To avoid making costly, easily avoidable mistakes, file a DBA, procure a seller's permit, and consider home-business insurance coverage
I am opening a store on eBay (EBAY). To purchase my products for resale from a wholesaler, I am told I need a resale certificate and a sales tax ID number. How and where would I obtain these items and how much do they cost?
—N.F., Watertown, N.Y.
You're on the right track in terms of making it a priority to get your legal status in order prior to blustering into business and perhaps making some costly, but easily avoidable mistakes. Here's some homework for you, provided by Marsha Collier, the author of the eBay for Dummies business books.
Start by filing your fictitious business name, or DBA, which stands for "doing business as," Collier says. "Search the Web for your local county name and 'DBA classified,'" she says. In your case, you will probably want to contact the Jefferson County Clerk's Office. Ask about the pricing involved in filing for a fictitious business name and publishing the classified business advertisements that the filing requires. "If it costs over $99, go directly to LegalZoom. For $99 they will file your DBA and handle the required newspaper publications for you," Collier says.
Next, contact your state about getting a seller's permit, which allows you to collect the required sales tax from your customers. "Search the Internet for your state along with the words 'seller's permit,' or just go to your state's Web site, select the business development department, and look for links to this area," Collier advises. In your case, try New York state's OPAL (online permits and licensing) page, which walks you through a series of questions about your business and presents you with a customized page of links to the various requirements you'll need to meet. "Your seller's permit is your magic key to enable you to buy wholesale from any business," Collier explains.
If your OPAL results page doesn't link you to your city hall, contact the business development department there directly to find out whether you need a local business license. "Even if you're doing business from home, you'll usually find that you need some sort of license," Collier says. "Be sure to say that your business is Internet or mail order, not retail. Retail would indicate that you have customers coming to your house, trucks delivering merchandise at all hours, and the like. Most cities have zoning laws against such activities taking place in a residential location." She also recommends that if a business license form asks for your projected annual sales, give a conservative estimate. "Don't try to be a big wheel. Give a low number. If there's a tax that you need to pay, it will be based on your sales," she says.
Along with LegalZoom, other online services also offer licensing and permit packages for startup companies. One of them, BusinessLicenses.com, will assist you with licensing and permits for fees starting from $19.99 and going up to $175, depending on how much of the work you want to do yourself, says the site's founder and president, David Polatseck.
One final thing to think about, if you'll be running your business from home. "Call your insurance agent about home-business coverage. For a very low fee, you can usually insure the merchandise that you're storing for sale," Collier says. "Good luck! It's a great adventure."