Last Updated on April 5, 2025 by BusinAssist Editorial Team
Etsy is a global e-commerce platform where sellers can set up their shop and sell various items, such as crafts, handmade goods, and vintage items. While it offers the flexibility to sell anything anytime, sellers may question the legal requirements for selling on the platform, such as, ‘Do I need a registered business to sell on Etsy?’
This is a crucial question entrepreneurs should consider before they start selling on Etsy, since it may have legal implications for taxes. This guide will explore the requirements for selling on Etsy and the steps to start your online business.
What are the legal requirements for selling on Etsy?
It is not a legal requirement to have a registered limited company to sell on Etsy. Since this is not a legal requirement, there are other legal requirements for entrepreneurs to be aware of.
Tax obligations: Entrepreneurs should consider and comply with tax obligations. Whether operating as a registered business or as a sole proprietor, entrepreneurs will be liable to pay taxes on profits earned by their businesses. Just like any business in the UK, entrepreneurs will need to pay tax on their income if they make over £12,570 in the tax year.
Businesses that sell less than £1,000 a year on Etsy do not need to pay taxes since HM Revenue & Customs (HMRC) lets you earn £1,000 a year at 0% tax allowance. For sales of more than £1,000 a year with Etsy, entrepreneurs need to submit a tax return.
Customer protection laws: Every e-commerce marketplace has customer protection laws to address customers’ complaints and issues, and Etsy is no exception. Every entrepreneur has to comply with all these laws, which include accurate product descriptions, price information, and handling customers’ complaints promptly and fairly.
Safety standards laws: Safety legal standards ensure that products delivered to customers meet the safety standard. Sellers should comply with these legal regulations to sell on Etsy. Before selling on Etsy, entrepreneurs should research and understand product safety, restrictions on certain items, labeling requirements, and many other factors.
Do I need a registered business to sell on Etsy?
While it is not required to incorporate a UK limited company when selling on Etsy, at some point, you will have to register your business with HMRC. When your business earns more than £1,000 a year, you will need to register with HMRC and file for a tax return.
You will start paying taxes for your Etsy shop once your profit goes above £12,570. You will also need to pay National Insurance on your income. When your business is earning profits above £12,570, it is advisable to register your business as a limited company.
Once incorporated as a limited company, you will need to pay corporation tax on your earnings instead of 40% or more on income tax. Additionally, if your business sells more than £90,000 worth of goods, it will have to register for Value Added Tax (VAT).
Why use a registered business to sell on Etsy?
Having a registered business to sell on Etsy is not mandatory; however, registering your business comes with many benefits that can safeguard your interests.
Tax management:
Once your business is registered, you will not need to pay taxes on your income. Limited companies pay corporation tax on their profits. Corporation tax is paid after deducting expenses and costs related to goods or services. Corporation tax is often lower than income tax, which aims to help businesses grow and reinvest more funds to grow their business and benefit the country’s economy.
Credibility:
By registering a business, the legal structure establishes a sense of legitimacy and trustworthiness between your customers. Entrepreneurs selling on e-commerce have a lot to prove to gain customers’ trust. With so many scammers pretending to be sellers just to steal from people, it has input fear for customers to easily trust a business that does not have a physical location. With a legal structure and a business address, customers may feel confident and have peace of mind to purchase products from you.
Brand protection:
Selling on an e-commerce platform needs intellectual protection since scammers can use your company name and logo without authorisation and defraud people. This will ruin your business reputation and even lead to a loss of customers. Once your business is incorporated, you can register your trademark to obtain rights to prevent others from using similar company names, logos, and product designs. Business registration makes your business look unique and legitimate.
Protection from legal implications:
Once you register your business, it allows you to operate within the legal jurisdiction of your country. With this, you will be able to comply with legal obligations within your country, such as tax obligations, preventing you from potential legal issues.
Enhanced professional image:
A registered business is always perceived as a professional entity that complies with legal requirements. This enhances the reputation of your business. Many customers and suppliers like to deal with a professionally incorporated business since it can safeguard their interests.
Growth opportunities:
A registered business has a higher opportunity to expand and grow. Sellers can expand to other countries to tap into their market and reach new customers. Having a legal business, you can easily register the business in another country and open an Etsy shop, which will allow your business to create brand awareness and gain a huge customer base as you increase sales.
How to register your business for selling on Etsy?
