Business Formation: What You Need Before You Start Your eCommerce Business

 Starting a dropshipping business can be exciting. However, it can also be daunting if you don’t know what you’re doing. To make your business formation seamless and straightforward, we’ve laid out the top six things you need to manage before starting your high-ticket drop shipping business.

1.  Choose a Business Structure

In starting a business, you need to select your business structure carefully. This will define the way on how you will run your business from a legal perspective. In the United States, there are four kinds of business structures, including sole proprietorship, partnership, limited liability, and corporation. Each one comes with different tax requirements and liabilities.

Sole Proprietorship – This is by far the simplest business structure that one can have. In Sole Proprietorship, the owner has full control over the business and is tasked to manage its records.

Home-based businesses, small shops, and one-person consulting services are some businesses that are usually formed under sole proprietorship. However, it’s worth noting that while Sole Proprietorship is the most straightforward business structure, it does not come with any liability protection.

Limited Liability Company – One of the more prevalent business structures today is the Limited Liability Company (LLC). This business structure is a hybrid that combines the characteristics of a sole proprietorship, partnership, and corporation. The best thing about LLC is that it’s relatively easy to set up and comes with liability protection – perfect for those looking for better flexibility and increased protection. 

Partnership – When two or more people come together to form and run a business, that is what you call partnership. In this kind of business structure, each partner has an equal share in the business’ profits and losses. Businesses under partnership also hold the partners accountable for the financial debts and obligations of the company.

Corporation – This business structure is the most complex type where the business’ obligations and liabilities are separated from the owners’ responsibilities. Unlike sole proprietor businesses and partnerships, corporations’ taxes are collected as separate entities at corporate tax rates.


The best choice for a startup brand is to set up an LLC business. Besides the reason that it’s highly practical to form, it also gives you liability protection for your assets. To do this, you can either get assistance from a business strategist, an accountant or a lawyer; or you can sign up for business formation services for faster results. If you need a reference, here are the best business formation services for high-ticket drop shipping.

2.  Get an Employer Identification Number (EIN)

Another facet of business formation is obtaining an Employer Identification Number. EIN is a unique number for businesses explicitly designed for tax purposes and is issued for free by the IRS. A more straightforward way to look at it is that it’s somewhat similar to a Social Security Number for businesses.

If you’ve decided to have a Sole Proprietorship, then having an EIN is not a requirement since you’ll be paying taxes through your record. However, there are some benefits of having an EIN even if you’re running a sole proprietorship business, including brand credibility boost, protection from identity and tax theft, and it prepares you ahead of time since you’ll still be required to get an EIN when your business grows eventually.  

On the contrary, EIN is a requirement for an LLC, Partnership, and Corporation. Applying for EIN is pretty easy so long as you have the complete details of your business. You need to fill out an application form and wait for it in a few days or weeks.


Registering for an EIN is free and can be done online. However, you should file for an earlier application for EIN to allow for some allowance if you have a target launch date since it typically takes weeks for processing.

3.  Business Checking Accounts

As for your financials, you need to have a business checking or PayPal account. You’ll need this to get paid in the dropshipping business. There are several good banks that you should check out, including Wells Fargo, Chase, and Bank of America. There’s also PayPal and TransferWise if you’re managing your funds outside of the U.S.


For starters, it may seem that your account can still handle your business. However, in managing a business, all your business transactions shall be distinct from your transactions. By having your business account, you’ll be managing your finances better, including your taxes and all other business expenses.

4.  Business Credit Card

Having a credit card is indispensable in any drop shipping business. Your credit card will be used mostly to pay your suppliers and all the tools that run your store, including Shopify. Aside from that, your business credit card can be used for all your business spending. Without a credit card, you will not have any means to pay for your suppliers since most dropshipping suppliers prefer credit card payments.

The perfect business credit card offers you a high limit with massive perks and rewards. This allows you to get the maximum value from every purchase. For starters, a business credit card that offers excellent cashback rewards should be the most practical choice. On the other hand, if you’re a frequent traveler, finding a business credit card that offers excellent mileage and other travel perks should be your top choice.

