To learn about the technological side of your business on eBay, we asked Mike Hogan, technology editor at Entrepreneur magazine and author of Accounting for Non-financial Managers, for his advice.
What technology do you need to start a business on eBay?
Mike Hogan: There's very little equipment you need to sell on eBay: a PC, a printer, a digital camera. There [are] just no technical hurdles. There are also some amazing multifunction devices coming out that are appropriate for entrepreneurs, and they include printers, scanners, copiers and faxes for $200 or less. It will cost you next to nothing to get rolling, and it's the kind of stuff you probably would've bought for your family anyway. Until you have a considerable volume of transactions, you're good to go. [To find high-volume software that fits your needs, check out product reviews at www.auctionsoftwarereview.com.]
What kinds of software programs can help entrepreneurs grow their businesses on eBay?
Hogan: You need to keep track of all your sales and all your costs of sales, and you need to make quarterly estimated tax payments. If you have people working for you, you need to keep track of salaries. Suddenly, you have an accounting challenge.
With eBay, you want to be able to balance the flow of goods through your company. That requires you to have an accounting program such as Peachtree, QuickBooks or Microsoft Small Business Accounting. They cost a couple hundred dollars and have entry-level versions. As you grow, you can move up to the next size in these products.
Intuit's TurboTax is hands down the best tax software to use for your business. Intuit has a website called Tax Center for eBay Sellers (www.taxcenter.turbotax.com). This is a tremendous resource because it addresses the issues that eBay sellers in particular face with taxes. Intuit also has a site to help you with filing estimated taxes (www.estimatedtaxes.com).
Embrace these tools--don't run away from them. It's not optional. These tools will teach you how to do business better.
Finally, you want to stay out of trouble with the law when you start your full-time business on eBay. Cliff Ennico, small-business attor-ney and eBay University instructor specializing in the legal and tax aspects of using eBay, offers his advice.
What is the first legal element you need to address in setting up your business on eBay?
Cliff Ennico: The hardest step for most people is just finding a good name for the business. When you think of a really cool name, make sure you can [use that name]. Check the U.S. Patent and Trademark registrations at www.uspto.gov. If someone has registered something as a federal trademark, you cannot use it, period, end of story. Check your secretary of state's office, and make sure no one in your state has registered the same name. Lastly, go to your county clerk's office, and make sure nobody in your town or county is using the same name as a dba. [Also make sure you can] get the domain name. Google it and see if anybody out there already has that website up. If it looks [clear], go ahead and register the URL.
Then find out if you [need to] get a license to sell stuff on eBay. Believe it or not, you may need a license to sell certain items. My little rule of thumb: If you're selling anything that has the potential to injure someone if it's abused, then you probably need to get a license from your state. Check out www.sba.gov/hotlist/license.html; it's a directory of state agencies that can tell you if you need a license or not. If you're not sure, call the agency and find out.
From a legal standpoint, how should you prepare to grow into a larger business on eBay?
Ennico: There's always a big question: Do I have to set up a legal entity for my business? Should I be a corporation? Should I be an LLC? If you're going into partnership with someone you don't know very well, [you might want to consider it].
What common legal mistakes do new eBay sellers make?
Ennico: The biggest mistakes that people make are not realizing they have a business in the first place and forgetting to pay their taxes, failing to charge sales tax to in-state customers, and not spelling out what their terms and conditions are. Draft your terms and conditions, and make sure those appear on every listing. My advice is to draft them yourself and have an attorney look at them, but don't put them in legalese.
Warranties are another legal issue: Anything you say in your listing description of an item on eBay is a legal warranty. If you don't know that much about your merchandise, disclaim all express and implied warranties. Make it clear [to the buyer]: You're giving lots of photos, answering questions, but you're not making any warranties whatsoever, so [they] should look at the item and make sure they're comfortable bidding. You can solve a lot of legal problems, in the event that a transaction goes bad, by warning your buyer upfront about what your policy is going to be.