If you're an online retailer, chances are that you want to sell your products in the United States. The process is not as straightforward as it may seem, and it's often a complicated task that requires the help of a qualified US-based legal pro. In this post, we'll go over the main steps in setting up your online store to run legally within America and register with all the relevant agencies so that you can start selling like a pro in no time!
Starting point
A legal online store is a big investment that requires a lot of effort and planning. So, if you're new to the business, you'll need to do plenty of research and plan everything properly before you jump in!
Here are some of the key things to consider:
- How much money are you willing to invest?
- What kind of products would you like to sell?
- Where would you like your online store to be hosted?
- Do you want US-based customers too?
- What's your US marketing strategy?
When it comes to marketing, there are two main ways that people go about it:
- 1. Using social media
- 2. PPC In the first case, there's a simpler process of setting up an account. You'll need to choose a social network that suits you best, like Facebook or Twitter, and then create your account. Next, you'll need to create a business profile and add the details of your online store.
With this in place, it's easy to register a business in the USA - you'll be able to start advertising your online store immediately and even get promoted by the social network itself!
However, if you take our advice and decide to go with PPC marketing, things aren't as simple. You need to set up a merchant account, which requires a lot of paperwork and documentation. This process will take time and require that you keep following the guidelines of the company you're setting up an account.
In any case, you'll need to set up a merchant account, which involves filling out all kinds of forms and submitting them to your hosting provider. Your hosting provider will be in charge of managing all the required information about your website (the customer's name, shipping address, etc.) so that they can provide you with the right tools to sell your products online.
Finally, certain agencies monitor retailers throughout the whole process of setting up an online store.
Step-by-step Process
To run an online store that's operating within the law, you'll have to take care of the following:
1. Register your entity name
Every business is based on an entity name. The name you choose will be used to identify your company in various ways, whether that's through federal agencies, bank accounts, or even as part of your domain name!
You'll need to consider a few things while choosing your entity name:
- What's the purpose of the company? For example, if you're going to be selling cosmetics and make-up products, it will make sense to use a cosmetic brand.
- How would clients contact you? Do you have a phone number or email address?
- What are your legal requirements? If you're going to open an online clothing store, it's best to choose a brand that fits in with this kind of business.
2. Apply for an EIN
An EIN, or Employer Identification Number, is a tax ID number used in the United States for businesses and corporations. It's a unique nine-digit number that identifies your business and allows you to file taxes appropriately.
To obtain an EIN, you'll need to:
- 1. Apply online at the IRS website
- 2. Use a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- 3. Provide information about your business's owners, partners, and any employees
- 4. Enter financial data such as your company's bank accounts You can do this on the IRS website or by contacting their agency directly.
3. Register for your state
Each state requires you to register a business with them so that you can run your business legally in that said state.
For this, you'll need to:
- 1. Create a website or register a domain name that includes the name of the state where your business is based
- 2. Choose an address in the required state (in this case, it's California)
- 3. Appoint a resident agent
- 4. Apply for a sales tax permit
- 5. File annual reports every year
4. Apply for an online business license
The online business license application is another necessary form that all online retailers need to go through to run their businesses legally. There are different options available depending on the type of company you're running.
To go through the process, here are some of the things you'll need:
- A valid name and address
- An annual report (if applicable)
- Proof of tax residence (i.e. a valid SSN or ITIN)
- Several copies of documents that prove your relationship with the company such as partnership agreements and shareholder power of attorney
- Other supporting documentation such as a written description of services, and business plan - The completed application form
- A check or money order in the specified amount (you can pay via postal mail)
Regardless of the type of business you're running, the process is similar. You can either fill out an online application by logging into your account or you can submit it by fax. Keep in mind that you'll need to fill out these forms once a year to maintain your online store's operating status.
5. Register with the state's tax office
To operate your business, you'll need to fill out a business license application. You can get one from your local or state tax office or by contacting the National Association of State Board of Equalization. This will allow you to run your business legally and help you avoid any penalties for running an unlicensed online store.
6. Apply for a sales tax permit
Every state requires that you register for sales tax permits to complete sales! Whether you sell physical products or digital products, completing this process is mandatory if you want to sell online. This helps protect your business from potential audits and penalties from the IRS.
7. Register with payment processors
A payment processor is a third-party company that's in charge of collecting money for your business. This will require you to make sure to get an agreement in place before setting up an account.
To complete the application process, there are a few steps that you'll need to take:
- Create a merchant account
- Provide proof of sales
- Provide proof of tax residence (i.e. use either SSN or ITIN)
- Provide information about your customers
- Submit the business license application!
Conclusion
There's a lot to learn when it comes to operating a business online, especially when it comes to taxes, sales tax permits, and payment processing. While it may seem like a lot of work at first, many virtual payment agencies can help you keep your online store in line with all federal regulations. They'll help you through the process and make sure that you get everything done on time. Start selling right away!
