How to Start an Online Business in the US: Online Store and Ecommerce

Starting an online business in the US can look quick, because a store can take orders from any state on the day it opens. The legal side starts on that day too. Sales tax, shipping and review rules apply from the first sale, and some tax rules belong to states where the store has no office. It's a big market to get right: the US Census Bureau puts online sales at $340.2 billion in the second quarter of 2026.

To start an online business in the US, you set up the legal base first. Then the store has to meet the rules Google and the Federal Trade Commission set for online sellers. The legal base covers four things:

• form a legal entity (most new store owners choose an LLC)
• get a free EIN from the IRS
• register for sales tax in the states where you have to collect it
• get any licenses your products need

The Google and FTC rules are about being straight with buyers: real shipping times, real contact details and genuine reviews. We'll follow your store through its first months, in the order these rules tend to show up.

Starting an online business: the company behind the store

Choosing a store builder can wait a few days. The legal setup comes first, and the IRS even asks you to form the company with the state before you apply for an EIN.

You're allowed to sell online as a sole proprietor. But then, as Xero's guide puts it, you and the business are one entity. Your personal assets aren't protected if the business runs into legal trouble.

An LLC separates personal and business money and offers liability protection. Wix's guide notes that an LLC isn't strictly required for an ecommerce business. InCorp's guide says most ecommerce startups choose one for its pass-through taxation and lighter formalities.

InCorp also points out that a C corporation suits businesses that plan to raise venture capital or issue stock. Which state to form in and what formation costs is a separate subject. It's covered in How to Start a Business in the US: What Comes First and What It Costs.

The state approves your LLC: now the EIN

Once the state approves the company, you need its federal tax ID. That's the EIN (Employer Identification Number), and the IRS issues it free of charge. The SBA lists it as needed for these things:

1. paying federal taxes
2. hiring employees
3. opening a bank account
4. applying for business licenses and permits

The IRS adds that a business generally needs one to pay sales and excise taxes.

The IRS online tool issues an EIN right away if the application is approved. But it works only when all of these are true:

1. the company was formed in the US
2. its principal place of business is in the US or a US territory
3. the responsible party has an SSN or ITIN

When the principal place of business is outside the US, the IRS says to apply by phone, fax or mail. And if you apply before the state has formed your LLC or corporation, the EIN can be delayed.

Your first products: business licenses for an online store

While you wait, you start loading products into the store. This is a good moment to check whether any of them need a license. Most online stores don't need a federal one. The SBA says it's needed only for activities a federal agency regulates. Its examples include:

• alcoholic beverages
• firearms and ammunition
• fish and wildlife
• agricultural imports or moving animals and plants between states

Other licenses can come from the state, the county or the city. They depend on what you sell and where the business is based. Some of them expire and have to be renewed. The SBA also notes that zoning rules can apply to a business run from home. Licensing is covered in more detail in How to Get a Business License.

By now your paperwork looks like this:

The first sale: sales tax in your home state

Then the store goes live and the first order comes in. That's when sales tax becomes real, and it's the part of the setup that needs the most attention.

A business that sells physical products usually has to register with its own state to collect sales tax. In California this is called a seller's permit. The state tax agency, CDTFA, says: "There is no charge for a seller's permit."

CDTFA may ask for a security deposit, depending on the type of business and expected taxable sales. It can sometimes issue the permit the same day.

Orders from other states: when you owe tax where you've never been

A few months later, orders arrive from states you've never visited. You might think their sales tax has nothing to do with you. Before 2018, that was mostly true. A state could make a seller collect its tax only if the seller had a physical presence there. That meant things like an office, a warehouse or staff.

In South Dakota v. Wayfair (2018), the US Supreme Court overruled that rule. Now states can require sellers with only an economic presence to collect tax. So a store that sells enough into a state may have to register there, even with no physical presence in that state.

In Texas, you need the permit and must start collecting by the first day of the fourth month after you cross the threshold. Texas also lets remote sellers use a single local use tax rate of 1.75%. That saves tracking every local rate.

