Legal considerations in a drop shipping business

Drop shipping businesses are expanding all over the world. They are super easy to set up. In the excitement and hurry to start your own drop shipping business, don’t forget that there are a few legal requirements you must fulfil. Fulfil these requirements to keep yourself from any trouble in the future.

Licenses

Any business that sells tangible products requires a number of licenses. Even if you’ll be operating the business from a single website from within your home, you’ll need a registered office location. You will have to decide a business name and get that registered. Then, you’ll have to go to your local county. This will be the county that is connected to the office address that you registered. After getting the country license, you’ll have to get the city license. Unless your registered address is in an area that comes under no city, this license is a must have to operate a legal business. Lastly, you will need a reseller’s license. This will allow you to sell products via drop shipping which is basically reselling in the simplest terms. These licenses can be obtained rather easily. Make sure you keep getting them renewed whenever they expire to steer clear of legal trouble.

Tax ID Number

A tax ID number (TIN) or Employer Identification Number (EIN) is a must have document for any business that is going to hire employees. You might not need it if you plan on running the business on your own. However, we would recommend you to still get one for future safety. This number will be needed for business bank accounts too. You can get your TIN from IRS.

Business account and credit card

A lot of people tend to forget this basic requirement. You’ll need specifically a business account for all your transactions. Opt for a bank that offers online banking for your convenience. Moreover, keep preparing your account to meet the requirements of a business credit card.

IP alteration

Opening a bank account will be troublesome if you’re not a US resident. They usually approve the opening of the account but later on, under Patriot Act, FBAR, FATCA, BSA, and hundreds of other laws, they might close your account. There is nothing illegal about your accounts yet, you may have to suffer loss. You can use VPNs while logging into your accounts from abroad to prevent this issue.

Deposits

After every sale, the ecommerce company you partnered with will deposit money in your account. By default, this money is deposited in your name even though it is not all yours. Overtime, such huge amounts of transactions will become red flags for the authorities. To keep yourself from legal trouble and baseless suspicions, make it clear with the ecommerce platform to deposit money in the name of the company.

Originality

Lastly, make sure in the process of building your own business, you don’t intentionally or unintentionally replicate someone else’s website. From branding to design to aesthetics, keep everything original no matter how hard you have to work.

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