The Business End of an Internet Business

By Chris Malta
Posted Monday, December 13, 2004

I've had a lot of email from people who know they want to start an Internet business, but don't know how to put the nuts & bolts together on the business end.

That’s not surprising. It can be confusing, and there are certain steps to be taken in a certain order. Without help, you can end up running in virtual circles for weeks.

Now, please keep this in mind, folks; I’m not an attorney, and I’d rather not have to hire one after writing this article. Let me just say that this is how it works where I live. Your local government may do things a bit differently, and of course I can’t speak to this issue for those outside the US. (Sorry!) If you need to, consult an attorney or accountant. You should, though, be able to do this pretty easily on your own if you choose.

So, here’s how we do it in Florida, USA.

First, swim to the poolside bar and grab yourself a nice cold drink. Then…oops, sorry, that’s AFTER work! Seriously, now, there are five things you would need in Florida to get started the RIGHT way. It works pretty similarly around the rest of the US.

1.) File your Business Entity
You need a “business entity.” That just means you need an official business name that’s recognized by the government. You can do this one of two ways.

A.) Corporation: You can file a corporation with your State. Florida has a web site at (http://www.sunbiz.org), where we can download and print all the forms we need to file a Florida corporation. I believe that all States in the US have a site like this. They also have instructional forms that detail what goes where, and what everything means on the forms. Once we complete our forms, we mail them in with about $90, and poof…we’re a corporation! We get our official copies back in a couple of weeks.

B.) Fictitious Name: This is a simpler way to register your business, but it does not afford you the protections that a corp does. Same thing…in Florida, sunbiz.org has the forms, and we fill them out and send them in. This doesn’t cost as much as a corp. In some States, this is called a DBA (Doing Business As…), and is obtained from your local County Office building for a minimal fee. ($35 would be an average).

If you’re not sure which way you want to go, see an attorney or accountant. This is an important decision!

2.) Obtain a Business License
Here in Florida, we are required to have a Business License issued by the county our business resides in. This takes a couple of hours at the local County Office Building, and costs about $30. We must show our Business Entity papers and supply our EIN. In some other States, a county Business License may not be required.

3.) Obtain a Resale Certificate
In almost every State you are required to have a Tax Resale Certificate (Tax ID Number). In Florida, we can get a Resale Certificate in about 20 minutes for $5. 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.

4.) Open a Business Bank Account
If you’re going to do business, you must have a business bank account. You’ll need your Business Entity papers, your EIN and your County Business License, (if required). Here, we can open a business account for a deposit of $50 to $100. Almost all banks offer business accounts.

5.) Open a Merchant Account
The last thing you need is a Merchant Account. You’ll need everything you obtained in the five steps above for this one. (Unless the County Business License is not required in your State).

This 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. We just opened a new one for a setup fee of $150. The Merchant Account will collect funds from your customers’ credit cards, and deposit those funds in your business account. The Merchant Bank will charge you about 2.2% of the amount you charge your customer’s credit card, plus about 30 cents per transaction.

Your Merchant Banker will help you to incorporate your Merchant Account into your Internet store software.
Well, there it is. That’s the business end of an Internet business. Sound complicated? It isn’t, really. The hard part is waiting for one thing before you can obtain the next!

As I said above, these are just guidelines. If you have questions, please consult a professional.

Chris Malta
WorldWide Brands, Inc.
For more information, visit (http://www.YouCanDropship.com)

About the Author
Chris Malta is a Microsoft Certified Systems Engineer. He has worked with computer Systems for 18 years. He's been involved in eCommerce systems, networking and site design for more than 6 years. He's taught college-level computer courses in Western NY. He developed The Drop Ship Source Directory, and he and his partners at Worldwide Brands, Inc., publish the Directory and run eCommerce sites of their own using Drop Shipping as their only business method.