Starting and owning your online auction business could be one of the best decisions you will ever make in your lifetime.
(article continues below)
Starting on the right footing makes the transition into business easier. Whether you are a regular participant or are new to online auctions, it is important that you are aware of the requirements for operating an online auction business.
An online auction retailer is a business like any other. This means income should be declared for tax purposes, and policies need to be established to protect you, the business owner. Before starting a business, it is advisable to consult both an attorney and an accountant if you need some questions answered. They will know the best practices as well as the local law, and can help you make the wisest business decisions in your situation.
The following are considerations and guidelines to help you get started.
What legal structure shall you adopt for the online auction business? Different legal structures offer different kinds of legal protection and differ in their income reporting procedures. The main options are sole proprietorship, corporation, partnership or Limited Liability Company.
What kinds of business licenses do you require to legally run your business? Some places require a license to run a business out of the home. Whereas online businesses have the advantage of not having many regulations, it is vital to consult with your local City Hall concerning business license needs and regulations for your specific business and to ensure that you are in compliance.
Inventory can be very expensive to replace in cases of damage or theft. In addition, being self-employed means your own medical insurance is your responsibility. You will need to think through your insurance needs and take every necessary precaution.
How will you maintain records of your expenses for the purpose of tax reporting? What taxes need to be paid each quarter or year? This information can be found at the IRS website. Obtaining this information prior to going into business will prevent many potential problems later.
Online auction retailers can find many helpful resources at online auction sites, the IRS website and local small business associations. If you have any inquiries, you could also consult an accountant or attorney for advice.