Amazon is an attractive option for any solopreneur looking to begin their business journey. However, before you begin selling, there are a few things you might want to consider to make sure you are ready from both a legal and business perspective. This article will explain what you need to know to establish your business and sell on Amazon.
What Business Structure Does Amazon Follow?
Many products sold on Amazon worldwide are from small or medium-sized businesses. Therefore, selling on Amazon is similar to running an online business through your website. However, the main difference is you will have access to the massive distribution network. As such, you should consider the best business structure to limit your liabilities and protect your finances.
If you wish to run your Amazon business by yourself, you can operate either as a sole trader or a company. Similarly, if you partner with someone, you can establish a general partnership or set up a company.
Operating as a sole trader or in partnership is cost-effective and straightforward. However, you and your business partners will have personal liability for any debts incurred by the business. This differs from running a business as a company, where you will have limited liability. Legally speaking, a company is considered a separate legal entity to its shareholders. Therefore, you will have limited liability protection. Of the options available to you as a potential Amazon retailer, operating as a company offers more safety. Remember that it is more costly to set up than a sole trader.
Should I Choose a Name for My Business?
You must choose a name that another business has not been registered as a trade mark. Do a thorough search of the trade marks register as well as general online searches to see whether businesses are operating under the name that you are interested in. This is to avoid a situation where you infringe on another person’s intellectual property (IP). For instance, consider you sell products under a specific brand only to learn that someone has registered a similar name as a trade mark.
Continue reading this article below the formShould I Register a Trade Mark?
Consider registering the name of your shop as a trade mark. This is especially vital if you hope to grow your store and establish it in the marketplace. Registering a trade mark allows you to protect the name of your business and any logo linked with your business.
In the same way, the greater your success on Amazon, the greater the need to protect your brand and logo, as consumers will begin to trust your brand. The more consumers trust your brand, the more value your business has and the more it will require protection.
Agreements for the Products
You will need an agreement that outlines the terms and conditions of the arrangement if:
- you are establishing a relationship with another business to sell and distribute their goods; or
- another business is manufacturing your products.
For instance, how are you sourcing the products you will sell on Amazon? You likely have already found a supplier in Australia or abroad that will produce your products. Alternatively, you may have established a relationship with another business that has agreed to let you distribute their goods in Australia.
In both these scenarios, you will need an agreement that outlines the terms and conditions of your arrangement. For example, you will need a manufacturing agreement if you are having your products manufactured or a distribution agreement if you are acting as a distributor.
What Are Amazon’s Policies and Agreements?
The Amazon marketplace is heavily regulated by its own policies and agreements. The products you offer for sale must comply with several Amazon’s policies. We explore some of these policies and agreements below.
Amazon Services Business Solutions Agreement
This agreement between you and Amazon dictates the terms and conditions you must follow to use the Amazon marketplace. In this agreement, essential requirements include:
- the general terms and conditions you must adhere to as a seller on the marketplace;
- payment requirements, including accepted payment methods, security measures and how payment will be sent to you and in what cases Amazon can withhold payment from you;
- termination options for yourself and Amazon and how you can exit the terms and conditions; and
- indemnification clauses and the obligations that apply to both you and Amazon.
Selling Policies and Seller Code of Conduct
This agreement ensures that sellers act fairly and honestly on Amazon’s platform. As a seller, you must comply with several requirements, including:
- providing Amazon and its customers with accurate and complete information, such as listing your products in the correct category;
- acting fairly and lawfully and not misusing any of Amazon’s services (for example, providing misleading or inaccurate information to Amazon or its customers);
- you must not attempt to influence customer ratings or reviews, such as offering an incentive for a positive review; and
- ensuring you only use customer information such as addresses or phone numbers to fulfil orders, and you must delete all information after the order is processed.
These are just a few examples of Amazon’s requirements for its sellers.
Will I Be Taxed When Selling on Amazon?
There is a common misconception that Amazon is collecting tax for its sellers. However, as an Australian-based seller, you are the one who is responsible for the collection and payment of the taxes for the products you sell on Amazon.
If you are running your Amazon store as a business and not a hobby, you must include your Amazon income in your tax return. The first step to do this is to apply for an Australian Business Number (ABN) for your business. If your Amazon Store exceeds $75,000, you may wish to register for goods and services tax (GST) voluntarily. This is to your benefit as you can claim back any GST embedded in the costs you incur in making sales. If your Amazon Store turns over $75,000 or more, you must register for GST.
If you run your business as a sole trader, your business revenue will be treated as personal income.
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Key Takeaways
A fantastic product is a good start, but succeeding on Amazon requires an understanding of your obligations towards your customers, business partners and Amazon itself. In particular, you will need to pay attention to:
- your business structure and any necessary trade marks;
- terms and conditions for any product agreements;
- Amazon’s policies; and
- your tax obligations.
If you have questions about structuring your online business and organising your affairs to begin selling on Amazon, LegalVision’s experienced e-commerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes, consider registering the name of your shop as a trade mark. This is especially vital if you hope to grow your store and establish it in the marketplace. In addition, registering a trade mark allows you to protect the name of your business and any logo linked with your business.
If you wish to run your Amazon business by yourself, you can operate your business either as a sole trader or a company. Operating as a sole trader or in partnership is cost-effective and straightforward. However, you and your business partners will have personal liability for any debts incurred by the business. This differs from running a business as a company, where you will have limited liability.
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