Do You Need a Business License to Sell on Amazon? See Why It Depends

by Tomer

January 25, 2022

When starting an online business, one question that often comes up is whether or not you need a business license.

Ask yourself, are you planning to sell on Amazon as a side hustle, or are you aiming big?

In this blog post, we will discuss if you need a business license to sell on Amazon, why I recommend that you start an LLC, and how to register for one!

Read the full article to learn how to make getting a business license much easier!

Disclaimer: Sourcing Monster is not a legal or tax professional. The content of this blog post is for informational purposes only and should not be considered as legal advice. It is your responsibility to do your research and consult your own attorney and tax professional before making business decisions.

Do You Need a Business License to Sell on Amazon?

do you need a business license to sell on amazon

You may be wondering if you need a business license to sell on Amazon. The answer is, it depends.

Where are you located?

On a basic level, Amazon does not require a business license to sell on their platform. Even other e-commerce platforms like eBay, Etsy, Shopify, and Facebook Marketplace, do not require a business license to start selling.

However, in the United States, some states and/or counties do require business licenses for online sellers. Before you start selling on Amazon or any other platform, it is important to research if your state and county require a business license and what the process entails.

What kind of items are you planning to sell?

Now you know that the need for a business license depends on location.

In terms of the products, you don’t need a business license to sell consumer products. Consumer products, also called “final goods”, are products for personal use. This includes items like clothing, books, electronics, toys, and more.

The vast majority of items sold on Amazon are consumer products and are not regulated by the federal government.

However, if you plan to sell federally regulated products, you may likely need a business license and even have to apply to Amazon for special approval to sell them.

It’s highly unlikely that you would sell federally regulated products on Amazon anyway. See a list of federally regulated categories here.

However, be aware that some federally regulated products are strictly prohibited for sale on Amazon, which you can read about here.

What kind of business model do you want to use on Amazon?

Are you aiming to be a Private Label owner like me? Do you want to do Retail Arbitrage? These two business models on Amazon do not require a business license.

However, if you plan to go the Wholesale route, you’ll almost certainly need a business license as well as sales tax paperwork because this information is required by brands, wholesalers, and distributors to verify that you are a genuine company.

All in all…

If you just want to test the waters and start small as a side hustle, you are allowed to sell on Amazon without a business license as long as you are not doing Wholesale, you’re located in an area that does not require you to get one, and if you are compliant with Amazon’s policies.

However, if you want to take it seriously and have bigger goals, I encourage you to get a business license and start an LLC (Limited Liability Company).

Why I Recommend That You Start an LLC

Starting an LLC makes you feel that you are “official”, and you are separating your personal life from your business life. Opening up a separate bank account for your business makes you much more organized, and tax season is less of a headache.

Need to learn more about taxes as an Amazon seller? I have an article all about what you need to know for FBA taxes.

The responsibilities that come with having an LLC make you more committed to your business’s success.

This commitment is how I started my business and got it to where it is today.

Additionally, having an official business helps you establish yourself as a proper entrepreneur. Operating as a business name rather than just your personal name is much more reputable and trustworthy, especially when dealing with suppliers and freight forwarding companies.

Why? Because there are product suppliers from overseas that don’t want to work with clients who are not registered businesses.

Pros and Cons of Sole Proprietorship and LLC

do you need a business license to sell on amazon

What is the difference between the sole proprietor and LLC business structures?

Sole Proprietorship

A sole proprietorship is a business owned and operated by one individual without any partners. The business owner receives all profits and has total responsibility for losses and debts, therefore no personal liability protection.

Benefits of selling as a sole proprietor

  • Low startup costs and easy to set up
  • Less paperwork needed
  • Somewhat easier to file taxes
  • Less government regulation
  • You can still get tax deductions and write-offs as a sole proprietor
  • Can operate under your own name and have full control over business decisions
  • Easy to change the business structure

Disadvantages of selling as a sole proprietor

  • You are personally liable for any business debts or lawsuits. If the business goes bankrupt, creditors can go after your personal assets to repay the business debt.
  • There is no separation between you and your business, which could lead to personal financial problems
  • It’s more difficult to raise capital from investors and/or get business loans, limited business growth potential
  • It’s more difficult to sell your company because you can only sell business assets


An LLC (Limited Liability Company) can have members with a degree of liability protection against lawsuits filed by third parties. The business is its own legal entity, separate from you.

There are several types of LLCs, and many Amazon sellers reach great success operating even as a Single-Member LLC.

Benefits of operating through an LLC

  • You are not personally liable for business debts or lawsuits because the business is its own legal entity, separate from you
  • Your personal assets are protected
  • If you operate as an LLC with several members, you have a team to go to for making business decisions
  • Wider range of tax deductions and write-offs for office space, banking and insurance fees, transportation, business travel, and professional development such as business education
  • Flexibility in allocating profits and losses throughout members
  • Avoid double taxation due to each member being taxed on their own personal level
  • Easier to raise capital from investors and/or get business loans
  • Easier to sell company

Disadvantages of operating through an LLC

  • More legal obligations and paperwork than a sole proprietorship
  • Some states, such as California, impose extra costs for operating an LLC.
  • Income splitting is feasible, although unlike an S Corp, all revenue derived from a LLC is subject to payroll or self-employment taxes if the business is operated as an LLC.
  • Many states reduce asset protection or do not honor assets for LLCs with a single owner.