If you’re looking for a good selection of credit cards, we came up with a list of the best credit cards for your personal and business needs.


The most practical choice is to get yourself a business credit card and another for your personal purchases. For business credit cards, it’s best to find one which offers massive cash backs, so you get the best value for every dollar that you spend. Finding a credit card that can offer great mileage and booking discounts shall be of significant consideration for digital nomads or business travelers.

5.  Apply for a Seller’s Permit

Another thing that you need to have before starting your dropshipping business is a Seller’s permit. A Seller’s permit is a state license that allows you to sell products or services and collect taxes from your customers. The said permit allows the State to monitor and control how businesses collect and pay taxes to them. Many suppliers also require this permit to get a dealer account as this will prevent you from getting charged with sales tax for every order you place with your supplier.


It’s always best to know first which permits and licenses you need to secure before launching your dropshipping business to ensure that you are doing business legally. Failing to do so will cost you a significant amount of money for the fines and penalties you will face. Here’s a guide on how to apply for a Seller’s permit in your State.

6.  Sign Up for a Virtual Mailbox

To formalize your dropshipping business, you need to sign up for a virtual mailbox in any State that you want to be in. Your virtual mailbox will provide you with a physical address, so it will appear like you have a business office. This will work in your favor, especially if you plan to be a digital nomad moving forward.


In choosing a virtual mailbox, it’s best if you sign up for a virtual mailbox service that has a vast network across the globe, accessible 24/7, and offers a variety of security features to ensure that all your incoming mails and parcels are correctly handled. By doing so, you’ll be sure that you can easily access your mails anytime and from anywhere. If you don’t know where to start, here are the best virtual mailbox services for entrepreneurs and digital nomads. 

7. Business Phone Number

While there are new digital messaging channels available for modern day customers  such as e-mail, chat, and other social media channels, many clients still prefer to have actual contact through phone lines. This is the main reason why businesses cannot entirely cross out the need of having a phone line. For instance, potential customers who are in need of instant responses would prefer to talk to someone to get instant answers for their queries. On the other hand, having a phoneline will positively affect your brand image as it allows your customers to get in touch with you even after they made the purchase, which is essential for customer support.

These are just two of the most important uses of having a phone line. However, if you don’t have an actual office to set up your business phone line, then don’t worry – there are virtual phone services that can help you have your own phone lines at an affordable price.


One of the best virtual phone systems in the market is GrasshopperGrasshopper is designed for entrepreneurs that aim to provide a simple and robust phone system that can be used anywhere in the world. Grasshopper has desktop and mobile phone applications, which allow you to answer calls wherever you are as long as you have your device. With these apps, you can even see a log of your calls to respond to your clients efficiently. Missed calls would not be an issue because you can answer your calls even at your home’s comfort.

8. Hire a Bookkeeper

A business will not work without an effective financial management system. Most businesses fail because business owners tend to overlook the financial details of their business and only act on substantial matters when it’s already too late. This is the main issue that a bookkeeper addresses. Having a bookkeeper will ensure that your financial standing is on track while allowing you to focus in running your business.

With a bookkeeper, you can just have an overview of your financials without worrying on the details. Plus, you’ll also have access to real-time information that can help you decide on important business matters.


One of the best bookkeeping services for dropshipping business is Bench. Bench virtual bookkeeping is designed for small businesses. BENCH offers an experienced bookkeeper, who will take care of your financial tasks. It’s cost-efficient and offers room for flexibility depending on your business needs. Of course, with BENCH you’ll have the freedom to focus on the day-to-day operations with the peace of mind knowing that your finances well-handled.

9. Choose a Domain Name

All dropshipping websites need both hosting and domain. These two serve as the foundation of your dropship store. The domain will be your unique address online while hosting will serve as your storage for your website. Once you’ve picked a unique name for your dropship store, the next step is finding where to buy a domain and subscribe for web hosting.

