, each business will require some.)

Secretary of State registration

Forming a legal business entity such as an LLC or corporation involves filing with the Secretary of State.


An Employer Identification Number (EIN) issued by the IRS. An EIN is the business equivalent of a Social Security number and is needed for taxes, banking, and payment.

General business license

The jurisdiction where your home is located is likely to require a general business license. This license, sometimes referred to as a business privilege license or business tax registration, serves a two-fold purpose. First, licensing protects the residents of the city or county by identifying businesses operating in its jurisdiction. Second, licensing raises revenue for the local government. For this reason, most general business licenses must be renewed annually.

Sales tax registration

If you sell tangible goods — even online — you may need to collect sales tax from your customers. Plus, many states tax a wider variety of services than they have in the past, so you may need to collect sales tax if your business is a service business. If you are required to collect sales tax, you will need to apply for a tax permit with the state tax department. (In most states, you must have registered before your first sale is made.) You can obtain more information from your state’s department of revenue website.

Additional sales tax requirements for ecommerce businesses

You may also need a sales tax permit and be required to collect sales tax in other states, even if you don’t have a physical location in those states. A 2018 US Supreme Court decision, South Dakota v. Wayfair, Inc., held that a physical presence is not necessary for a state to require a seller to charge and collect tax on sales to customers in the state. A threshold level of activity is required, which may be based on the revenue earned in the state, the number of transactions, or another basis. More information can be obtained from the revenue departments of the states where you make sales. It's also a good idea to have a conversation with your accountant before you start taking orders. For more information on sales tax requirements for online businesses, see An updated look at the impact of the supreme court’s Wayfair decision on state sales tax laws.

Professional/occupation licenses

In addition to the licensing requirements imposed on businesses, states require certain professions — such as attorneys, architects, contractors, and hair stylists — to have state-issued licenses or certificates. Every state has its own list of licensed occupations, so it is essential to know your state’s laws.

DBA or assumed name registration 

Every state has its own DBA ("Doing Business As") requirements for businesses. If your business is operating under a name other than your own name (if you are a sole proprietor) or the name of all your partners (if you have a general partnership) or the name of your corporation or LLC (if you formed one), you will need to register that assumed name. You may even have to register your assumed name in multiple locations, such as the county and city where you’re doing business.

Unemployment and worker’s compensation registration 

In some states, you must register even if you are the only employee.

Weights & measures registration

If you weigh items for sale, your state may require that you have this type of permit. These permits are state-specific and sometimes even city-specific, so check with your local government to determine what may be required.

Alarm permit

You may need a permit from a “fire protection district” or the local government if you plan to install a commercial fire alarm system. If you provide home-based childcare, you may have to have your home inspected by the local fire department prior to receiving a permit to operate your business.

Health inspection/certification

If you prepare any type of food products, you may be required to obtain permits and undergo inspections. In fact, you may find you need both food industry related permits at the state and local levels.

Privacy, advertising, and digital rights/copyright laws

Every business owner needs to be aware of — and comply with — a variety of privacy laws and online advertising and marketing laws.

If your business will be largely conducted online, you will also need to understand your obligations under digital rights and copyright laws. Violating these provisions, even unintentionally, can be a costly mistake.

CT Corporation can help

Farming out business registration and license research, applications, management, and renewals can help you take the pressure off internal resources. By working with a full-service management provider who specializes in the efficient processing of all the licensing applications and instructions you need to operate your online or home-based business legally, you can focus on starting and growing your business while ensuring you keep up with changing compliance requirements.

For more information on CT Corporation services and how we can streamline your business licensing, please contact us.

Related articles

Understanding business license requirements and obligations
Do you need a business license to sell on Etsy?

John Randazzo, Business Consultant
Business Consultant
John has been consulting with corporations and law firms on corporate legal transactions and business entity compliance since joining CT Corporation in 1994.
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