What do I need legally to sell on Etsy?
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What do I need legally to sell on Etsy
With Etsy, artists, collectors, and crafters now have a very prominent online marketplace where they can sell their own original works of art, antiques, and crafting materials. Do you wish to sell your creations to customers all across the country or possibly the entire world? Are you a skilled, practical person? You may have then pondered about how to launch a small business on Etsy.
I fully comprehend. I found the following information to be interesting:
On Etsy, there were 9.3 million active purchasers in 2012; by 2019, that figure had risen to almost 46.3 million. What do I need legally to sell on Etsy
The number of sellers on Etsy has likewise increased, from 830,000 in 2012 to around 2.7 million in 2019.
Etsy has a lot of advantages, such being simple to set up and having cheaper shipping. Additionally, it has a sizable internet audience and a variety of strategies to keep customers engaged. Anyone, anyone can now easily sell practically anything online thanks to Etsy, including handmade goods, craft supplies, and home decor.
You may discover additional details about opening a shop on Etsy.com. I'll go over the most crucial business and legal measures you must follow to launch a small business on Etsy in this article. As you consider the opportunity, I want to offer you a general picture of what you might have to do. However, you should consult reputable legal and financial experts if you require assistance with legal matters, taxes, or accounting. They can assess your condition and offer you professional guidance.
What do I need legally to sell on Etsy
1. Assess the viability of your product idea.
No matter what they do, no business owner can be certain that they will be successful. Creating an Etsy store to sell your products also has no guarantees.
But if you do some research to find out about your target market and your competition on Etsy, you can increase your chances of success. Before opening your Etsy shop, put in the work necessary to market distinctive things that will entice customers.
Of course, cost is also a key factor. To properly price your items and manage a profitable business, you must be aware of both your direct and indirect costs.
Here are a few instances of direct expenses:
the price of the goods you purchase to sell on Etsy or the cost of the resources you need to create your goods.
Package charges
Shipment charges
The costs of the employees who directly work on your products are referred to as direct labor costs. It's still vital to consider 1) how much time each unit takes and 2) how much money that time is worth, even if you aren't paying yourself for this labor.
Here are a few instances of indirect expenses:
What do I need legally to sell on Etsy
You can charge rent for your studio, workplace, or storage area.
Taxes
A transaction cost of 6.5%, a listing fee of \$.20, and a payment processing fee of 3% + \$.25 are all levied by Etsy.
Consider your time spent on business-related activities that are unrelated to the production of the good when calculating indirect labor costs. maintaining your Etsy shop, updating social media, responding to emails, etc.
Professional fees, such as those paid to your tax advisor and attorney.
Licenses, permits, and state fees for things like business registration, fictitious name filings, annual report filings, etc. are all examples of compliance costs for a business.
Etsy charges a lot of fees to its vendors. Below, I've highlighted a handful of them:
Sellers must pay a \$0.20 listing charge each time they add a product to their Etsy store. Sellers are responsible for this whether or not they make a sale.
Multiple quantity fee: When merchants sell more than one of the same item in a single transaction, they are assessed a \$0.20 fee. It is paid for by the listing charge for one item. Only extra items that were sold during the transaction are subject to this cost.
The price of the item, shipping, delivery, and gift-wrapping are all included in the transaction fee, which is 5% of the entire cost of the sale. Every time a sale is made, sellers are assessed these costs.
The payment processing fee in the United States is set at 3% of the total sale + \$0.25 per order.
The whole list of Etsy's fees may be seen in the website's Help Center.
2. Pick the most advantageous business entity type.
Your tax duties, your level of financial accountability for your company's debts, and the amount of paperwork you must file to maintain the legality of your Etsy shop will all be impacted by the business structure you choose. I believe you should consult with tax and legal professionals before making this crucial decision.
