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    10 Replies Latest reply on Sep 7, 2008 2:39 AM by bittybabys

    Help with Online business Issues

    Mounika Wayfarer



      I started an online art gallery in US for the Indian artists. They can sell their paintings on my website and I do all the advertising and promotion work for them (I m not reselling any item here) and I get commission when their Art is bought on my website. Art is to be shipped directly to the buyer in US from the seller in India, not to My shopping cart, register and sign in pages are secure, safe and perfect to use and I m still working upon the main webpage look. My business checking act is ready too. I haven't activated my merchant account yet because of some issues like


      1) I want to make my business more trustworthy and legally stronger.


      Right now it's under sole proprietorship and I have not registered anything related to my business with the CA GOV yet but would like to do it for the reason stated above. Do I stick to Sole Proprietorship for now since it is just few days old and change it in future depending on its success or register it as LLC or INC now itself. Do I need any license, permits etc for my virtual business? Do I need to register my DBA name? (I have my SSN).


      2) Taxes


      Is it better if I collected the taxes from my customers and do the administrative work, or leave it to my customers by clearly writing in my terms and conditions and Invoice that they are liable for taxes even if I haven't collected them?


      I would really appreciate if some one could help me. I m open to all kinds of suggestions and experiences.
        • Re: Help with Online business Issues
          LUCKIEST Guide
          Mounika, Welcome to this web site and good luck with your online art gallery.
          Where are you located?? like City and State??

          1) I want to make my business more trustworthy and legally stronger.
          Sole proprietorship is the most common form of business organization.
          To register go to " " and register and get a Federal I D Number.
          You do NEED to register your DBA name if you are going to use it.

          2) Taxes Everybody in business should have an Accountant, A Lawyer and
          Maybe an Insurance Agent.

          Do you know about SCORE?? SCORE is FREE and helps you succeed.

          Again good luck, LUCKIEST
          1 of 1 people found this helpful
            • Re: Help with Online business Issues
              Mounika Wayfarer
              @ Luckiest


              Hey Thanks a lot for the info. I m located in Sacramento, CA. Yes, I m looking forward to getting an accountant for my business but Lawyer I haven't thought of yet because I heard they are quite expensive, right now I don't think I can afford, so right now I m relying only on free resources for Legal advice. I will surely check out SCORE.
            • Re: Help with Online business Issues
              Lighthouse24 Ranger

              Welcome to the community. Others will disagree, but I'd stick with the Sole Proprietorship for now -- because it is simple and inexpensive. (You can always change to an LLC or corporation in the future, when you're certain the business is viable and when the structure you need becomes more apparent.)

              In California, you register a sole proprietorship by filing a Fictitious Business Name Statement (DBA) with your county clerk-recorder (cost varies by county, but will probably be less than $30, and may include a search fee to confirm that your business name is unique).

              After the business is registered with the county, you can then apply for a federal Employee Identification Number (EIN, also called a Tax ID). You can do this on-line for free. It is better to use an EIN than your SSN for business -- both for your own personal privacy/security, and so you can begin establishing a separate history/identity as a business entity.

              Once you have filed with the county and obtained an EIN, you can open a business checking account under the business name and identity -- which is a good idea for the same reasons as above, plus it's easier to keep your business and personal finances separate if the two entities have separate bank accounts.

              When you have the EIN and a bank account, you'll apply for a Seller's Permit. Under California law, you are required to obtain a seller's permit if you are engaged in business (i.e., you're selling something to make a profit) and you intend to sell items that would normally be subject to sales tax if sold in a retail store. You are required to collect sales tax on purchases made on-line that are shipped to customers with addresses in California. You are not required to collect sales tax on items shipped out of state. (It doesn't sound like you'd be need to collect any other special taxes on sales, like excise taxes, for example). You can apply for the seller's permit on-line, by mail, or in-person and the cost is free -- but a tax deposit is sometimes required (it probably would not be for your type of business).

              This may sound complicated -- but you can do generally do it all within a few hours on one day -- and then you'll "officially" be in business. I think California allows 40 days from the time you start selling something to actually register the business and obtain a seller's permit.

