eCommerce Business: How to Legally Start One

In case you are looking to begin an eCommerce business rest assured that you are venturing into a business that has a promising future. If statistics are to be believed, the number of shoppers online is expected to rise to 230 million by next year.

But, keep in mind that, similar to any business, beginning an eCommerce business requires you to perform research, plan, and do a lot of hard work.

Here are the 7 Steps to Legally Start an eCommerce Business

 1. Writing your business plan: Having a business plan helps in capturing the details of what is entailed by your business and how you are going to operate it. This business plan will serve as a roadmap for your organization guiding you through a startup process and beyond it. Keep in mind that with time, competition, and targets, you will be required to update the business plans. These business plans have to be dynamic documents that will evolve with your organization.

 2. Select the type of business entity: The business structure you have selected decides the personal liability of the owner for the debts, taxes, and administrative difficulty for keeping your organization legally compliant. Some of the usual business entity types are sole proprietorship, limited liability company, corporation, and S corporation. The organizations that will not register with the government for forming a corporation or LLC can be considered to be a sole proprietorship by the IRS for tax purposes.

 3. Registering the business: The business entities are created at the state level. Therefore, the required forms have to be submitted to the government where the organization will be operating from. The complexity and cost of registering a business vary from one state to another. You can also do the company registration online but it is a good idea to verify with the secretary of state to make sure that you are aware of all the requirements. Most states will have the forms available online.

 4. Get an EIN: The long form of EIN is Employer Identification Number and it is a nine-digit number issued by the state or IRS more specifically. This number is used for reporting and tax purposes. It doesn’t matter whether the organization employs people or not, it has to obtain the EIN. Almost all financial institutions need the EIN before opening their business accounts. Even multi-member corporations and LLCs are required to have the EIN. The partnership businesses also need the EIN for filling the distribution forms.

 5. Setting up your credit and bank accounts: One of the more difficult missions for a business is keeping the business funds away from the owner’s funds. This not only makes your bookkeeping less confusing but, it also helps in showing the courts that this organization is a separate financial and legal entity. This reduces the liability risks the owner has to face if the business is sued or runs into financial problems.

 6. Obtaining business permits and licenses: Similar to brick-and-mortar businesses, the eCommerce business has to obtain the necessary permits and licenses for operating legally. These requirements keep on changing depending on the organization’s location. For finding out what permits and licenses are required, the business owners have to check with their local bodies. Keep in mind that there is a certain gray area between state sales taxes and eCommerce sales in the state lines.

 7. Be ready to stay on top of the legal business compliance responsibilities: After you have started your eCommerce business, you will be required to fulfill some ongoing compliance obligations. Some of these responsibilities are universal for all kinds of organizations. While the others depend on business location, type of products, industry, and business structure. Being late or failing to comply with these responsibilities will result in penalties, fines, and it can get worse.

 Conclusion

You need to begin your eCommerce business on the right foot. You can get in touch with professionals to get assistance for all the formation settings of your business. They can make sure that the paperwork is accurately completed, and is done affordably and fast.

Even after the launch and growth of your organization, these professionals can help you out all the time. They are especially useful with compliance requirements.

I trust that you find this info about starting your eCommerce business legally useful. Feel free to leave a comment below.

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