What do I need legally to sell on Etsy
On Etsy, most businesses are run by a single person. However, creating an LLC or incorporating their Etsy business may be beneficial for sellers. Here is a list of the most typical business structure types:
Unincorporated business structure: Sole Proprietor (or Partnership, if there are many owners): You don't need to submit any papers with the state to operate a business as a sole proprietor (other than perhaps a DBA, but more on that later!). It is the simplest option in terms of corporate compliance. The lack of a legal or financial barrier between a sole proprietorship's business operations and its owner's personal assets may be a drawback. What do I need legally to sell on Etsy This implies that all debts and legal actions incurred by a business are the owners' responsibility. Business owners declare and pay taxes on their business activities on their personal tax returns. If the business owner is also self-employed, Social Security and Medicare are likewise taxed on all business profits. The majority of the time, sole proprietors make non-deductible "owners draws" from the business to pay for their own expenses.
Limited Liability Company (LLC): In many aspects, a limited liability company is comparable to a sole proprietorship, but it also provides legal protection for both the company and its owners (referred to as "members") from one another. An LLC's members and the LLC are recognized as separate legal entities. Therefore, in general, the owners' private assets are safe in the event that the LLC is sued or unable to pay its debts. An LLC is treated the same as each of its members for tax purposes. The tax returns of business owners list every tax liability of the company. Members of an LLC pay themselves through "owner draws" from the business instead of payroll, which are not tax deductible. All business profits are subject to self-employment taxes, just like in a single proprietorship.
What do I need legally to sell on Etsy
C Corporation (C Corp): A C Corporation is a separate legal and tax-paying company from its owners, who are referred to as "shareholders," and it offers business owners the greatest legal defense. Corporations file their own tax forms, and at the end of the year, they pay income tax (at the corporate rate). You have probably heard the term "double taxation" in regard to how C Corporations are taxed. Owners who work in the firm get paid through the company's payroll, not through "owners draws." Some corporate profits are subject to double taxation: once when the company reports its earnings and once again when the earnings are distributed to shareholders as dividends.
S Corp. - The S Corporation isn't a specific kind of enterprise. Instead, it is a unique tax decision that businesses and LLCs may make (assuming they meet the IRS's standards). When a company is incorporated as a S Corporation, its owners' tax returns reflect the company's earnings and losses. In most cases, an LLC chooses to be taxed as a S Corp in order to allow its owners to pay less in self-employment taxes. Instead of paying Social Security and Medicare taxes on all of their business profits, business owners only pay those taxes on the wages and salaries they receive from their business. When a S Corp owner works in the business, he or she is paid through the company's payroll, not through a "owners draw." Profit distributions to shareholders are not subject to this type of tax. A corporation typically opts to be classed as a S Corp in order to avoid paying two taxes (since profits flow through to the tax returns of the owners).
The majority of Etsy shop owners can't be suitable for every kind of business. Carefully look into the advantages and downsides and maybe talk to an attorney or accountant before making a decision.
3. Choose a name for your business
Your business name will be a significant aspect of your brand and marketing, so it's crucial to chose it wisely.
Check to check whether another business on Etsy has already grabbed the name you wish to use for your business. Doing a corporate name check to make sure the name is available in your state is also a smart idea. Also, you might want to run a trademark search to see if the business name is accessible in all 50 states. If your business will be registered in more than one state, this is vital.
Etsy gives merchants some ideas to help them choose a name for their shop. As you choose the official name for your business, keep in mind that Etsy only enables shop names have 4 to 20 characters. If an Etsy store owner has a shop name that isn't the same as their legal name, they may need to submit a DBA (fictitious name registration) with the state to be authorized to sell under that name. A lawyer will be able to help you figure this out.
What do I need legally to sell on Etsy
4. Choose a Registered Agent
A business on Etsy that is set up as an LLC, S Corp, or C Corp must name a registered agent in the state where it is registered. A registered agent's function is to accept critical government, legal, and tax notices on behalf of the firm. This is termed "service of process." For the state to allow the registered agent to conduct their job, they must follow specific regulations, such as keeping set office hours from Monday to Friday. Some organizations, like CorpNet, are able to offer their services as a registered agent in all 50 states.
5. Tell the government about your business
To make a business official with the state, registration paperwork must be filled out. Articles of Organization must be filed by an LLC, and Articles of Incorporation must be filed by a C Corporation. (Some states call the paperwork by a different name, but they all need the same information.)
What do I need legally to sell on Etsy
For federal income tax purposes, if a qualifying LLC or C Corporation wants to be taxed as a S Corporation, it must file IRS Form 2553 together with its formation documents.
