I often see people say in forums that you don’t need to have a business license. The logic appears to be that since your business is entirely online, it doesn’t need to be licensed locally. It’s a nice thought, but if you look at things more carefully, that’s not true everywhere.

Many places require a business license even for home based businesses or online businesses no matter how much you’re earning. Olympia, Washington, for example, gives some very useful tips on which home based businesses need a license in that city, and they include internet businesses in that mix. In other words, it pays to check with your local area to see if you will need a license when you decide to start an online business in your home.

A business license isn’t all that expensive in most places. Mine is just $50 a year. The exact cost will vary by where you are and may also vary by what you’re earning and if your earnings come from the local area.

Many online businesses don’t bother getting a license because it’s so easy to hide. Who’s going to notice you when customers never come to your door? The problem is that if you get caught doing business without a license, the fines can be very steep. You can be caught out as a home based business when you file your Schedule C with your taxes, which is something your municipality can check for.

For this reason, you need to find a copy of your local ordinances online and read them. Find out exactly what the law says about needing a business license or home occupation permit for the kind of business you’re going to run online. If you aren’t selling physical products or if you’re doing affiliate marketing, you may not need a license. Then again, you might.

It doesn’t matter that you can say your business is located online. You are doing your business activities from your home (okay, maybe the coffee shop too, but you aren’t getting your mail there), and that’s what matters when determining where your business is located for most places.

You may also need a home occupation permit. Sometimes this is instead of a license, sometimes in addition to the license. Basically it means that the business you’re running from your home is acceptable for the zoning in your area. Online businesses are usually fine, unless all home businesses are banned.

If you have a homeowners association to deal with or similar organization, you may have to check with them as well. Of course, they aren’t terribly likely to notice a purely online business, but it still pays to know the rules.

If you aren’t sure about what’s required in your area, you may want to consider talking to an attorney about the matter. Sometimes it takes a professional to figure what exactly the rules mean.

Disclosure: I often review or mention products for which I may receive compensation in the form of affiliate commissions. All opinions are my own.