Online Business or e-commerce is any type of business or transaction which involves sharing information online. The basic definition of an online business is any business that uses technology to enable transactions to take place between a seller and a buyer. Online commerce includes the exchange of goods and services between individuals, companies, groups and other entities and is easily visible as one of today’s important activities of any business. In fact, it has become such a part of our lives that some of us barely remember a time when there was no such thing as the Internet.
In an online business setting, a sole proprietor will have to register his business with a legal entity called an LLC. An LLC is a Limited Liability Company, which limits the liability of its owners. Each LLC member will own only one share in the LLC and each partner will own one share in the partnership. In case of any disputes, a sole proprietor is considered to be the owner of the LLC. Therefore, in an online business setting, the sole proprietor and all partners are treated as separate individuals.
If you are considering starting an online business, you need to consider various factors. One of these factors is planning. You need to plan your business with respect to local permits and laws, taxes, financing and marketing. Your best option is to hire an attorney or a qualified accountant to help you in formulating the necessary paperwork.
Online businesses taxes differ from traditional businesses because most online stores do not have employees or offices. This makes them different from regular enterprises that must register and pay taxes even with no sales happening. Some states actually offer online store tax exemption if the business meets certain requirements. Other states may allow an online business to register for state tax breaks, if their sales exceed a set amount.
An ideal business structure for an internet business is a sole proprietorship or a partnership. This is because you will be the only entity benefiting from your business idea. You may want to hire an accountant or attorney to help you formulate your business plan. You can ask friends and relatives if they know of any legal firms that provide services in your area. However, in my opinion, it is best to seek out the services of professionals who specialize in commercial law.
Taxes are something that you should never take lightly. It is highly recommended that you hire a tax professional to help you make the right business decisions based on your business status. Taxes are based on your net profits after all, not on what you earn. If your business consists of many employees, you will be required to pay them their salaries and this also adds to your taxes. If you have your own online business, you will not be required to pay the employee and wages, whether you make them sales or services.
If you are planning on using sole proprietorship as the way to start your online business, you may have to get started by filing a fictitious name statement. By doing this, you will be able to protect yourself from potential liabilities. Your sole proprietorship will be considered a separate legal entity from your other business entities. The IRS will treat your sole proprietorship as your business entity. This means that all IRS regulations will apply to your business entity, including taxes based on your profit and loss statement, cash transactions, purchases, sales, and loans.
Forming a limited liability company (LP) and setting up a business partnership are the other options available when you want to start your online business. Limited liability companies do not have to get started with any legal paperwork. You may decide to set up a general partnership (a form of business ownership known as “domineering interest”) or a sole proprietorship. You may also decide on the type of entity filing your paperwork. Once you have decided on these forms, you can get started on completing the paperwork.