Most of the time, a sole proprietor business doesn't have to file official registration paperwork with the state. But if they will do business under a name that is not their own name, they do need to file a DBA. So, if they are selling things under a name that doesn't include the first and last names of the owner(s), the DBA registration will tell the state and the public who runs the business. For example, Maura Longo would need to register a DBA if she wanted to run her Etsy shop under the name "Maura's Magical Masks" instead of "Maura Longo's Masks."
Also, a registered business may need to establish a DBA if their Etsy store name is different from their actual business name (remember, Etsy only allows shop names to be 4 to 20 characters long) (remember, Etsy only allows shop names to be 4 to 20 characters long).
Depending on the type of business entity and the state, the paperwork to start a business can get a little confusing. Business owners can opt to prepare and file the paperwork themselves, engage an attorney to do it, or utilize an online service like CorpNet to save money and make sure it's done appropriately.
6. Ask the IRS for an EIN.
To open a business bank account at most banks, you need an EIN (Employer Identification Number) (Employer Identification Number). An EIN is a unique nine-digit number that the federal government uses to identify a business as a tax-paying entity. It is also called a Federal Tax ID Number. EINs are utilized for filing taxes and sometimes when filing other reports and paperwork. They are free from the IRS. Business owners can apply for an EIN on the IRS website or ask CorpNet to fill out and mail the EIN application.
7. Open a bank account for your business
Having a company bank account is helpful because it enables you keep your personal and business finances separate. It is very crucial for LLCs and corporations to have this separation. When the proprietors of registered business entities mix their own money with business money, they risk losing their protection from personal liability. If someone sues the firm, a court may determine that not enough was done to safeguard the "corporate veil," which keeps the owner's personal assets apart from the company's debts. Having a separate bank account for the business and a credit card in the name of the firm (and only using it for business) will assist you tell the difference between business and personal money.
8. Get licenses and permits for your business.
Etsy does not require merchants to acquire a business license in order to sell things on its platform. But the state, county, and city where your business is headquartered may require you to acquire licenses and permissions to properly run your business.
Depending on where your consumers live when they order your products, you may additionally need to apply for a sales tax permit in the states or localities where they live.
Etsy calculates, collects, and sends sales tax on items shipping to states having Marketplace Facilitator laws. On the Etsy website, you can discover an up-to-date list of the states for which Etsy collects and sends sales tax.
So, what about sales tax on orders that are transported to states lacking Marketplace Facilitator laws? What do I need legally to sell on Etsy
In certain states, it may be up to the Etsy seller to join up with the state or local tax office to figure out, collect, and send back sales tax. Most of the time, a seller has to register for sales tax if they have either an economic tie to the state or a physical presence there.
Economic nexus arises when a vendor reaches a certain amount of sales revenue or number of sales in a state. The economic nexus thresholds for each state are varied. For instance, California's economic nexus criterion is when a remote seller's total sales in a 12-month period are greater than $500,000. Arkansas, on the other hand, has placed its cap at taxable sales of more than \$100,000 or 200 separate sales.
If a buyer buys a taxable item from a seller outside of the buyer's taxing jurisdiction and the seller did not collect sales tax, the buyer must report and pay a use tax on the item for storing, using, or consuming it.
What do I need legally to sell on Etsy
Remember that the regulations governing sales tax have changed a lot during the past few years. Getting experienced tax and legal guidance will help you make sure you know what you need to do for your Etsy business to follow the law and meet any sales tax permit requirements.
9. Make an account on Etsy
If you already have an Etsy account, you can sign in.
Your Etsy shop will be operated by your account.
To give your brand a face and help people in the Etsy community get to know you, post a high-quality profile image and write an interesting bio.
10. Open an Etsy shop
You'll need to set up and open your Etsy shop before you can start selling on the platform. To achieve this, use a desktop web browser to go to Etsy.com.
Go to the top right of the Etsy website and click "Sell on Etsy." Then click "Open Your Etsy Shop."
Choose how you wish to shop (including the language, country, and currency) (including the language, country, and currency).
Type the name of your store.
After you set up your shop, you can use the Sell on Etsy mobile app to make adjustments and keep track of it.
