As I’ve discussed in previous articles, one of the easiest ways to make money online is drop shipping. It’s not my business model personally, but it’s something that I think can be a great source of income for those who take it seriously. I’ve met quite a few people who’ve made money drop shipping, and while it can be complicated, it can be lucrative when done right. One of the drop shippers I know was able to buy a family member a vehicle with the money he earned. So is drop shipping legal? I’ll get into it in this post, and give you some strategies on how to maintain compliance in your company.
No country has made drop shipping as a business model illegal
Granted, I don’t speak every language and don’t have access to every country’s law books. But generally speaking, the criminalization of drop shipping is unheard of. Some countries might have harsh regimes, and there might be some unfairness there, but I see no reason why these regimes would make drop shipping as a business model illegal. There’s no upside to such a decision. All drop shipping is, is the process of taking a customer’s order and passing it on to the wholesaler. It’s a fulfillment method, nothing more. That being said, there are many ways in which people can mess up compliance in their businesses, and fall on the wrong side of the law. Thankfully, these things are easy to avoid. Here’s what you need to do to keep your business running and profitable.
Avoid selling items that are prohibited
Some items are legal in the place they are manufactured in, but illegal in the places where they are shipped to. Oftentimes, the places where products are being manufactured will know the laws, and check that the packages are being shipped to the right places. That being said, a few of my drug dealer (ex) friends have told me that certain factories, especially in China and Southeast Asia, don’t give a shit. You can look for yourself, just search “Hydriodic Acid china shipped”. That’s a precursor for meth. You don’t want to get involved in stuff like this as a drop shipper. It’s more dangerous than it works. Try shipping to only one country/region at a time.
Check how you should be collecting and paying sales tax
Every country has different rules for sales tax. While it’s uncommon, governments will crack down on businesses that they know for a fact are keeping revenue hidden from them. You want the opportunity to grow a big business and run it publicly if you want to. Figure out how sales tax works before you start doing business and make sure you have a way of collecting and paying it.
Check your business licensing
Drop shipping doesn’t require any import or export licensing, because you don’t touch the items yourself. That being said, it’s important that you set up a proper corporation as soon as you’re making money. This way, if anything goes wrong, you can offset as much liability as possible onto your business. This will come in handy if you ever find yourself in tax or criminal trouble. You might roll your eyes at the concept, but it’s pretty easy to get in trouble when you’re running a business. Especially if you have employees. So create an official corporation, and distance yourself from all that liability. The type of corporation you should open will depend on your country. Hire a professional consultant and be discerning in your decision-making.
Pay your income taxes
Tax avoidance is legal, tax evasion isn’t. Get an accountant and/or business consultant to help structure or move your corporation to the lowest tax jurisdiction possible. Then pay that jurisdiction, and pay them on time. The last thing you want is to be having money seized because you were lazy or greedy. The good thing is, as long as you’re running a straightforward business you shouldn’t be taxed on money you’re not making.
Compliance for drop shipping is really simple because all you’re doing is marketing. It’s a completely legal way of doing business as long as you cross your Ts and dot your Is. Just make sure to start a corporation (preferably an anonymous one, you can start those in Wyoming or Ontario, Canada among other places), and avoid going into debt. There should be no trouble, as long as you’re honest, diligent, and sensible.
By Rising Current on .
Exported from Medium on November 8, 2024.
