Etsy is a great way for creative people to earn money from doing what they love thanks to its powerful tools and enormous userbase.It’s also simple to open a shop on Etsy, which makes it hugely popular among independent creators, hobbyists, and side-hustlers who are looking for a low-friction source of part-time income.
Etsy is home to a wide variety of shops ranging from artists who sell their work for fun to prolific sellers who run their Etsy stores as full-time businesses. With such a diverse group of hobbyists and business people, many new Etsy sellers can’t help but wonder: “Do you need a business license to sell on Etsy?”
The short answer is: it depends. There are many factors that affect whether or not you need a business license for Etsy, including your annual revenue, how much time you devote to your shop, if you turn a profit, and what your long-term intentions are for the store.
But fear not, entrepreneur! While business laws can be complex, this handy guide will help you figure out if you need an Etsy business license to launch your store!
Hobbyists Do Not Need A Business License To Sell On Etsy
According to Etsy’s policies and business law (in most places), hobbyists do not need a business license to sell on Etsy. However, every municipality defines hobbies according to different legal definitions.
According to the IRS, “A hobby activity is an activity not done for profit.” But that is a fairly broad definition. Here a few ways to determine if your venture is a business or a hobby according to the IRS in the United States:
- Whether you run your hobby like a business (by keeping careful records of profit and loss)
- Whether you have operated a similar profitable business in the past
- Whether your hobby turns a consistent profit
- Whether your hobby is likely to profit in the future
- Whether the hobby represents a substantial portion of your income
If you are experimenting with Etsy for the first time by listing some of your artwork or crafts for sale in an effort to offset the cost of your hobby, you probably won’t need a business license to sell on Etsy. If you are willing to turn your hobby into a business, but you fail to consistently turn a profit, you also probably won’t need a business license for Etsy.
Of course, these qualifying conditions are subjective, so if you are in doubt, it may be wise to consult a tax or business law professional with questions.
Also, if you have earned several hundred dollars in profits, and it looks likely that your business will continue to grow, you should definitely consider getting a business license to avoid headaches in the future.
When Do You Need A Business License To Sell On Etsy?
If you are launching your Etsy store for the sole purpose of running a business and turning a large profit you’ll likely need a business license, if not immediately, then sometime within your first 18 months of operation.
While getting a business license can be a bit of a burden, it also offers several benefits that a hobby does not. For example, full-fledged businesses can write off their expenses and losses, qualify for special loans, and often earn more trust from consumers.
How To Get A Business License For Etsy
Once you decide to get a business license, you’ll need to apply for one through the proper channels. The process will differ by municipality, but typically, the best place to start investigating will be on the official government website for the city, state, or province where you live.
As part of your application, you’ll likely need to pay a license fee. Sometimes, you’ll need to pay a renewal fee every year to keep your license.
Before you apply for a business license, you’ll need to get a few things in order:
- You will need to name your business
- You will need to make sure your business name and logo do not violate existing trademarks
- You will need to decide on a business structure for taxation purposes
- You may need to acquire additional licenses and permits
How To Name Your Etsy Store
When naming your new Etsy business, you’ll want to consider both the legal requirements for naming your business and best practices for coming up with an Etsy shop name.
Here are a few tips for naming your Etsy store:
- Choose a unique name that doesn’t conflict with existing businesses in the same (and similar) categories
- Do a trademark search (search US trademarks here)
- Choose a name with strong SEO and marketing potential
- Choose a name that’s easy to spell
- Choose a name that allows you to expand your business beyond your initial product line or operating location (don’t name it after one product or one city if there’s any chance you’ll move away or alter your product line-up)
- Consult a business lawyer
How To Choose Your Business Structure
Different types of businesses must operate according to different laws. If you are in the United States, you’ll have to file your business as one of the following:
- Sole proprietorship – if you will operate alone
- Limited Liability Company – if you will work with a co-owner
- Corporation – if you will hire lots of employees
Of course, choosing your business structure is more complex than detailed above. Every business type offers different advantages like liability protections, tax policies, access to loans, investment opportunities and more.
Before filing for your business license, you should definitely consult a business law professional to help you choose the right business structure.
How To Grow Your Etsy Store
Whether you operate your Etsy side hustle as a business or a hobby, you will have a lot of responsibilities: market research, competitor research, copywriting, content creation, customer service, etc. Even for a hobbyist, running an Etsy store can be overwhelming without the right tools. Fortunately, Roketfy can help you save time and make more money with cutting-edge artificial intelligence tools. Roketfy’s tools make it easy to manage all aspects of your Etsy store from a single, convenient interface so that you can run your store with confidence.
If you’re ready to grow your Etsy store with artificial intelligence, explore Roketfy today!