The Ultimate Guide To High-Ticket Drop Shipping For Beginners Lesson 5: What You Need Before You Start Your High-Ticket Drop Shipping Business
The Ultimate Guide To High-Ticket Drop Shipping For Beginners Lesson 5: What You Need Before You Start Your High-Ticket Drop Shipping Business
Hey guys, welcome back to the Ultimate Guide to Drop Shipping.
In this episode, we're going to talk about starting your business.
Starting your business is important before you actually build your website. You're going to need a few of these business things to be done to set up your merchant accounts, get paid, and you're also going to need certain legal forms to set up before you get suppliers. With that said, it's really important to get this brief overview and pay attention, because a lot of the things in here are easy to do, and yet they are super, super important for your success.
First things first, I want to make sure that you understand the commitment required to start one of these businesses. This is a real business. If you've never been involved in business before, understand that businesses take a lot of time. If you're working a day job or consumed with all sorts of hobbies, you're going to have to make sacrifices with your time. You're going to have to become passionate and make a hobby out of your eCommerce. Not just a hobby, but you're going to become a professional marketer. This should be something that you are so excited about doing that you just can't wait to get to the coffee shop, sit down on your laptop, do more of it, and learn more of it. It should be something exciting that you're going to wake up earlier, do work after hours, do things on the weekend when you'd normally be watching Netflix or going out with your friends at night. You're not going to do that anymore. You're going to be working on your computer on your website.
Yes, I know it sounds terrible but trust me, it's worth it.
If you want to live a location independent and time-independent, financially free lifestyle like we do, you have to understand that it takes sacrifice. A lot of the normal things that people do every day are there because they have a safe, secure job. Building out an eCommerce business dropshipping store is a great way to get out of that service. That slavery kind of lifestyle, that rat race kind of lifestyle and break into more of an exciting, thrilling, free life where you get to decide what and where you go and do at any part of the day, any time of your day and life.
You're going to make a big-time commitment.
You're going to need to commit time to talk to customers and talk to suppliers. It's in the same thing in any business model. Whether you're doing information products, affiliate marketing, Amazon Kindle books, or drop shipping, you're always going to talk to customers and suppliers through either written or spoken words.
For instance, with dropshipping, you have suppliers, and you have customers. It would be best if you connect with both of them. Affiliate marketing is the same way. You're going to have to talk to these vendors, and you're going to talk to customers through the written word. Kindle also has the same way. You need to talk to people who are writing your books for you and write your reviews. No matter what the online business model is, you're there to connect product information service to the person who's buying it. You're the creator of that, and also the connector. You can also be just the creator by hiring a connector to look for customers.
In this model, specifically in eCommerce drop shipping, you're going to be the connector between the product supplier and the customer who wants to buy that product. With that said, you're also going to have to invest some money.
The investment is really low with eCommerce like I've said in the first video or two. The investment is only in a few hundred dollars to get started and then a few more hundred dollars to grow beyond that and then maybe a few hundred dollars, a thousand dollars to scale beyond that even.
As far as businesses go, businesses usually cost tens of thousands of dollars to start. I actually went through starting a physical brick-and-mortar storefront back when I was doing my first eCommerce business. That cost me around $30,000, and that was for the bare minimum. I didn't have that great of a store. I actually ended up shutting it down six months later because I was so tired of it. Most of that was product inventory, and a small portion of that was fixing up the place, adding all sorts of fixtures and paint, paying for overhead, rent, electricity, and the insurance.
There are many more costs involved with other business models, whereas the online business model only requires a laptop computer. You have to pay for that, your hosting, and other services you need to use online that costs money. Add that to your regular lifestyle expenses. It's not a whole lot more than that. Now, because you'll be having to make sacrifices, you can consider that as a cost. But a lot of this cool stuff you're going to be doing is also a business write off, so consider that as a great benefit to this business model. With that said, the first thing you have to decide upon when you're building your business is your business structure.
There are a few different types.
I want to clarify and add a disclosure here that I'm not a CPA or a lawyer. This is not official advice. This is just coming from my experience and what my choices were for the best for my position. Now, this might work for you as well or it may not. You might have a different situation, a different asset structure, so you should consult a CPA or attorney based on your assets to what business structure you should start.
If you've never heard of business structures before, I'm going to go over the three most common types right now. Only two of them are types that you need to know about these days. Here are three types:
Types of Business Structure
Sole Proprietorship or a Partnership
Sole proprietorship and a partnership are taxed in similar ways. But sole proprietorship is just you and I. We're a single person, a single entity, and we don't have any major assets to speak of.
We don't have huge houses and huge investment accounts in the millions of dollars. We don't have many assets to protect, so it's okay to just go into business selling as yourself.
You don't need to protect any of your assets that you own personally. Now with that said, a partnership is kind of similar to a sole proprietorship. It's two people that come together, and neither of them has assets they want to protect. It's taxed a little bit differently, but similar things apply to it.
Both sole proprietorship and partnership have no liability, but they're also very cheap and easy to start. In fact, they don't require any official information or documentation besides the other things I'm going to mention.
Limited Liability Protection (LLC)
The next type of business structure is an LLC. It's popular, easy to form, but it does provide you limited liability protection, and that's the important concept to apply. You do have to make sure your business is set up properly. Again, talk to a business banker, a CPA, an attorney to make sure you structure everything properly, so you really have limited liability protection. But LLC's, depending on the state that you form in, are very inexpensive to form.
