The disclaimer: This section is intended to be a brief and general overview of the steps involved in starting a small, online business. I am not a tax professional, and am not intending to give advice or direction on any legal matters. Please consult a professional tax advisor and do your due diligence prior to making any tax-related decisions.
Ok, if you read the last step then you’re imagining yourself on that white-sand beach, and some attorney-looking dude in a suit just walked by and told you about the disclaimer. Sorry about that. So, let’s talk a little about the next step. Once you have your domain name registered and you know what type of items you want to sell on your web site, it’s time to let Uncle Sam know what your plans are. Please consult a CPA or tax advisor if you’re unclear about any part of this step. Sometimes it makes more sense when you hear someone explain something than it does when you read it (especially if they’re wearing a suit). Either way, don’t be intimidated! I put off starting my own online business for years because I was so nervous about tax obligations, reporting, penalties and the like. Once I jumped in with both feet, I found out it wasn’t so bad after all. All it really boils down to is this. You’re a glorified middle-man. When you sell an item to someone that is in the same state as you, you’re just collecting tax from that customer and handing it to your state’s Department of Revenue on a quarterly basis. Some states don’t even require that since some don’t collect sales tax, so be sure to read up on your state’s Department of Revenue web site.
Getting all the paperwork in place is really very simple. Assuming you’ll start out as a Sole Proprietorship, you:
1) Go to the Internal Revenue Service website and complete form SS-4. What this does is assigns you an Employer Identification Number, or EIN. Even if you have no employees, you still have to do this.
2) Apply to your state’s Department of Revenue website for a Sales Tax Permit. They will require an EIN so be sure to have that step completed first.
3) You don’t have to, but you can also open a business checking account with your company name. It just simplifies things come tax time when all business expenses are separate from your personal expenses.
That’s the worst of it! Not too bad, huh? I told you. From here, you just keep an accurate record of the taxes you’ve collected, and pay them quarterly to your state. You can even pay them online in about five minutes, literally. The most important thing is to be absolutely certain that you collect from your in-state customers, and keep accurate records of the tax totals. Most shopping cart software can be set up to do this automatically, so don’t freak out thinking that you have to keep all these crazy amounts of documentation.
If you want to incorporate or set up as an LLC (Limited Liability Corporation), then I would suggest having a professional company set up your legal paperwork for you. It can be a little tricky, based on which state you live in, and they will keep you on track. One of the largest and most affordable of them is called Legal Zoom. I’m sure you’ve seen their ads all over tv. They offer a basic package for as little as $99. Believe me, with the hours I spent online researching what to file to whom and when, I would have gladly paid Legal Zoom ninety-nine bucks. You can find them by clicking here to read more: www.ACoolKid.com/LegalZoom.php
Well ok… now I have some good news: From here on, it’s all downhill. Well, it is IF you have the right partners in place. We’ll get into those details a little later on. The short version is this: the partners that you choose to provide your drop shipped items, host your store, and all that fun stuff can make or break your new business. This next section is ridiculously important. I’ll show you an eCommerce solution (store) to display your products that is the best I’ve ever worked with, and I’ve tried a lot! So, without further delay, let’s move on to how you get your items on the Internet in Step 4: The Front Line