11. Add Items to Your Shop to Stock It
Go to your Etsy account and click "Shop Manager" to add the things you want to sell. Then, if you are a first-time seller, click "Your Shop." If you currently have items in your shop, you can add more listings by clicking "Listings."
When making a listing, there are different elements and bits of information to add:
What do I need legally to sell on Etsy
Etsy encourages utilizing at least five images of each item so that shoppers can see it from multiple angles and feel more sure about their decision to buy. Images should have at least 2,000 pixels on the widest side (height may vary) (height may vary). The bigger the image, the easier it will be for purchasers to zoom in and get a good look at your product. As you submit photographs, think about which one you want to be the thumbnail. That's the one purchasers will see on the front page of your shop, in search results, and in other places on Etsy.
Videos: You don't have to upload product videos, although doing so can help your listing stand out. Videos must last between 5 and 15 seconds (recommended resolution is at least 1,080 pixels) (ideal resolution is at least 1,080 pixels). Note that there is no sound in listing videos. If you recorded your video with sound, the sound will be taken off when you upload it.
Listing details: This information will effect how Etsy groups your listing and how it shows up in Etsy search. Give your listing a title that tells what it is (up to 140 characters) (up to 140 characters). Also, fill out the "About this listing" area to tell shoppers what the item is, who made it, when it was done, and if it is handmade, vintage, or a craft supply. Then, on Etsy's Categories page, choose the category where you want your item to appear up. You can also set other elements about your listing to make it more specialized.
Listing description: How you describe your product will effect how shoppers view you straight away and how easy it is for Etsy users to find your item. Use titles and tags in your listing description to help customers locate your goods when they are seeking for things like the ones you make. Include keywords that customers will probably use to search goods similar to yours as well. Making your business more visible in Etsy searches doesn't require you to be an SEO expert, but understanding the fundamentals of SEO for Etsy can be beneficial.
Pricing and stock: You can specify the cost of your goods and display how many you currently have on hand. In order to keep track of your inventory, you can also add SKU numbers.
Delivery: You can select the shipping option you want for your listings after setting up shipping profiles for your shop.
12. Select the payment options for customers.
For payment from customers, Etsy mandates that sellers in the US and other nations use its Etsy Payments network. As long as Etsy agrees, payments can be made to sellers in foreign nations using PayPal, checks, money orders, or any other requested method.
13. Open a store on Etsy
There's one more step to complete before your Etsy store is prepared for customers once you've set up your shop, added listings, and established how buyers can pay. To start having fun and earning money, click "Open Your Shop."
You can find your store at the following URLs:
yourshopname.etsy.com or https://www.etsy.com/shop/yourshopname
Replace "yourshopname" with the actual name of your shop when referring to the webpage for your Etsy shop.
You can make adjustments to your store after you've opened it.
14. Promote Your Store
Consider your strategy for attracting customers to your Etsy store. Regardless of how fantastic your items are, you will still need to invest some time and energy in spreading the word about your company.
Social media is a fantastic tool for promoting your Etsy shop and showcasing your goods. Facebook, Instagram, TikTok, YouTube, Snapchat, and Pinterest are just a few examples. Inform your audience when you add new things to your shop by posting on social media.
Live Events: By displaying your products in person at occasions like art and craft fairs, you may also take your Etsy shop offline. These opportunities can increase your revenue and attract more customers to your Etsy shop.
Using Etsy Ads to advertise your products is another approach to draw customers to your store. You may track your expenses by setting a daily budget for your Etsy advertising efforts. Ads can be found in Etsy Search, on Category pages, and on Market pages on the Etsy website and Etsy app.
15. Make sure your company is compliant with the law.
Your corporation will have additional legal and tax requirements to fulfill every year or on a different schedule in addition to operating your Etsy business in accordance with Etsy's seller regulations. The regulations will vary based on your company's structure, the products you offer, local and state legislation, and other factors.
Here are a few instances:
tax filing and payment
recording a registered agent
Renewal of licenses and permissions is required.
Meetings of members or shareholders to renew a DBA
Including yearly reports
Talk to your accountant and lawyer about what has to be done, and keep note of the deadlines so you don't forget them. If you don't follow through on your compliance commitments, the government may punish you, impose other sanctions, or even shut down or dissolve your company.
What do I need legally to sell on Etsy