              Hope this helps. Good luck with your new enterprise!
                • Re: Help with Online business Issues
                  Mounika Wayfarer

                  @ Lighthouse24


                  Thanks for the advice. I will surely follow these steps. There is just one thing I m still not clear about, that would be my role in business terms. I m not reselling anything here, I m just bringing the seller and buyer at one place ( my website) so what am I ? am I still a reseller or retailer or wholeseller even if I dont see or store the products ?
                    • Re: Help with Online business Issues
                      Lighthouse24 Ranger
                      I assume you're not running this operation at your expense -- so how does your business generate revenue (how do you get paid, who pays you, and what do they pay you for exactly)? If you can explain that, it might help me clarify your role and tax obligation. Thanks.
                        • Re: Help with Online business Issues
                          Mounika Wayfarer

                          My VC is my husband :) ...he helped me set up my business. My friend who is a financial analyst is helping me define my finance structure that includes prices, commissions etc. For now I m not charging the artists any registration fee ( or call it advertising fee or membership fee ) they can put up their Art pieces for sale on my website for free and once my fee structure is defined, I will be charging my clients accordingly. My business is just few days old and I m learning day by day.

                          Who pays you?

                          How do you get ?
                          when an art piece is sold say 1000$ I will be paid 30% of $1000 by that piece seller, i.e , When the customers tranfers the money into my bank account, I keep the 100% in it untill the customer recieves the art piece and is happy with it after that I will debit 70% of the total to the artist and keep the 30% commission.

                          what do they pay you for exactly ?

                          For now getting their Art sold on my website. I have lot of advertising ideas where in he/she might pay me for advertising, as I said it is still under the process of getting defined.

                          I hope it was clear enough. If you still need to understand better you can check this website ..... .... basic operation is similar to it.

                          Thanks a lot for the interest.
                            • Re: Help with Online business Issues
                              Lighthouse24 Ranger
                              The "test" is whether or not a piece of art is ever in your business' physical possession (i.e., such that you are delivering or shipping it from your business to the buyer).

                              If the artwork is in your physical possession at the time of sale, then you are a "consignment seller" and are responsible for collecting sales tax for any item purchased on-line that is shipped to a customer with an address in California (you are not required to collect sales tax on items shipped out of state).

                              If the artwork is never in your physical possession, then you are a "broker" and are not responsible for sales tax. If you're the broker, the actual "seller" (in most cases, the artist or gallery that has the actual piece) is responsible for collecting and reporting sales tax on the purchase, not you. (If the seller fails to do that, it is the California "buyer" who would be obliged to report and pay use tax on the purchase -- again, not you).

                              The website you noted seems to serve as a broker (where the artist or gallery, not the site owner, is in possession of the artwork and handles the shipping/fulfillment when a piece is sold). If that's correct, and your site would be similar, you would not need to collect sales tax.

                              Hope this clears things up. Best wishes.
                                • Re: Help with Online business Issues
                                  Mounika Wayfarer

                                  @ Lighthouse24


                                  Thank you very much for taking time to explain everything so clearly, I really appreciate it. This has cleared one of my major confusions.

                                  Thanks once again.

                                  Best regards


                                  • Re: Help with Online business Issues
                                    bittybabys Newbie
                                    I agree with Lighthouse24, and as a former employee of both the IRS and the State of California Franchise Tax Board, make sure you are clear about your role. If it turns out you don't have to collect sales or use tax- great. Keep in mind, however, you may need to pay estimated income tax each quarter to both the Feds and the State. There are calculators on each website to see if you are liable. I agree you should remain a sole-prop until you outgrow that designation. Also, has relatively inexpensive SSL certificates to make your website more secure which would provide confidence to the customers. I saw you had a link to SSL certificates, but I didn't see that your site is protected. Truthfully, you probably could hold off on a merchant account until you see how profitable things get. PayPal is pretty widely accepted for Visa/Mastercard, and you can put one of their "pay now" buttons right on your website. Finally, invest in a good accounting software. I use Quickbooks, but there are many other out there- including free (open souirce) ones. Even if you have an accountant, you will still need to be aware of your financial status. The IRS could care less that you left everything in the hands of an account. The one who signs the tax return is the one culpable in their eyes.