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.