The next type that you should get if you make a lot of money through your business is an S corporation.
(Talk to an attorney, talk to a CPA, get actual advice but S corporation)
LLC can be taxing over proprietor or taxes. An S corp is separate. It's a different thing if you want to form an S corp. S corp is a C corp that is taxed as an S corp.
I know it sounds really confusing, and it is quite confusing, so like I said, talk to an attorney or CPA.
I never actually formed an S corp because I didn't need to. The benefit of having an S corp is that you can actually pay yourself as an employee and pay yourself a minimum amount. Take the rest as dividends that are taxed at a lower rate. That's why people do it a lot, but most people just go with the LLC because it's cheap and easy to form. You can tax yourself as a sole proprietor; keep really simple, and you still have the LLC protection. And that's what I recommend.
That's how I do it, that's for my asset class. That's not for you and your position, so make sure that you understand that, and you go out and seek the advice of an actual CPA.
With that being said, let's get on to the first bit that you'll need after you set up either your sole prop or LLC, and that is the EIN.
EIN stands for Employer Identification Number. The IRS issues it for free. It's really simple and easy to set up, and you just go there and follow the directions and tell them how your business is structured, what the name is it, website address, phone number.
You'll need to get the EIN. It takes a few weeks to process, so do that before you start your website. The next thing is setting up your business accounts. You need a business checking account, you need a PayPal account, and you need a credit card. Those are all really important things to do. You want to set all those up.
I use Chase, and I recommend them for the business checking account. PayPal, of course, is easy to use and easy to set up, and I recommend for credit cards that you look for business rewards. Credit cards, either cash back or points rewards, and I recommend you looking for them that come with bonus points.
Now, if you go to ecommerceparadise.com/resources, there are four or five, maybe more business rewards credit cards, and each of them comes with big bonus rewards. I highly recommend checking those links out. You'll get 50 to 100,000 in bonus rewards just by setting up through my link, so definitely check out ecommerceparadise.com/resources.
The most important part of this puzzle is your seller's permit. It's the way you'll be able to collect sales tax, and it's also the way you'll be able to exempt yourself from having to charge sales tax in particular states that you aren't in.
The state issues a seller's permit, so if you type in seller's permit and then your state into Google, you should be able to find either the direct link or a taxjar.com article. Some states charge for it, some states it's free. With a seller's permit sometimes they won't allow you to sign up with a virtual office address like a registered agent address, they need your physical address, so if you start your LLC in a non-sales tax income state like Wyoming, for instance, but you're located in a different state they're actually going to use the address in that different state on the seller's permit, and that's perfectly fine to do. Understand that and give them that address. Also, keep in mind your sales tax liabilities in the state that you're in. Let's say you're located in California, if your business is in Wyoming, you're still going to have to charge California sales tax, and you're still going to have to pay California state income tax even though your business is located in Wyoming. Wyoming does not charge any income tax. They charge a 4% sales tax. No income tax. It's important to understand that concept and again talk to an attorney or a CPA.
If you're outside the US, it can be really complicated to do this whole process, but the bottom line is that a lot of people do it, and it's not that bad. Consult a business like Incfile. I've used them in the past for setting up LLCs. Check ecommerceparadase.com/incfile.
If you're outside the US, you can hire them, and they'll set up your entire LLC for you. They can get you all your documentation for you and set you up with a registered agent address for a year for free, included with the cost. You'll still need to get the seller's permit yourself, and you still need to get the EIN if you don't want to pay for their service. But it's quite a bit easier to do, and also, by the way, you can set up a virtual mailbox address in any state by using the service I recommend called Traveling Mailbox. You can check it out on ecommerceparadise.com/travelingmailbox.
Traveling Mailbox is only $15 a month to start. I highly recommend using that service for an address in another state or within any state that you want to be in.
That's it. That's how you set up your business for drop shipping eCommerce. It's for the online business dropshipping model.
The next video will be about setting up your website and evaluating other sales channels to sell in them.
That's the next step, and as soon as that's done, if we can get suppliers and then we can optimize and launch and start making some sales, I know it's a lot, but it's worth it.
If you're watching right now, I know you're committed to it. Congratulations on being committed. You're making a huge change in your life, and your life is going to change for the good forever.
Thank you so much for tuning in.
We'll see you in the next video.
Step-By-Step Training for High-Ticket Drop Shipping
Here are the next steps you'll need to take to start your high-ticket dropshipping business:
Resources for Starting A High-Ticket Drop Shipping eCommerce Store
These are the resources I've created to help you start your own high-ticket dropshipping eCommerce store:
Recommended Resources for eCommerce Entrepreneurs and Digital Nomads
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eCommerce Paradise was created by Trevor Fenner of Seattle, Washington in 2015 to help you, the entrepreneur, to start and scale your own eCommerce business selling high-ticket products online with the drop shipping fulfillment method so you can make more profit per sale, have a sustainable and evergreen online business, get started with very little upfront investment, and live a location independent lifestyle. Trevor owns multiple 7-figure High-Ticket Drop Shipping eCommerce stores and is a digital nomad, traveling the world while working remotely with the help of his team of over 10 virtual assistants from around the world. Trevor is currently located in Bali, Indonesia. Trevor is also a passionate skateboarder, surfer, scuba diver, photographer, environmentalist, outdoorsman, fitness and tattoo enthusiast.
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.