Post a new topic
    6 Replies Latest reply on Dec 30, 2007 12:41 AM by moogrdotcom

    eCommerce and the Law

    brooksyerpus Newbie
      I'm not sure whether to post this here, or in Legal and Insurance... so I'll post in both =-P.

      I'm about to launch my online business, but I'm not entirely sure if I need to register my business name, get a tax ID, or get a business license.

      I know most eBay sellers don't do any of the three.

      What's making this a hard decision to make is the fact that I'm starting really small, but plan to expand pretty rapidly over the next 2 years. At first, my sales will definitely be falling underneath the scope, if you know what I mean. In other words, I expect to sell about as much as an eBay hobbyist for my first month or two. Can I wait for a month or two before going about the system by the book, without facing any kind of penalty? Will it effect my ability to write off start up costs in the future?

      The second part which makes this an odd problem is I'm not selling through eBay, but rather an embedded shopping cart. All information I've found regarding SMALL businesses selling products online has been specific related to eBay, so I'm not sure if it also applies selling elsewhere on the web. I don't see why I would make any difference?

      Anyways, if you have any questions let me know :-)
        • Re: eCommerce and the Law
          Lighthouse24 Ranger

          My suggestion would be to 1) form a sole proprietorship by filing a DBA form with your county clerk, 2) apply on-line for an Employer Identification Number, 3) take those and open a business checking account, 4) apply on-line for a state Sales Tax and Use permit, 5) open a PayPal account under the business name. In most areas, you can do all that in a half a day, and costs are minimal.

          By doing this, you gain certain benefits that come from being in business, and you keep your personal finances separate from your business finances (making the management of both easier). It also helps you keep your personal data private (while some of your business information necessarily has to be public). Another compelling reason is that many cities, counties, and states are now creating task forces to aggressively go after on-line sellers who are not collecting and paying sales taxes. Obviously, a person selling a few personal items on ebay isn't a "business," but anyone who repeatedly engages in an activity with the expectation of making a profit IS, by law, a business. Taxing authorities know that a lot of these business have been sidestepping sales taxes, and they're going after them. You'd have no such problem, however, because your business name, EID, address, permits, tax payments, bank account, etc. would all match up in everyone's records.

          Bottom line: If you intend to be in a legitimate business, then start off right -- as a business. Hope this helps in your decision. Best wishes!
          • Re: eCommerce and the Law
            LUCKIEST Guide
            Lighthouse has good advice. Every person going into business should have both an Accountant and
            a Lawyer on retainer.
            Also if you about to launch your business you should WRITE A BUSINESS AND MARKETING PLAN.
            Visit SCORE Virtual Learning Center online (IT IS FREE) at "www," SCORE has 26 online
            Good luck, LUCKIEST
              • Re: eCommerce and the Law
                moore83 Newbie
                I agree with some of the the advice you were given. I strongly agree with your need for a good attorney and a good accountant. I find this is the most difficult part of having a small business, having access to the proper resources to protect yourself while you grow your business. I would suggest getting much needed advice at and you can get information you need. The service was designed for small business owners and you can join the other 48,000 business owners who are members nationwide enjoying this service. Use the group buying power to save on your companies attorney fees as you will automatically as a member of the service get legal consultation, legal correspondence, help with debt collection, contract review, and you have access to a organization of business consultants from a company that was put together buy Fran Tarkenton. You can ask a business consultant the same question you asked above and get a detailed answer back from a consultant who has over 20 years of experience in start up envioronments, and will give you a customized researched answer.
              • Re: eCommerce and the Law
                moogrdotcom Adventurer
                Honestly, this is what i would do.

                1. Incorporate - LLC/C/S-Corp. Do the math for what works best. Its not as scary as you think.
                2. Get your EIN - free
                3. Get your reseller certificate - free
                4. Open a bank account - cheap/free - major bank. Don't skimp out on this.
                5. Open a savings account with the same bank as your checking account
                6. Open your paypal account and link it to the SAVINGS (or if you don't want a savings, open a secondary checking account)
                7. Get a business number. I use voice over IP but some people just get a forwarded number from verizon tot here cell phone. You basically want a service that will get you directory services/411 listing so they can validate your phone to an address.
                8. get your DUNS number - fill out the online duns form and state that you are interested in bidding on government contracts. Don't fall for credit builder bs, just state you want a number for bidding on government contracts and leave it at that.
                9. Open up some net 30 accounts with Reliable, Quill, Nebs & rapidforms. Order checks/deposit slips from and pay the net30 immediately. Order some office supplies from Reliable or Quill as needed and pay the net 30 immediately. This will help you establish a paydex score
                10. Use Microsoft small business accounting free version if you have to, but track everything. Look at your P&L (profit & loss), track your ebay/paypal fees and use these types of tools to grow your business.

                I say to do these 10 steps because even if you do do baby steps of a few hundred bucks a year or a few hundred a month it builds business credit that you can leverage should you make it big without having to worry about how you can have credit when you make it big. If after 12-18 months your business is in the black and making money you should have no problems expanding into business credit cards, business lines of credit and whatnot and eventually migrate to your own ecommerce system or implement on other sites such as and ubid and whatnot.

                i guess my response, is don't sell yourself short. If you're looking to go into business to be in business - do it right!

                As far as the paypal goes, i say link it to your secondary account so if anything happens you won't loose anything in your primary checking account - chargebacks/fraud/fees/paypal annoyances can hurt you but your better off if you can manage them. If you do a decent volume on ebay remember to re-negotiation your rate so you can get down from 2.3% to 2.2 2.1 or all the way down to 1.9% (online - non card holding transactions)

                oh yeah.. be sure if you open an ebay store to ask them to verify you in advance. they froze my store 5 days before christmas because i did 20k/sales that month and they wanted to verify me. they never did anything and it just worked again - 3 days after christmas so i sat on a bunch of inventory that would have made some serious cash but you live and learn