How to Start an LLC in 6 Steps

Watch my video tutorial or follow the process below! All in all, this can take you only 10 to 15 minutes if you are prepared with all the information that the legal services will ask from you.

  1. Choose your LLC name

Your LLC name does not have to be the same name as the name of your Amazon store! It can be a personal name that means something important to you, like your pet’s name or child’s name.

I personally recommend that you don’t name your LLC after a specific industry in case you want to expand over time.

If you’re stuck and can’t think of a name, try using a business name generator.

2. Choose a registered agent

It may cost you extra, but registering without any issues is worth it. I have used both LegalZoom and Rocket Lawyer and can recommend them.

Opening an LLC with LegalZoom starts at $79 plus filing fees, while Rocket Lawyer charges $99.99 for business filing or $39.99 with a monthly subscription to some of their other services.

Be aware that legal services such as consultations, helping you with legal documents, obtaining an EIN, and others may cost extra.

However, costs shouldn’t be your deciding factor. Start a conversation with the customer service of a legal service and do your own research before deciding who to choose as your registered agent.

3. Decide on Member vs. Manager Management

Small LLCs frequently opt to handle their business directly through their members, but LLCs may choose to have one or more individuals (outsiders) manage the company, much like how a board of directors supervises a corporation.

Managers decide on significant issues including obtaining a loan, acquiring property, and modifying strategic plans.

I am registered as a single-member LLC, and many Amazon sellers operate this way too especially when they are starting from scratch.

4. Create an LLC Operating Agreement

This is another aspect that a legal service (such as LegalZoom or Rocket Lawyer) can do for you.

It is an important document that solidifies how your business is structured and helps prevent conflict between members in the future because it is clearly stated within the document what each member’s responsibilities and ownership percentages are.

5. Comply with other Tax and Regulatory Requirements

For many business-related activities, such as opening a business bank account and paying business taxes, you will need an EIN. An EIN is the Employer Identification Number, also known as FEIN (Federal Employer Identification Number).

It is a nine-digit number used by the IRS (Internal Revenue Service) to identify a business and keep a record of them. Even if you won’t hire employees for your business, it is necessary to have an EIN.

I have previously written an article about EIN that will guide you through the process of obtaining one.

Aside from the EIN, you may need to obtain other local and state business licenses. Again, most of the time a business license is for sellers who do Wholesale on Amazon. As always, do your research and check with your county and state to find out.

6. File Annual Reports

This is where you get your accountant involved. They keep you compliant with all the tax laws, help you set up and organize your business finances, and give you advice on how to make your business more profitable.

You should consider your accountant as a valuable asset to your business, because they are worth the investment.

How to Sign Up on Seller Central

Begin by browsing the Sell on Amazon website to familiarize yourself with Seller Plans.

do you need a business license to sell on amazon

A Professional plan is $39.99 monthly and is recommended for those selling more than 40 units. Individual plans are for those who sell 40 units or less per month, and they pay $0.99 per item sold.

Have your business and contact address, mobile phone number, chargeable credit card information, tax information, and identity details ready before beginning the sign-up procedure.

  1. Visit the Seller Central website and click on the yellow Sign Up button
  2. Enter your full name and the email and password you would like to use for your account. It’s best if you use your business email address that is completely separate from your personal emails. Click Next.
  3. Amazon will send an OTP code to your email. Enter the code into the sign up window to create your seller account.
  4. Enter your business information through the dropdowns provided. Amazon will ask about business location, type, Company registration number, jurisdiction, registered address, contact information, and primary contact person.
  5. Enter your personal information as the seller. Amazon will ask for your country of citizenship, date of birth, proof of identity, country of issue, residential address, mobile number, and a few more questions.
  6. Choose the Marketplace(s) you would like to sell in. Amazon Marketplaces refer to other countries where Amazon is available. To access selling privileges in all marketplaces, you will have to pay an additional monthly fee of $39.99.
  7. Enter your billing information. They specifically ask for credit card information. Do not attempt to insert debit card information, because they do not allow it.
  8. Enter Store Information. Amazon will ask what you would like to name your store, if you have UPC codes for your products, if you own a trademark, and if you are the brand owner or manufacturer of the products to be sold. However, be aware that you are not required to own a trademark to sell products on Amazon.
  9. Lastly, provide your identity details. Upload a clear copy of a government-issued identity document. You will have to show both the front and back sides. They will also ask you for your residential address, and an additional document (such as a bank or credit card statement).

It will only take 10 to 15 minutes if you have prepared the necessary details ahead of time!

Keep in mind that Amazon may request a video call verification session. They’ll want to see the actual paper copies of your identification papers. You’ll need a device with a decent microphone and camera for this video call.


It is crucial to know the requirements for selling on Amazon for different scenarios.

Many resources will tell you that you simply don’t need a business license to sell on Amazon, but it really depends! Selling without a business license when you actually need it may lead to fines, penalties, and even forced closure!

I hope this article clarified any confusion for you and gave you the motivation to start taking action to become a serious business owner.

If you’re still unsure about other aspects of selling on Amazon, continue to read the Sourcing Monster blog!

About the author

My name is Tomer, and I founded Sourcing Monster to share proven tips and methods that I use every day for my Amazon business to provide value and growth for you as well as you journey through your own business!

Feel free to comment or share any feedback down below!

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