Selling through a marketplace can change the obligation too. Say you sell into Texas only through a marketplace provider that certifies it collects the tax. Texas says you don't need a Texas permit then. But you must keep records of those sales for at least four years.

As payments pile up, one more tax form may show up. Payment apps and online marketplaces must report a seller's payments on Form 1099-K in one case. That's when payments for goods or services top $20,000 in more than 200 transactions. They may also send the form for smaller amounts. The IRS says all income has to be reported on the tax return, whether or not a 1099-K arrives.

Getting your products onto Google: Merchant Center rules

With sales tax under control, you'll want more shoppers to see your products. On Google, that means working with Google Merchant Center. Its Misrepresentation policy is strict. For egregious violations, Google suspends the account "upon detection and without prior warning," in its own words.

Google may review the listing, the website, the seller's accounts and third-party sources. The policy doesn't allow any of these:

• a false identity, business name or contact information
• selling products without the required licenses
• refusing returns when the store's own policy allows them
• hiding the business location or the place products ship from

Google specifically names "displaying a false or virtual physical address as your headquarters while operating entirely from an undisclosed region" as a violation. The total price has to be disclosed. It includes taxes and fees, shipping and any recurring costs. You also can't hide handling delays, cross-border return shipping costs or restocking fees.

Most of these things also make a shopper hesitate. That's why the policy works as a handy checklist, even for stores that don't sell through Google.

Promising a delivery date: the FTC 30-day rule

Your product pages need a shipping time, and the number you write there is a legal promise. The Federal Trade Commission's Mail, Internet, or Telephone Order Merchandise Rule covers goods ordered online. If you state a shipping time, you need a reasonable basis for it. If you state no time, you must reasonably expect to ship within 30 days.

If an order can't ship on time, you have two options. You ask the customer to agree to the delay. Or you cancel the order and give a full refund.

For a dropshipping store, this has a direct effect. A delivery estimate like "2 to 3 weeks from the supplier" has to be based on how the supplier actually performs.

The empty review section: FTC rules on fake reviews

A new store has no reviews, and the empty section can look bad. It's tempting to ask friends to fill it in. But in August 2024 the FTC announced a final rule on consumer reviews and testimonials. The rule bans these practices:

1. creating, selling or buying fake reviews, including AI-generated ones
2. paying for reviews that express a particular opinion
3. reviews by insiders such as staff or managers without disclosure
4. "independent" review sites the company controls
5. threats used to get negative reviews removed
6. buying or selling fake social media followers or views

The FTC can seek civil penalties against businesses that knowingly break the rule. So "seeding" a few reviews at launch is a real legal risk for a new store.

What a first-time buyer looks for

Your store has no history and no storefront. So buyers, payment platforms and marketplaces look at what they can verify. Several of these checks are written into Google's and the FTC's rules. A buyer or platform looking at a new store expects to see these things:

• the legal company name
• a working email address and phone number
• a return and refund policy the store follows
• clear shipping times and costs
• the total price, with taxes and fees, before checkout
• a privacy policy
• genuine reviews, including mixed ones

On privacy, Stripe's guide points to laws such as the GDPR for customers in the EU and the CCPA for California residents. How outsiders judge a young company is covered in How to Tell if a Business Is Legitimate, and How a New Business Looks Credible.

Showing up on Google without a storefront

Local shops get a pin on Google Maps, so you might expect your online store to get a Google Business Profile too. But Google allows a profile in only two cases. The business "has a physical location that customers can visit" or "travels to customers where they are" (Google's wording). An online-only store does neither, so it doesn't qualify.

Listing an address that customers can't actually visit breaks Google's guidelines. Google may suspend profiles that break them. A store with a real showroom or pickup point where customers come in is in a different position. It may be eligible.

For an online store, the free route onto Google is Merchant Center. With free listings, your products can appear at no cost in these places:

• Google Search
• Google Maps
• Gemini
• YouTube
• the Shopping tab
• Google Images
• Google Lens

New Merchant Center accounts are opted in by default. Google says being opted in doesn't guarantee the products will be shown.