After seeing all the benefits of a registered business on Etsy, it is right for you to register your business. Here are the steps to register your business for selling on Etsy:
Choose a company name:
The name has to be unique and distinctive from existing names. In the UK, Companies House has set name regulations that entrepreneur should be knowledgeable about before incorporating their company. You can use the Companies House Availability Name Checker to check if the proposed name is available.
Choose a company structure:
There are various company structures an entrepreneur can use to incorporate their business in the UK. As an entrepreneur, you can choose to operate your business as a;
Sole trader: This is a structure where the business owner runs the business on their own. They are in charge of decision-making and operating the business. They pay taxes on their income, receive profits or losses, and are liable for legal implications and debts.
Limited liability partnership (LLP): This is a structure that combines the aspects of a limited company and a partnership. Some or all partners have limited liability. Partners are only liable for their contributions to the business.
Limited company: This is a legal entity that is distinct from directors, shareholders, and business owners. The company can own assets, take loans, pay taxes, and pay debts. In case of legal implications and debts, directors’ and business owners’ assets are protected.
Directors and Shareholders:
Your company must have at least a director and a shareholder. To qualify to be both, you must be at least 16 years of age. A director should not have an undischarged bankruptcy or have been disqualified as a company director. One director must at least be human. A company limited by shares must have at least one shareholder who owns 100% of the company. However, there is no maximum number of shareholders a company should have.
Registration:
To register your UK business, ensure you have a registered office address since it is a legal requirement. You can choose to register your business through the Companies House website or a UK company formation agent.
The business registration process may take 24 hours to start trading. However, if you choose to register through the postal service, the application process may take 8 to 10 days for your company to start trading.
Do I need a registered business to sell on Etsy? It is not a legal requirement to have a registered business to sell on Etsy. However, it is recommended since it comes with various benefits, from a professional image, enhancing credibility, and tax management, to building growth opportunities for your business.
To register with BusinAssist, all you have to do is complete an online application form, which may take 5 to 10 minutes to complete. Once we have all your information and that of your company, we will handle all the paperwork and submit it to Companies House on your behalf.
We also offer bank account and VAT number registration and return services that will help with your Etsy shop. As a one-stop shop, you will get to comply with all legal requirements and still separate personal and business finances.
Do you have any questions about registering your business to start selling on Etsy? Contact us at [email protected].
FAQs
Q: Is Etsy a British company?
Ans: No, Etsy is not a British company. It is an American e-commerce company that connects buyers and sellers.
Q: Are Etsy businesses profitable?
Ans: Yes, Etsy business is profitable, however, the success depends on many factors such as the target audience, product quality, pricing, and marketing.
Q: Can I change my Etsy account to a business account?
Ans: No, you cannot change your Etsy account from personal to business. Etsy does not allow the transfer of shops and accounts.
Q: Can I sell on Etsy without a business license?
Ans: Yes, you can sell on Etsy without a business license, depending on individual circumstances and the local government’s specific requirements.
Q: Can you change your business name on Etsy?
Ans: Yes, you can change your business name on Etsy. To change your business name, you will have to go to the Etsy website
- Click on Shop Manager
- Go to Settings
- Select Info & Appearance
- Click Change next to Shop name
- Enter your new proposed shop name
- Then Save
Q: Do I need a business bank account for Etsy?
Ans: It is not a legal requirement to open a business bank account, but it’s vital to keep your personal and business finances separate.
Q: Does an Etsy shop count as a business?
Ans: Yes, an Etsy shop counts as a business if you are earning a profit and pay taxes.
Q: How to build a business on Etsy?
Ans: To build a business on Etsy,
- Go to the Etsy website, https://www.etsy.com/signin, and register.
- Create an account by filling out your details.
- Answer questions about your business and residency
- Choose your shop’s country, language, and currency
- Input your shop’s name
- Verify your identity using your government ID
- Set up your billing and payment details
- Add listing to your shop
- Market and promote your brand
- Start selling
Q: Is Etsy a good place to start a business?
Ans: Yes, Etsy is a good place to start a business, especially for entrepreneurs who create custom, vintage, and handmade products.
Q: Is Etsy a legitimate company?
Ans: Yes, Etsy is a legitimate company. However, just like any other e-commerce marketplace, there may be scammers.
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The BusinAssist Editorial Team has 15+ years of experience writing about small business and company formation in the UK, Canada, and the USA. We simplify complex processes and provide practical insights to help entrepreneurs succeed.