eBay selling is often discussed as if it were a simple "start immediately" kind of business, and in some ways, it can be—but if you're serious about eBay selling and long-term success, it's important to treat your eBay selling as a business. If you're not already an entrepreneur familiar with the ins and outs of starting a business, here are some steps to start you off on the right foot.
Register a New Business
In most areas, becoming a business is first and foremost a matter of registering with the authorities in some way. In the United States, this entails getting a business license, which usually involves an annual fee paid to the local authorities, and collecting and paying taxes as a business.
Most beginning sellers who are serious about selling will choose either to become a sole proprietorship or a limited liability company (LLC). Many beginning eBay sellers wonder whether there is any point to this step, particularly when it leads to additional accounting complexity and the obligation to collect sales tax for local sales and similar issues. The fact is that in many local jurisdictions, you are legally obligated to obtain a license or register a business operated for profit.
There are also important disadvantages that you'll suffer if you don't register your business. You won't be eligible for business banking accounts. You won't be able to write off any business losses you experience on your taxes and you won't be able to source directly from wholesalers at wholesale prices.
There's more to registering a business than making the decision to do so and filling out the paperwork that follows. There's generally a decision to be made about the kind of business you'll become. For some, a sole proprietorship or partnership will be appropriate, while for others, an LLC or even a corporation of some kind may be more appropriate. Consult your local government offices for requisite forms and preliminary advice, but if in doubt, consult an accountant, tax preparer, attorney, or another expert to help you decide on the business structure or organization that will best suit your needs.
Segregate Your Business Finances From Your Own
For accounting and tax purposes, you must segregate your business income and spending from your personal income and spending, even if you are operating as a sole proprietorship. This can be easier and cheaper to do than you might imagine. Most banks and credit unions are able to offer simple checking or other kinds of accounts in DBA (doing business as) form. In many cases, these are the same products (i.e., types of accounts and fee schedules) available to individual account holders.
Thanks to eBay's close association with PayPal, successful selling on eBay rarely requires a merchant account of the sort required to accept credit cards directly or the rental of any related equipment. Instead, PayPal can play an intermediary between banks and businesses for transactional purposes.
It's still important, however, that you operate your business using your business account rather than your personal account, and for sellers that become involved in large wholesale purchases or international (import/export) kinds of transactions, you should communicate with your financial institution about using letters of credit (LOCs) rather than checks or other forms of payment for major sourcing expenses.
Consult a Tax Specialist
Because the U.S. tax code is often both difficult, uneven, or unintentionally unfair, it's important to consult and continue to work with a tax specialist as you launch and grow your eBay business from the very beginning. A tax specialist can help you to comply not only with federal and local tax requirements, but they can also help you to make critical decisions about investments, business organization, expenses, and other day-to-day business operations choices. This is especially true for "novel" kinds of businesses like eBay selling and other online businesses—especially in this era of rapid regulatory change.
Get a Business Address or P.O. Box
Another step that is often considered optional by new sellers is having a business address or P.O. box, but this can be important for several reasons. For starters, it protects you and your family's safety by protecting your home from being located by dissatisfied customers with mal intentions. Many sellers shrug this kind of worry off until they receive their first death threat, either from an unhappy buyer or a competing seller; then they quickly wish that they hadn't broadcast their home address around the world with each sale.
There may also be zoning and business operation concerns. Many localities restrict the kinds of activities that can be legally carried out by home businesses in residentially-zoned areas. These restrictions can include restrictions on the number of shipments (even small, individual package ones) arriving or departing from a location and restrictions on the amount of incoming and departing automotive traffic—even if that traffic is your own.
Depending on the kinds of office space, business space, or other kinds of small business space available in your local area, you may find that it's much cheaper to get set up with broadband, a telephone and fax number, computing and printing facilities, and shipping/packaging materials and pickups at an existing office space or shared office location than it is at your own home.
While it is possible to be a successful online seller with a very slow online connection, it certainly puts you at a tremendous competitive (and psychological) disadvantage to be constantly frustrated by slow connections that leave you a fraction of productive as you'd normally be. To get things done, broadband is a must. For most sellers, the realities of customer service and wholesale sourcing will mean that a separate business telephone and fax number will be essential, particularly as the business begins to grow. Though you can start out pre-growth using your own home telephone and fax, once others have your home phone and fax numbers as your business numbers, it can be almost impossible to get them to switch to dedicated lines later on.
For most online selling businesses, having a dedicated website is a must for real growth to occur, particularly on eBay, where old transactions become unavailable to both buyers and sellers after just 90 days. Having a website gives you an address that repeat buyers can bookmark, a space to include product documentation and other customer services, contact information, and another platform to sell.
Most inexpensive web hosts around the country can offer both a domain name and for a nominal monthly or annual fee. eBay Stores is also a great alternative for those who want to stay within the eBay family and not have to navigate technical decisions or tasks. Don't be tempted to mix your personal and business email communication together; this is a recipe for disaster for many reasons. First and foremost, most personal email addresses just don't seem very professional (firstname.lastname@example.org), particularly when compared to an email address at, for example, your web hosting company (email@example.com). Also important is the increased chance of missing critical business communications when they're spread throughout your personal mailbox and the increased difficulty in searching for and finding business email messages from the past.
There's More to Do
Though it may sound like a lot, it's really not much when compared to the long-term complexity of running a successful business, even if that business happens to be on eBay. If you're balking at these steps, it's probably worth asking yourself whether you're cut out to become a serious independent business owner anyway. If you can get these things done, you've positioned yourself to take a serious crack at starting and growing an eBay selling business where the sky (and your own patience and determination) are the limits.