Your Business, Get Legal or Get Cheated

Are you an Online business owner, or do you just "play one on the Internet"? There is a difference, and that difference will hurt your business.

As I've said several times so far, when you sell products online, just like anyplace else, you need to be Sourcing those products from a direct Wholesale Supplier. Most of the time, that's a Factory-Authorized Wholesale Supplier. If you're not, you're paying middleman markups that chip away at your profits until you're barely making enough to pay your hosting fees. Sometimes I think that there are more middlemen online than there are Ecommerce sites, and they're all targeting YOU!

Here's a scenario:

John Doe wants to open an online store, and make lots of money. He's seen all the news items about Internet millionaires. There are pictures of some of these people in the news and online, and some of them seem to be one sandwich short of a picnic.

"If they can do it, so can I!" he thinks, and starts to search around online for mmore information on starting a business. John is luckier than most; he comes across a good store provider early in his search, and realizes that he can set up an online store quickly and easily. All is right with the world!

Only one thing left; what to sell?

John looks around online for product Suppliers. He comes to our site, sees our Directory of WBI Certified^TM Wholesalers, and realizes he's found legitimate sources for millions of products from real Wholesale Suppliers. Then he realizes that he will have to have a Tax ID number to buy from these Suppliers, because they are LEGITIMATE.

"Yechh!" thinks John. "Tax ID number?" That sounds like work. Worse, it sounds like LEGAL work. That's a scary thing to most people, and John is one of them!

A little more searching and John finds a site called "Stuff's R's Us". Stuff's R's Us is screaming at him: "Thousands of wholesale products you can sell on your website! NO investment for inventory! We send each item right to your customer! No shipping, no handling products, no minimums! Sign up for our FREE TRIAL and we handle everything! This is your road to Online Riches!"

Well, that's the road John was looking for, alright, so he happily sends his name and address to Stuff's R's Us along with his sign-up fee. Suddenly he can put all kinds of products on his web site, and all he has to do is email his orders to Stuff's R's Us, and they handle the rest. No paperwork, no hassles.

John is creating a new Online millionaire, all right. No doubt about it. Unfortunately, it's not him. It's Stuff's R's Us.

Stuff's R's Us is a middleman. They sit between John and the REAL wholesaler. Every time John places an order with Stuff's R's Us, they turn around and place that same order with the real wholesaler, who sends it to John's customer. John never knows this is happening.

Stuff's R's Us is marking up the real wholesale price to John. John will piddle along selling the same over-marketed imports as thousands of other Stuff's R's Us clients, at over-inflated wholesale prices.

Stuff's R's Us thinks this is great, and they're laughing all the way to the bank.

So, where did John go wrong? What did he do to unwittingly get stuck in Ecommerce's biggest trap, the "middleman rut"?

It's simple. He took the easy way out when searching for a supplier. Stuff's R's Us said, "We'll handle everything", and John said..."Hmmm, that sounds easy!" So, instead of bothering to do some simple legal paperwork for his business, John let Stuff's R's Us cheat him out of most of his profit, because it was easy.

Please remember the following two statements:
1.) You MUST work DIRECTLY with REAL Wholesale Suppliers to be truly successful online (and offline!).
2.) You cannot buy from a REAL Wholesale Supplier if you are not a LEGAL business.
Let me repeat that last one, for those who may have their music turned up too loud:

YOU CANNOT BUY FROM A REAL WHOLESALE SUPPLIER IF YOU ARE NOT A LEGAL BUSINESS!

ANYONE who allows you to purchase wholesale products for resale without legal business paperwork is NOT a real wholesaler, and is taking profit that should be yours.

As you know by now, we created our Directory of WBI Certified^TM Wholesalers & Dropshipping Wholesalers. It helps entrepreneurs like John find and contact real wholesalers that will work with Home Based Online Businesses. Every once in a while, we get an Email from someone who says, "Wait a minute, I don't have to go through all this legal stuff to use the suppliers YOU list. I can just go to Stuffd's R's Us and do it the easy way!"

I have no doubt that Stuff's R's Us finds this absolutely hilarious. Getting legal is not that hard. Don't listen to the people who tell you that you don't have to do it.

Here are the basics (in the US):

1.) File your Business Name - You need an official business name that's recognized by your state government. You can do this one of two ways.

 A.) Corporation: You can file a corporation with your State. All States in the US have sites where you can get information on this, and in many cases actually file your business papers online.

 B.) Fictitious Name (or "DBA"): This is a simpler way to register your business, but it does not afford you the protections that a corporation or LLC does. This doesn't cost as much as a corporation. In some States, this is called a DBA (Doing Business As), and is obtained from your local County Office building for a minimal fee. ($50 would be an average).

If you're not sure which way you want to go, ask an attorney or accountant. There's got to be one in your family somewhere, right? :o)

2.) Obtain a "Tax ID" - In almost every State you are required to have a Tax ID. Some call it a Sales and Use Tax Certificate, some call it a Seller's Permit... it's the same thing. It allows you to collect Sales Tax on sales you make within your own State. In Florida, we can get a Tax ID fairly quickly. We must again show our Business Entity papers. This is done at the local State Tax Office. When you buy from a wholesale supplier, you will be asked to supply them with a copy of this certificate. They use it as proof to the IRS that they are not required to charge you tax on the products they sell you at wholesale.

3.) Open a Business Bank Account - If you're going to do business, you must have a business bank account. You'll need your Business Name papers first. And remember, almost all banks offer business accounts.

4.) Open a Merchant Account - The last thing you need is a Merchant Account. You'll need everything you obtained in the steps above for this one.

A merchant account is the thing that allows you to accept credit cards from your online customers. Without this, you'll get nowhere. Online buyers are instant gratification junkies. They want it NOW! If they have to mail you a check, they'll go somewhere else and buy. Merchant accounts used to cost a thousand dollars and more to set up. They've come down a LOT. The Merchant Account will collect funds from your customers' credit cards, and deposit those funds in your business bank account. The Merchant Bank will charge you a percentage of the amount you charge your customer's credit card, plus other fees they will outline for you when asking about an account.

You can also use your Merchant Account to sell on eBay, of course.

There are also a couple of ways you can accept credit cards online without opening a merchant account, like PayPal.

Well, there it is. That's the "business end" of an Online business. Sound complicated? It isn't, really. Just take it step by step. Don't let a few pieces of paperwork stop you!

As I said above, these are just guidelines. Some states may require an additional license, such as the inexpensive "Occupational License" used here in Florida. When you set up your Business Name, they will tell you if you need anything like that. If you have questions, please consult a professional.

Getting legal is not hard, and the benefits are tremendous. Don't make money for a middleman; make it for yourself!