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How to Start an E-commerce Business

What it takes to legally start an e-commerce business in the US — licensing, structure, EIN, taxes, insurance, and your first customers. The steps are the same everywhere; the forms and fees depend on your state, so pick yours below for the exact links.

Typical startup cost
$1,000–$20,000 (inventory is the variable)
Licensing
state + local — varies
Best structure
LLC for most
First customers
referrals + local search

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  1. Check the licensing for e-commerce work

    You need a seller's permit in your home state and must monitor economic nexus in other states (register once your sales there cross a threshold, often $100k or 200 transactions). Marketplace facilitator laws mean Amazon/Etsy often collect tax for you. This is the part that varies most by state — some require a state license or registration before you can advertise, others leave it to the city or county. Confirm both your state board and your local government before you take a job.

  2. Decide what the business needs to open

    Selling physical products online through your own store or marketplaces. The setup areas that usually matter for an e-commerce business: Seller's permit + economic-nexus sales tax, Resale certificate for wholesale, Store platform + payments, Fulfillment (self, 3PL, or dropship), Product liability considerations. Typical cost to get operational: $1,000–$20,000 (inventory is the variable).

  3. Pick a structure — sole proprietor or LLC

    You can start as a sole proprietor with no filing, or form an LLC (usually $50–$300 depending on your state) for liability protection. For hands-on trade work where something can go wrong on a customer's property, most owners choose the LLC.

    LLC filing fee and steps by state ↗

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  4. Get a free EIN from the IRS

    An Employer Identification Number is free and takes a few minutes online. You need it to open a business bank account and to hire.

    IRS — Apply for an EIN ↗

  5. Register for state taxes and get insurance

    Register with your state's tax agency if you'll collect sales tax, then line up general liability insurance — most contracts and license boards require proof of coverage.

  6. What e-commerce businesses charge

    Price for a contribution margin that survives shipping, payment fees, ad cost, and a realistic return rate — many first stores are 'profitable' until returns and CAC are counted. Bundles and subscriptions lift average order value. Category-dependent, with a strong Q4 for most consumer goods. Marketplaces (Amazon, Etsy) validate demand quickly; a branded store with email and repeat buyers is the durable asset.

  7. Get your first e-commerce customers

    Marketplaces for initial validation, then paid social and email for a branded store. Unit economics first — know your margin after shipping, fees, and returns before scaling ad spend. Repeat purchase rate and email are the compounding assets.

    Getting customers for an e-commerce business ↗

  8. The mistake most first-year e-commerce owners make

    Scaling ad spend before the unit economics work. If you don't make money on the first order after all costs, more traffic just loses money faster — fix margin, repeat-purchase rate, and email first.

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Frequently asked

How do I start an e-commerce business?

Check the licenses for e-commerce work in your state, pick a structure (sole proprietor or LLC), get a free EIN from the IRS, register for state taxes, open a business bank account, get general liability insurance, then set up a Google Business Profile and line up your first jobs. The order and the exact forms depend on your state.

Do I need a license to start an e-commerce business?

You need a seller's permit in your home state and must monitor economic nexus in other states (register once your sales there cross a threshold, often $100k or 200 transactions). Marketplace facilitator laws mean Amazon/Etsy often collect tax for you.

How much does it cost to start an e-commerce business?

Plan for $1,000–$20,000 (inventory is the variable) to get operational, plus $50–$300 if you form an LLC (varies by state). An EIN is free, and general liability insurance runs a few hundred dollars a year for most solo operators.

What should I charge for e-commerce?

Price for a contribution margin that survives shipping, payment fees, ad cost, and a realistic return rate — many first stores are 'profitable' until returns and CAC are counted. Bundles and subscriptions lift average order value.

How much do e-commerce businesses make?

It depends on your rates, your utilization, and your area. See the income and pricing breakdown for an e-commerce business for typical owner take-home and what to charge.

How much does an e-commerce business license cost?

It depends on your state and exactly which license applies — a state professional license commonly runs $50–$300 plus any exam or renewal fee, and a local city/county business license is often another $25–$100. That's separate from the $50–$300 LLC filing fee if you form one. Use the License Finder tool with your state for the exact fee for e-commerce work.

How much does e-commerce business insurance cost?

General liability insurance for a solo e-commerce operator typically runs $300–$800 a year, more with commercial auto coverage or a higher liability limit. Most contracts, landlords, and license boards require proof of coverage before you can start.

Where do the first e-commerce customers come from?

Marketplaces for initial validation, then paid social and email for a branded store.

Official sources

Fees and timelines are commonly-cited figures last reviewed September 2026 and can change — always confirm on the official site. This is educational information, not legal or tax advice.

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AI-generated guidance is for educational purposes only and is not legal, tax, or investment advice. Disclosures · Trust center