Amazon has finally arrived in Australia and offers a new opportunity to sell your products online. Before jumping on Amazon’s website to start 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 to begin selling on Amazon.

Business Structure

Half the products sold on Amazon worldwide are from small or medium sized businesses. Selling on Amazon is similar to running an online business through your own website, but with a massive distribution network. As such, you should consider what business structure would be best to limit your liabilities and protect your finances.

If you will be running your Amazon business by yourself, you can operate your business either as a sole trader or a company. Similarly, if you are partnering with someone, you can establish a general partnership or set up a company. If you establish a company, you and your business partner will be shareholders in the company.

It is both cost-effective and straightforward to operate as a sole trader or in partnership. However, you and your business partners will have personal liability for any debts incurred by the business. This stands in contrast to running the business as a company, where you will have limited liability.

Trade Mark

It is crucial that you choose a name that another business has not already 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 are infringing by selling under a specific brand only to learn that someone has registered a similar name as a trade mark.

It is also a good idea for you to consider registering the name of your shop as a trade mark. This is especially vital if you are hoping to grow your store and establish it in the marketplace.

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.

How are you sourcing the products that you will be selling on Amazon? Most likely, you have already found a supplier in Australia or abroad that will produce your products, or you 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. You will need a manufacturing agreement if you are having your products manufactured, or a distribution agreement if you are acting as a distributor.

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 Amazon’s seller agreement and applicable Amazon policies.

If you do not comply, you may be suspended from using the marketplace and liable for breach of contract. Therefore, make sure you carefully read Amazon’s policies and agreements.

Tax

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 a running your Amazon store as a business and not a hobby, you will need to 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 turns over less than $75,000, you may wish to voluntarily register for goods and services tax (GST). This is to your benefit as you can claim back any GST embedded in 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. 

Key Takeaways

An amazing 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, get in touch with LegalVision’s e-commerce lawyers on 1300 544 755 or fill out the form on this page.

Johan Lundstedt
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