Sales Tax, Structure, & Trademarks

There are three important considerations to make that are sometimes overlooked when starting an online store: sales tax, your company's structure, and trademarks.

Starting an e-commerce site is one thing. Starting an e-commerce business that will grow and be profitable is more difficult. Addressed below are a few topics to consider when creating a business plan for e-commerce success.

Sales tax

Most states treat online sales in the same manner as mail-order sales. There is no retail taxes for sales between states, however, sales within a state are taxed the standard tax rate.

As a general rule, plan on collecting and paying taxes on sales within your state. Most states (if not all) maintain a formal position on e-commerce sales. Your state government will most likely send you quarterly tax reports to fill out.

Company structure

Your company's operating structure is important. This holds true with any business including e-commerce. You should research the various forms of business structures available in your state. For small businesses, the most common are sole proprietorships, LLC's and incorporations.

1. Sole proprietorships are the easiest to get started. You simply need to register with your state and possibly acquire a business permit from your local city government. Many small businesses start out as sole proprietorships. The government sees you and your business as one entity. This means that you are personally liable for your business practices and risks.
2. Most states will offer an LLC, S, or C type corporation. One great advantage of a corporation is that it creates a separate entity for your business. Your liability is limited to the assets of the corporation. If you are looking for outside capital, investors will prefer a corporation to allow stock to be purchased in exchange for funding.
3. Choosing to incorporate on the other hand will cost a lot more than sole proprietorship. The costs often exceed $1,000 to cover all expenses of incorporation. There will be a good deal of paperwork involved and the process takes a lot longer to complete.

Trademarks

In e-commerce, your domain is a huge part of your identity. You will want to protect this. The best protection you can apply for in this instance is a trademark. A trademark is a word or symbol used to identify the source of goods or services to customers.

You may only apply for a trademark after you use the mark to identify products or services performed 'in commerce'. In other words you have used the word(s) or symbol in advertising and/or paid sales to customers.

The trademark office will not register a domain name that doesn't meet the requirements of being a trademark. Having trademark rights allows you to protect your domain name against others who might allege that it infringes upon their trademark. Trademarks are very complex.

Consult an attorney for your particular situation, and you can learn more at: www.uspto.gov