Starting Online Businesses

Online Auction: Business Entity Information

Written by Charles Mburugu for Gaebler Ventures

For many entrepreneurs who work at home, online auctions are a source of steady income. For others though, online auctions provide a way to decongest the attic and basement and make a little profit. With its increasing popularity, most people know about online auctions and many are involved either as a seller or buyer. What factors should be considered before venturing into an online auction business?

Starting and owning your online auction business could be one of the best decisions you will ever make in your lifetime.

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.

Legal structure

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.

Privacy policies and terms of use

Most auction retailers find it useful to have a website. A website should be included in the privacy policy or the terms of use statement.

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.

Charles Mburugu writes for us from his home in Nairobi. He has a graduate degree in Business Management from Kenya Institute of Management. He is interested in writing about branding, CSR and intellectual property.

Share this article

Additional Resources for Entrepreneurs

Lists of Venture Capital and Private Equity Firms

Franchise Opportunities


Business Glossary


Conversation Board

We greatly appreciate any advice you can provide on this topic. Please contribute your insights on this topic so others can benefit.

Leave a Reply

Questions, Comments, Tips, and Advice

Email will not be posted or shared
Code Image - Please contact webmaster if you have problems seeing this image code

Problem Viewing Image? Load New Code