The store itself needs a site with product pages, and a big catalogue naturally means many pages. In our work with clients, a multi-page site suits companies with many services or products, such as online stores. But even then, a landing page with a funnel is still needed for specific offers and campaigns.

The difference between the two is explained in Do You Need a Website for a Small Business? Website vs Landing Page. Social media pages, a launch press release and listings in trusted directories add to the same picture. They show a business that exists beyond its own website. For new companies at launch, our team sets up the social media pages, the directory listings and a press release.

The first month: what it costs to start an online business

After the first month, you sit down with the bills. Much of the setup cost little or nothing. The real spending depends heavily on the products. But several items can be checked on official or vendor pages:

Shopify offers a 3-day free trial, then $1 a month for 3 months on most plans. Amazon's referral fees depend on the category. They're 15% of the price in many categories.

For other costs, Xero's June 2026 guide gives these ranges:

1. $10 to $20 a year for a domain
2. $50 to $500 for LLC filing in most states
3. $50 to $400 for initial licenses and permits
4. $2,000 to $10,000 for an ecommerce business that holds inventory

We worked out a first-month example ourselves from the figures in the table. Say you run a small store on Shopify Basic with monthly billing. You file one trademark class and take 50 online card orders of $40 each. Shopify costs $39 and the trademark application $350, paid once. Card fees come to 50 × ($1.16 + $0.30) = $73. The EIN and the California permit cost $0.

The total is about $462. An Amazon Professional account would add $39.99. This figure leaves out inventory and the state LLC fee. It also leaves out product photos and marketing and advertising. For most stores, those costs decide the real budget.

Your own store, a marketplace or both

Looking at those bills, you may wonder whether a marketplace would be cheaper. Your own store and a marketplace charge in different ways.

Many sellers use both. The marketplace brings shoppers who are already there. Your own site gives full control over the brand and builds a direct customer list. The marketplace, on the other hand, sets its own rules for listings and customer contact.

If you run the store from outside the US

If you live outside the US, you can still own a US online store. But several rules work differently for you. When the principal place of business is abroad, the IRS online EIN tool isn't available. You request the EIN by phone, fax or mail instead.

A US single-member LLC owned by a foreign person must file a pro forma Form 1120 with Form 5472 attached. The penalty for not filing is $25,000. Another $25,000 is added for each 30-day period the failure continues more than 90 days after an IRS notice. The details are in Form 5472 for Foreign-Owned US LLCs: Who Must File, Due Date and Penalties.

FinCEN says US companies are exempt from beneficial ownership (BOI) reporting and no longer need to file. That's under a final rule that took effect on August 14, 2026. A foreign company registered to do business in a US state may still have to report. The deadline is 30 calendar days after its registration takes effect. FinCEN charges no fee for BOI filings and warns about scam letters.

California's remote seller rule applies to sellers outside the US as well. Google Merchant Center doesn't allow a virtual address to be shown as the headquarters of a business that runs entirely from an undisclosed region. So if you run your store from abroad, state where you operate and where products ship from.

Where new online businesses most often slip

Looking back over the first months, the same mistakes cause new stores the most trouble:

• adding fake reviews, which the FTC bans and can penalise
• promising shipping times you can't meet, or stating none and missing the 30-day limit
• ignoring sales tax in other states after crossing a threshold such as $500,000 in Texas or California
• hiding the business location or using false contact details, which can get a Merchant Center account suspended without warning
• trying to get a Google Business Profile for an online-only store, which isn't eligible
• adding restocking fees or return costs that show up only after purchase
• putting off a trademark application for the store's name (the USPTO base fee is $350 per class)

What to do this month

Before your first sale, check your home state's sales tax rules. Then watch which states you sell into, since each sets its own threshold. Only promise shipping times you can actually meet, and keep every review genuine.

If you live outside the US, give Form 5472 the most attention. Missing it costs $25,000. Form 5472 for Foreign-Owned US LLCs: Who Must File, Due Date and Penalties explains who files and when. And if a Merchant Center account gets suspended or a filing looks unclear, that's the point to ask for help.