While this may sound easy, there are tons of factors that you should consider before buying domain and hosting. For one, you need to make sure that your hosting can handle a lot of traffic and has good customer support. The last thing that you’d want is to have a down website in the middle of the night and no customer support to turn to. In addition, before securing a domain name, you need to carefully check the pricing plans as there are those that offer $1 domain name for 1 year but will charge you double rates upon renewal.


One of the best domain and hosting services that offers great value for money is NamecheapNamecheap is a great option for small business as it does not have a huge amount of charges upfront. This company takes pride in giving you the latest technology with its PowerEdge M1000e Blade Enclosure and Dell’s state-of-the-art shared data center infrastructure. Essentially, with Namecheap, your website is guaranteed to have at least 99.9% uptime.

10. Set up Your eCommerce Platform

Of course, you can’t run a dropshipping website without a storefront – this is where an eCommerce platform comes in. When choosing an eCommerce platform, one of the things that you need to consider is the time it takes for setting up. You’d want to choose an eCommerce platform that allows you to get started in no time. But don’t worry, building your eCommerce storefront should not be difficult given the right solution. In building your eCommerce site, you should only use a platform with the easiest navigation and control panel or perhaps one that offers an out-of-the-box type of solution. This will ensure that you don’t waste too much time in building and managing your storefront.


One of the best eCommerce platforms for dropshipping is Shopify. This eCommerce  platform is extremely easy to set up. In fact, you can create your own eCommerce store within an hour provided you have all the essential store elements. Furthermore,  Shopify is well-known for its user-friendly control panel and out-of-the-box solutions, so you certainly won’t have any difficulties in navigating the platform. Another good thing about Shopify is that it allows you to easily duplicate your stores so you won’t have to start from scratch all over again in cases wherein you’ll put up additional stores. You also have the option to buy a Shopify dropshipping store and request for it to be made in accordance with your requirements.

11. Design your Website

Every brand has to have a unique atmosphere for its customers to connect with. The same goes for eCommerce shops – every web store shall have its own unique brand identity. If you are no artist and have no talent in web design, then don’t worry, you can just opt for shopify themes to make your store look professional and credible. Making use of a store theme will make your life easier as you can just drag and drop elements to your liking. Take note however, that not all store designs are built equally – there are designs that can work perfectly with heavy inventory and some themes that work only for stores with few inventory. Thus, you should carefully consider the theme and match it with your needs before adopting it.


If you want to ensure high conversions, Shoptimized is the way to go. Shoptimized theme offers tons of optimization features on all pages, including the product page, cart page, homepage, and even the blog and article pages. This shopify theme offers tons of conversion optimization features normally found on eCommerce websites like eBay, Amazon, and even information product websites like ClickFunnels. It also has striking features such as countdown timers for sale releases, stock levels, shipping time estimator, product insights, and marketing integrations among others. Shoptimized boosts your webstore performance by offering optimization features and pleasing sales funnels that are proven to increase sales.

Now that you know the things that need to be settled before you start your dropshipping business, you must have a 100% understanding of the kind of business that you are diving into. So, it would help if you covered the basics first...

What to expect?

While there is no doubt that dropshipping is one of the simplest forms of eCommerce, you are still expected to do your fair share of work to jumpstart your business successfully. It can’t work if you’ll just depend on all the dropshipping tools available to you. Instead, it would help if you combined strategy and hard work while leveraging all available tools.

A typical day in the dropshipping business mainly revolves around supplier coordination, marketing, and customer support. This is unlike any other eCommerce business, which deals with merchandising and inventory as well.

Once you have these fundamental aspects and a solid understanding of the business, you should be able to start building your high-ticket drop shipping business in no time.

What do you think of this article? Leave us a comment below!

AFFILIATE DISCLOSURE: Some of the links on this page may be affiliate referral links. I will get a commission from the vendor when you make a purchase after clicking them at no added cost to you. As a result, many of them also provide you with a special discount just for using my link. You can go directly to their support if you have any issues with their software or product.

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