How to Start an eCommerce Business: A Step-by-Step Guide

Any time is a good time to start an eCommerce business. If you have an idea for a small side hustle or a million-dollar business, the internet gives you a worldwide audience of potential customers. Whether you want to build your own website or use a platform like WordPress or Shopify, it’s essential to follow the steps to validate your idea and handle the legal, accounting, and tax side of the business to protect your assets and put your best foot forward.

Here’s a look at how to start an eCommerce business poised to thrive for years to come.

Step 1: Choose a Niche and Validate Your Idea

To start, it's important to have a well-vetted idea and identify your potential market. Even if you love the idea, it’s only a good business if you can connect with real customers willing to pay for your product.

Identify Your Niche

Many of the best product ideas come from founders solving their own needs and problems. If you don’t already have a product idea, think through your target customers and what they may need and want.

Try to solve a specific problem or serve a passionate community with a product they can stand behind. Consider how that aligns with your interests, experience, and current trends. To create a successful eCommerce business, you need a product or service, a way to create and deliver the product, and someone to buy it.

Validate Demand

You can look online to research the potential demand for your product and how you may stack up against competitors. For example, keyword research helps you understand how many people search for relevant terms and how many click through to various results.

Look for consistent search volume and underserved markets where you can have an outsized impact. You can also look to sources like Google Trends, Reddit, Etsy, and Amazon reviews. You can look at online advertising platforms like Google AdWords and Meta Ads to learn more about the competition and what it would cost to put your product in front of a large audience.

Step 2: Research Production and Delivery

Now that you know what you want to create, you need a way to create and deliver the product. Delivery methods and costs may vary widely depending on the product type.

Product Types

Digital products: Downloadable products are arguably the cheapest and easiest type of product, as you can create them on your computer, collect payment, and deliver instantly with little incremental cost. eBooks, guides, printables, and other digital products can be lucrative and are created with the lowest costs and risks.

Physical products: Physical goods are more complex but can sometimes lead to higher sales and profits. You’re probably already very familiar with both direct-to-consumer products and those sold through other retailers and platforms, ranging from Amazon and Etsy to Walmart.com and eBay.

Knowing how you’ll produce the product and handle fulfillment is critical. Again, you have plenty of options. For example, with Etsy, you would likely want to sell something you handmake yourself. On Amazon, you may want to hire a factory in China to produce the product. You can also decide between fulfilling orders yourself or hiring a third-party dropshipper to handle storage and shipping.

Key Considerations

Before proceeding with any product, calculate costs and profit margins. To help you iron out the details, make a mock-up for digital products or a prototype of physical products.

Step 3: Legally Set Up Your Business

Now it’s time for one of the most important steps: turning your idea into a registered business. Costs and steps vary depending on your state. Many companies choose a Wyoming, Nevada, or Delaware LLC for enhanced privacy and tax benefits.

Choose a Business Structure

Choosing a business structure is the first step in forming your business. Many eCommerce businesses choose an LLC because it offers low costs and more straightforward taxes.

Two of the most common options include:

• Sole proprietorship: A sole proprietorship is the default status for a business. If you don’t register with your state, you’re automatically operating as yourself, which is called a sole proprietorship. However, with this type of business, you take on all legal and financial liabilities, which isn’t ideal for most people.
• LLC: A limited liability company (LLC) turns your business into an independent legal entity. If you follow best practices, such as maintaining separate personal and business finances to protect your corporate veil, it offers excellent protection. You can also opt for taxation as an S corporation, which includes even more financial benefits if your business grows to provide a full-time income.

You can also look into creating an S corporation or C corporation, though they come with more complex filing requirements an tax implications. When in doubt, consult with a trusted tax or legal professional to ensure you fully understand what you’re getting into.

How to Form an LLC for Your eCommerce Business

If you choose an LLC, you’ll follow these steps:

1. Pick a name for your business: Pick a unique name for your business, and take note of any state requirements, such as ending the name with “LLC” or similar. Search your state’s business registry and the federal trademark website to ensure it’s not already taken.
2. File formation documents and pay state fees: You can go to your secretary of state’s website or work with an expert service like LLC Attorney to file the required paperwork and documents. Working with an expert helps maintain your privacy and ensures you don’t make costly mistakes when filing.
3. Maintain your registration: Check the state database to make sure your business is listed accurately. Most states require annual or biannual renewal to keep your business current and in good standing. Again, a service like LLC Attorney can automatically handle this if you don’t want to worry about missing a due date.

Step 4: Handle Tax and License Requirements

Now it’s time to handle more business formation-related tasks. Those include:

• Get an EIN: An Employer Identification Number (EIN) is like a Social Security number for your business. You can get one free from IRS.gov, and every business owner should have one. You’ll need it to open a business bank account, file taxes under your business name, and hire employees down the line. LLC Attorney offers the option to get your EIN during the registration process.
• Register for Sales Tax: If you’re selling physical products in the U.S., you’ll likely need to collect sales tax. That means registering for a state sales tax license or seller’s permit. You might also need a resale certificate if you’re buying wholesale inventory, which lets you avoid paying sales tax when purchasing products for resale.
• Stay Compliant with Nexus Rules: Sales tax rules can get tricky once you start making sales across state lines. If you have “nexus,” a tax connection to a state, you’re likely required to collect and remit sales tax there. Nexus can come from having a warehouse and employees or even hitting a certain number of sales in a state. It’s something to keep an eye on as you grow.
• Other Permits and Licenses: Depending on your location and what you’re selling, there may be a few more boxes to check. Some cities and counties require a general business license. And if you sell regulated items like alcohol, supplements, or cosmetics, look into any industry-specific rules.

Step 5: Choose and Build Your Online Store

Now that your business is registered and legal, it’s time to get your online store up and running. You may prefer to build your site or pick an eCommerce platform depending on your technical knowledge.

For those with knowledge of website hosting, it’s hard to beat WordPress. If you’re unfamiliar, WordPress powers more than half of the sites on the internet today, and it comes with thousands of themes and plugins to customize the site’s appearance and features. For example, adding WooCommerce gives you powerful eCommerce features in just a few clicks.

If you don’t know as much about websites and servers, a hosted platform like Shopify, Wix, or BigCommerce gives you the tools to build a site without tinkering with code or behind-the-scenes computer optimizations and settings. However, you’ll usually spend more for a hosted solution and have less flexibility when building your site.

You can get your domain name (e.g., yoursite.com) independently of your site using a registrar like Cloudflare, Porkbun, or GoDaddy. You can also get a domain through your hosting provider or eCommerce platform, but you will likely pay a premium for the added convenience.

Step 6: Set Up Payments and Shipping

Payment Processors

You can use your bank or a specialized online payment process to collect funds if it’s not included in your hosted platform.

For online sales, Stripe, Square, and PayPal are among the most popular options. These providers offer integrations with popular sales platforms, allowing you to get connected and start selling as quickly as possible. Each has different pricing models and features that could have you prefer one over another.

Shipping Logistics

Your eCommerce platform may have built-in tools to handle shipping and fulfillment. For example, Shopify includes features to manage orders and print shipping labels with just a few clicks. You can also use dedicated shipping tools like ShipStation. When starting out, it’s best to keep things simple and low cost. As your business grows, you can optimize your processes further.

Conclusion: Starting a Successful eCommerce Business

Congratulations, you’re in business! Now, your focus can be on the fun stuff: launching and promoting your new business, building a loyal customer base, and optimizing your website, products, and processes to maximize revenue and profits.

With LLC Attorney as your trusted partner for business registration and related needs, you can create your business entity quickly so you can focus your time and efforts on building an eCommerce business you’re proud of.