Entrepreneurs love Etsy because it’s quick and simple. Its millions of active sellers can set up shop with little or no startup costs, inventory or previous retail experience, and the site comes with a built-in customer base.
Still, every retailer needs to ask the right legal, tax, insurance and operations questions to keep their online business legit. Jump ahead to learn:
The beauty of Etsy is that anyone with an account can sell digital and physical products, from wall art you can print at home to handmade jewelry and vintage goods.
However, starting a business on Etsy is just that — starting a business. And business activities come with legal implications. For example, you may need to obtain business licenses and permits to sell your goods on Etsy.
If you aren’t familiar with local, state or federal business laws, you might turn to Etsy for guidance. However, you’ll quickly discover the platform offers little help. Etsy doesn’t require sellers to have a business license.
But here’s where things get tricky: Just because Etsy doesn’t require a business license doesn’t mean that you don’t need or shouldn’t get one.
Unfortunately, there isn’t a clear-cut answer. It depends on:
Many Etsy small business owners operate their small businesses from their homes. Home-based Etsy business owners aren’t exempt from business license regulations. Your county or local jurisdiction may require a home occupation permit or certification of occupancy for your home-based business to be legal.
That said, in many states, sole proprietors aren’t required to get a business license or even register with a Secretary of State office. However, if you have a limited liability company (LLC), you will probably need to get a business license and, register your business; check local regulations.
Some Etsy sellers treat their store as a hobby rather than a job. In some locations, hobbyists may not need a business license or permit. Otherwise, the same considerations may apply based on location, products and sales volume.
Laws can vary from state to state, making knowing if you need licenses or permits confusing. The best course of action is to find your local Small Business Administration (SBA) office and inquire about local licensing requirements.
In addition to a business license, your retail business may need to comply with other legal requirements. For example, you cannot sell copyrighted material on Etsy — it’s illegal and against Etsy policy. Some online sellers believe crediting the original creator can avoid copyright infringement on Etsy. But that isn’t the case. The only exception is if you have permission from the creator or copyright holder.
Other legal considerations for selling on Etsy include:
You don’t need business insurance to open a store on Etsy. Etsy doesn’t require it to sell. But think about this: Anytime you sell products to people, you put yourself — and your finances — at risk.
If you didn’t read Etsy’s terms of service, you might not know that you agree to release the platform of any liability — and place it squarely on your shoulders. Something as small as scented soaps could cause a harmful rash and potentially trigger a lawsuit. Without business insurance to protect you, you’re financially responsible.
Ecommerce liability insurance can help. If you or one of your products causes an injury, illness or other damage, general liability insurance and professional liability insurance coverage can help protect your personal assets.
If you have an Etsy shop or you’re thinking of starting one, small business insurance can help protect your store and finances.
At NEXT, insurance is simple and affordable. Our ecommerce insurance can help cover some financial losses such as medical payments if a customer gets hurt, and protection if a competitor claims you stole their ideas.
Our application process lets you review your policy options, purchase coverage and get your certificate of insurance in less than 10 minutes.
