Starting a successful yarn shop takes more than knowing how to be a good knitter. Starting a new business requires completing several steps, and obtaining licensing is an important one as it may impact your ability to operate legally.
The question, “what business license do I need to start my yarn shop” is a common one, but in reality, your business will likely need multiple licenses, permits, and registrations from federal, state, and local agencies.
Let’s look at which licenses to consider when starting a yarn shop.
Related: Guide to starting a yarn shop
To not miss any important licenses and permits, we recommend also checking with your local Chamber of Commerce, economic development agency, or use a business license service like Incfile or Corpnet.
What Licenses Do You Need to Start a Yarn Shop?
There are several licensing requirements for starting a yarn business at the federal, state, and local level. While licensing requirements vary by location, here are a few of the common licenses and permits that a yarn shop may need:
When starting a business, the legal entity needs to be selected. A legal entity refers to how a business is organized to operate. There are four main types of entities; sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
Each type of entity has its own pros and cons, such as liability protection, costs, and administrative requirements.
Business Name Registration
While not necessarily a business license, it’s worth noting that to use a name for a business, many states require the registration of that name. Making matters more complicated, the process of name registration is different by state and the type of business entity.
For instance, sole proprietorships and partnerships generally need to register a business name (also referred to as a Doing Business As, DBA, fictitious business name, or assumed name).
Learn: How to register a DBA
Corporations and LLCs register are a little easier because the name is registered when the entity is formed with the state.
General Business License or Permit
Depending on where the business is located, a general business license or permit may be required. A few states require a business license; however, they are more commonly found at the city level.
Learn more: Business license requirements by state
Federal Employer Identification Number
The Federal Employer Identification Number (also referred to as a FEIN, Employer Identification Number, EIN, or Federal Tax ID Number) is a unique nine-digit number that identifies a business with the Internal Revenue Service (IRS).
Any business with employees or those that form as a partnership, Corporation, and in many cases an LLC, the business will need to get an EIN.
Sole proprietors and single-owner LLCs without employees can instead use the owner’s social security number.
Learn: How to get an EIN
Sales Tax Permit or Business Number
In order to sell products and/or offer certain services, a state sales tax permit (also referred to as a sales tax license, business tax number, or tax ID number) may be needed. This permit creates an account number with the state’s Department of Revenue (or similarly named state taxing agency) to collect and remit sales tax.
When buying inventory that is being resold to customers, such as yarn, knitting needles, crochet hooks, and other knitting accessories, the business can purchase these items tax-free. A resale certificate (sometimes referred to as a seller’s permit) allows a business to purchase inventory, and instead of paying the sales tax to their vendor, they charge the sales tax to the end-user of the product.
A resale certificate only allows a business to not pay sales tax for items being resold, and sales tax will still need to be paid for supplies or equipment.
Certificate of Occupancy
In most communities, a yarn store will likely need to secure a Certificate of Occupancy (CO) before operating in a commercial building. This certificate is typically obtained from the city and/or the county and allows a business to occupy and operate from a building. Before the certificate is issued, the building will need to comply with zoning regulations, building codes, and any other local requirements.
If the yarn shop will be operated as a home-based business, a home occupation permit may be required.
Before purchasing or leasing a location for your yarn shop, be sure to check with the local zoning department first to ensure the business can legally operate out of the chosen location.
The process of identifying all of the licenses and permits necessary to start a yarn shop may feel confusing and overwhelming. It is critical to do this right the first time, otherwise, your business may be temporarily shut down until all licenses are obtained.To make sure your bases are covered, you can do it yourself and contact the city or local economic development office and request assistance. Additionally, there are companies that specialize in business license research, such as Incfile or Corpnet.