While it is true that setting up an online business can be done in an afternoon and that is certainly part of the attraction, there are still some official steps you can’t avoid.
There are obviously vastly different types of online businesses ranging from affiliates who earn money by “selling” space on their blogs and websites through to businesses of all shapes and sizes offering goods and services. Determining how you are going to collect the money will dictate how you should set up the legal and financial side of your online business.
Registering with one of the leading payment processor companies such as PayPal or Stripe is a simple way to get going quickly. Both charge you a fee for every transaction as well as a percentage of sales as well as a monthly fee.
Payment processors allow you to sell and collect money on your website. They facilitate this for you by accepting the funds from your customers, on your behalf, directly as they checkout. Once their processing costs have been deducted from the funds collected, you can log into your account and withdraw those funds by transferring them to your bank account. You can also usually set up an automatic direct daily/weekly/monthly payment.
And so, if you are going to be earning money this way then you will need to ensure that you have considered the various regulations that apply in your country.
Following are some of the main considerations.
How will you be trading? It would pay to get some advice on this decision. Setting up a company is costly and in many cases not really necessary. It is also something you can do at a later stage.
But if you are going into this business with a business partner then I would strongly recommend that you get advice on the best way to structure the business because in so many cases, it’s the structure that lets a partnership down when and if the wheels fall off.
For a sole trader and a small business, just getting started is a challenge and setting up a company may not be necessary for some time. After you get some advice you may find that setting up as a sole trader is the cheapest way to get started and you can set up something more substantial when you find you are earning some decent cash.
But please be warned, no matter which kind of business you are planning to set up, attempting to do so without going through the appropriate authorities can land you in all sorts of trouble down the track.
Do not set up an online business hoping to avoid declaring income to either the welfare or the tax authorities or to any other the appropriate governing authorities.
Registration with the relevant authorities
Every country has its own authority governing the conduct of its businesses. You must find out what is required in your particular country. In the US you could start with the Small Business Association website (www.sba.gov) and find out which federal and state bodies you need to be registered with and which permits and licences you require.
In Australia, the Australian Government website (www.business.gov.au) provides information on registration for an Australian Business Number and in the UK you will find everything you need to know on www.uk.gov.
Before you go any further you must do this step. You must find out what is required in your country in terms of registration, permits and licences. Some of these official steps can take time so get them underway as early as you can.
Tax: It is worth getting advice on this step from someone who knows your local tax requirements. Your accountant or financial adviser should be able to advise you here.
It is important to ensure you get this right from the start.
If you have a sales tax in your country you will need to know if you need to charge sales tax on the goods or services you are planning to sell.
There are strict penalties for someone who doesn’t pay their taxes so don’t get this wrong!
With respect to product registration, compliance and approval, you will need to ensure you check which authorities you will need to approach.
The following is by no means comprehensive. There are literally hundreds of these authorities all over the world. Check the requirements in your country, but please don’t ignore this step. The fines and penalties can be huge and always remember, in Australia at least, ignorance of the law is not a defense!
For importing or manufacturing food items, cosmetics and health products and supplements you will need to check with the US Food and Drug Administration (FDA) the Therapeutic Goods Administration in Australia (TGA), National Industrial Chemicals Notification and Assessment Scheme in Australia (NICNAS). If you are importing electronic goods you will need local certification for example in Australia you need SAA Approval. You will also need to know and understand your local customs, trade and tariff requirements.
Business bank account
Any online business by definition must be able to take money via an online interface and for that you must have an appropriate bank account. At this point it would be wise to call your bank and find out what their requirements are to allow you to accept payments online. Unfortunately depending on your bank, this may not be a simple step.
In Australia, the NAB is the only Australian bank that will allow you to set up an international bank account. There are plenty of international banks operating in Australia and in every country that will set up international accounts. So it would pay to do your research on this before you set up your business bank account, especially if you are planning on accepting a currency other than your local currency.
Of course, you could just start off small and open up a business bank account with your current bank, accepting your local currency only and expand later.
When setting up a business bank account you will probably have to show your business name registration documents so be sure to have done that first.
Further Reading:
If you are selling on Amazon.com and you are not living in the United States, here is some advice on how to receive the money you make on Amazon.com: