How to Start an Online Pharmacy

Start an online pharmacy by following these 10 steps:

1. Plan your Online Pharmacy
2. Form your Online Pharmacy into a Legal Entity
3. Register your Online Pharmacy for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Online Pharmacy
6. Get the Necessary Permits & Licenses for your Online Pharmacy
7. Get Online Pharmacy Insurance
8. Define your Online Pharmacy Brand
9. Create your Online Pharmacy Website
10. Set up your Business Phone System

There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your online pharmacy. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?
• What will you name your business?

Luckily we have done a lot of this research for you.

What are the costs involved in opening an online pharmacy?

Owners will need to buy plenty of medical insurance in the case of a liability claim. The average cost of a pharmaceutical claim is more than $14,000, and those numbers will likely increase due to the still somewhat unregulated online healthcare space.

Medical professionals will also need to obtain licenses for the state from which they sell their prescriptions and the states to which they sell. (The costs for these licenses will vary depending on the state.) Entrepreneurs will also need to hire a lawyer to ensure they’re following all rules to the 0 and pay their healthcare professionals a substantial salary to guarantee quality care. Finally, owners need to account for the wholesale cost of prescription drugs, which will vary by supplier.

What are the ongoing expenses for an online pharmacy?

Online pharmacy owners will have the following ongoing expenses:

• Liability insurance
• Legal expenses
• Advertising costs
• Wholesale prescription costs
• Employee salaries
• Administrative costs (e.g., website upkeep, etc.)

Who is the target market?

For the time being, it will likely be people between the ages of 30 to 50 who will order from a online pharmacy. They’re the ones who will be most comfortable navigating pages, chatting over a video platform, and using an online shopping cart.

How does an online pharmacy make money?

Online pharmacies make money by marking up the costs of the drugs from wholesale. They may or may not charge people to speak to the pharmacist or doctor on-site.

How much can you charge customers?

The markup for a prescription drug is based on both demand and location. The best way to determine how much you can charge is to do research on what people are paying in the markets you serve, and what their insurance will typically cover for each drug.

How much profit can an online pharmacy make?

Online pharmacies stand to make a significant portion of the more than $370 billion spent on prescription drugs each year. These numbers are only expected to rise due to both an aging population and standard inflation. If your pharmacy sells 1,000 prescriptions a month at at average of $400 a piece and operational costs are $300,000 a month, that's still $100,000 in profit per month.

How can you make your business more profitable?

Online pharmacies may include premium subscription services as they grow. For example, a person with a Gold plan will get 5 hours a month of direct pharmaceutical care from a licensed doctor. They will have access to personalized treatment plans or more detailed advice about their conditions.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Online Pharmacy Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your online pharmacy is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

Small Business Taxes

Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).

You can learn more about small business taxes in these guides:

• LLC Taxes
• Sole Proprietorship vs LLC
• LLC vs Corporation
• LLC vs S Corp
• How to Start an S Corp
• S Corp vs C Corp

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Open net 30 accounts

Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.

NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

Federal Business Licensing Requirements

There are many federal regulations regarding the production and distribution of prescription drugs. Before opening your online pharmacy, be sure to review this FDA page regarding drug distribution, as well as any other relevant FDA laws. 

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an online pharmacy business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

For information about local licenses and permits:

• Check with your town, city or county clerk’s office
• Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Learn more about General Liability Insurance.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market an online pharmacy

It’s not just low prices that customers want when it comes to their prescriptions — they also want effective and convenient advice. Since you’ll be running your store online, you should primarily be advertising your services online. Use social media, blogs, and even Google Ads to boost your online presence. However, you may also want to establish relationships with local doctors in your area, and consider finding ways to advertise specifically to their patients. This may be done either by direct recommendations from the doctor or with printed flyers around the hospital.

How to keep customers coming back

The more important thing is to deliver safe drugs alongside an equally safe treatment plan. The doctor or pharmacist should have excellent people skills and the ability to quickly develop relationships with their patients. They should also be knowledgeable and ready to find the answers if they're unsure of something.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

• All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
• Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
• Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Start a Online Pharmacy in your State

Is this Business Right For You?

This business is suited for entrepreneurial doctors/pharmacists or business people who can partner with pharmacists or doctors. An online pharmacy owner should have an inherent interest in the healthcare space and follow the many trends in insurance, patient care, and consumer preferences.

What happens during a typical day at an online pharmacy?

Doctors or pharmacists are required to be employed on-site to handle and quality check the medications. If you’re the employer, you will be responsible for managing the online inventory and general customer service. Reduce your liability by consistently evaluating communication protocol and working with suppliers to determine which drugs will best serve your audience.

What are some skills and experiences that will help you build a successful online pharmacy?

A business owner doesn't need to be a doctor or pharmacist, but they need to employ a qualified and licensed professional to distribute drugs on an online platform. If the business owner doesn’t have a formal medical background, they will need to be industrious, organized, and diligent. They should have at least some experience working with suppliers, lawyers, and insurance companies before jumping into this career.

What is the growth potential for an online pharmacy?

The growth potential is huge for online pharmacies. Based on recent statistics, it’s thought there will be 4.25 billion prescriptions written in the US alone by 2019. While there has been plenty of bad press for online pharmacies selling fake or otherwise unsafe drugs, those that offer a consistent, reputable service will find they can quickly grow their business.