I’m planning to start up my own e-commerce business. Do I need to file anything or apply for something with the government to declare the store as a new company?
In short, no. However, to fulfill my obligation as your Small Business Advisor, I should explain both the basic nontechnical and technical issues you should address before opening that store.
The nontechnical matters are easily addressed through a host of support agencies and Web sites. They include the following:
- Your legal business structure — your options include sole proprietorship, corporation, a limited liability company (LLC) and partnership. Your primary concerns will be liability and taxes. Locate a lawyer who specializes in these matters, explain your intentions and proceed accordingly. Your accountant should be able to help you here as well.Nolo.com offers explanations of each business structure, and lists the advantages and disadvantages of each.
- Business plan — please take the time to plan this new venture. A business plan, properly developed, will likely save you time, money and prevent mistakes many people make in the startup process. The Small Business Administration offers an excellent outline.
- Occupational licensing — Practically every city and county (parish) government in the United States requires businesses located in its jurisdiction to purchase an annual occupational license. Frankly, in my opinion, this is nothing more than a source of government income for which you get nothing in return. Regardless, you need the licenses to conduct business in that location, and some governments are very aggressive when it comes to collecting that money.
- Sales Taxes — Every state has a department of revenue, which is charged with collecting sales taxes. Any item you sell inside your state requires that you collect a sales tax. Typically, you are required to make quarterly reports on these sales and make payment to that state agency (if your revenue reaches a certain amount, you may be required to file monthly). Take the time to learn what your state requires. For example, some states do not require sales taxes on all Internet sales. Others require the sales tax on all items sold in the state, online or off. Go to Vertex to get a state-by-state summary.
There are many others issues to consider, but the four listed above provide the foundation on which to begin the process.
Let’s Get Technical
As you would expect, technology also plays a major role in starting your Web-based business:
- Web Site Hosting — you need to shop around for a Web hosting company that will give you the most bang for your buck. That is especially important if you plan to rely on your host provider for your e-commerce engine and shopping cart. There are thousands of them out there, like the used car lots and dealerships that line a highway just outside your local city limits. Pay close attention to the customer support services offered. For example, some offer Web-site building templates, shopping cart services and live 24/7 support.
Some hosting providers will offer services for less than competitors, but reliability and experience are critical. It is one thing to offer the service. Reliability is quite a different matter. Ask for a list of other clients and then view those sites. Also, do not forget the axiom “you get what you pay for.” With rare exception, the more reliable companies charge more for their services. Quite simply, it takes more money to provide a higher quality of service and product options.
- Search Engine Optimization — I suspect you don’t need any explanation of why you should optimize your Web site content for a high ranking in the major search engines. You have four primary Web site submission options:
- Free submission: There is no charge for submitting your Web site page(s). Dmoz and Google are the two most popular access points for free submission. Alternatives include AddMe, Submit Express and Superb Submit Pro. They are not search engines, but they do direct your submissions to a variety of smaller and industry-specific search engines.
- One-time fee: Your cost of one-time submissions varies with the search engine. For example, Yahoo charges $299 annually. An example of a more economical, optional format is offered by Submission Pro, which provides tiers of prices and levels of search engine submission. This provides an economical option to the startup watching its budget.
- Pay-Per-Click: You pay a small fee for each Web site visitor entering from a hyperlink earmarked by the search engine as pay-per-click. Many Web site choose this option to ensure high rankings and preferred placement in search engine results pages. Others prefer to rely on the first and second options above, not wanting to pay a fee for a site visit that doesn’t guarantee a sale. Examples include Overture ($0.10 per click), FindWhat ($25 deposit minimum) and GoClick ($0.10 per click).
- Pay-For-Rank Bidding: Often referred to as a pay-per-click format, paying for rank involves the pay-per-click process, but only for specific keyword terms. 7Search is a primary example of this more economical plan.
- Web site Analytics — Depending on the services your Web host offers, you may or may not need a Web site analytics service to monitor and decipher Web site traffic. Personally, I believe the two best service are ClickTracks, Omniture and WebTrends Live. Why? All three receive high rankings for performance and I use one of them myself. I’m not going to tell you which one. That wouldn’t be fair to the other two. That’s just the way I am.
Anyway, there is really so much more we could address, but this should offer a good start on the many factors you need to take in account before developing and opening your online store.
Steve Windhaus is principal of Windhaus Associates, a business plan consulting firm serving small, existing and startup ventures throughout the United States and overseas. His clients range from technology-based firms in software development, e-commerce and telecommunications to retailers of ATV’s and watercraft and a variety of service firms. Steve is a published author who also conducts training in business plan development and participates as a judge in business plan competitions. Steve can relate to small biz environments relying on computer technology. His skills and use of many related technologies are all self-taught. If you have a question your would like to see Steve address in a future article, send it to us today.
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