How to Start an eBay Business

Start an eBay Business by following these 10 steps:

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

We have put together this simple guide to starting your eBay Business. 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 will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

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

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 eBay Business 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.

What are the costs involved in opening an eBay Business?

Perhaps the most attractive part of selling on eBay full-time is that it involves virtually no start-up costs. You must pay, of course, for any of the products that you plan to sell (assuming that you don’t have a steady stream of products online), and you must be prepared to pay the aforementioned fees to eBay upon successfully selling a product. eBay also charges a per-item listing fee, or, if you sell more than 50 items per month, you can opt to pay for a subscription. The subscription will cost from $19.95 per month for a yearly subscription ($24.95 for month-to-month) up to $299.95 per month for a yearly subscription ($349.95 for month-to-month). However, because the business is run directly from your home, it requires no additional start-up costs.

What are the ongoing expenses for an eBay Business?

The most significant expense for this type of business are fees paid to Ebay, as outlined in a previous section.

Who is the target market?

The nature of this business means there is little to no personal interaction with customers. Rather, all of the interaction happens online. As such, the most basic example of a preferred client is someone who pays for products promptly and offers honest, positive feedback. More broadly speaking, the best clients are ones who are up front about questions regarding your products so they are not surprised at what they get and leave poor online feedback based on expectations that did not match the reality of what you were selling.

How does an eBay Business make money?

At the heart of every eBay sale, the seller is making money by receiving a certain amount from the buyer (either a fixed “Buy it Now” amount or the final result of a successful auction), with a certain percentage of each sale being owed to eBay itself.

The amount that is owed to eBay varies based on whether the seller is a “basic” seller or pays for either a monthly or yearly subscription to eBay.

• A basic seller can offer up to 50 items for sale per month without paying any fee to list them and simply pays ten percent of the final price up to $750. Beyond that, the seller pays $.30 per item listing but pays no additional amount per sale. Paying $24.95 per month allows the seller up to 250 free listings per month and discounted prices on listings beyond that much ($.20 for fixed prices instead of $.30).
• A $74.95 per month payment allows up to 1,000 free listings per month and $.15 per additional listing whereas $349.95 per month allows up to 10,000 free listings per month and $.05 per additional listing. All of the subscription options offer enhanced sales options including a customized homepage, store address, featured items, and enhanced branding.

How much can you charge customers?

The very nature of eBay means that determining how much to charge customers is more art than science. For instance, the best auction prices are typically lower for items than what customers can find in a store—this is part of their incentive to shop online. However, the price must be competitive with other eBay sellers while also insuring that you make a profit. A final component of this equation is that many auctions offer a “buy it now” price. This allows sellers to skip the traditional auction process and immediately buy the product. This price, too, should be lower than the MSRP of an item while still competitive with what you think a final auction price may end up being.

How much profit can an eBay Business make?

The amount of profit an eBay business can make is entirely contingent on how much the seller is able to sell each year. One way of calculating profit potential, though, is to be aware of the various fees that eat into profits.

• In addition to paying an average of ten percent to ebay, you will be paying 2.9 percent to Paypal in addition to a blanket $.30 fee.
• Most sellers will want insurance for their products, which requires $2.00 for coverage of up to $50 dollars.
• Finally, there is the cost of packaging and shipping the item.

The end result of all of this is that a sale of $40, and assuming a $4.99 charge to the buyer for shipping, the seller must still pay $8.46. This means that each sale can have twenty percent or more of its profits eaten up by shipping and fees, so sellers may have to sell additional products to meet the profit margin they desire.

How can you make your business more profitable?

Effective item descriptions and relentless marketing help ensure that buyers are attracted to your store while honest communication and quick shipping ensure that they trust your services and return to your store. It is important to maintain marketing efforts within and without eBay, including newsletter, social media advertising, and even networking within online bulletin boards and forums that are interested in any niche products that you sell. Above all, be diligent in how you set prices so you can continue to straddle the fine line between offering customers a solid deal and making yourself a solid profit.

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 eBay Business 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!

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.

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.

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.

State & Local Business Licensing Requirements

Certain state business permits or licenses may be needed to go into business as an Ebay entrepreneur. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

eBay Restrictions

It’s important to familiarize yourself with types products that might not be illegal to sell, but violate ebay’s user terms. Such items include counterfeits of a brand name product or vending pirated copies of movies/music.

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.

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.

Is this Business Right For You?

This job is primarily successful for those who already use eBay extensively. At the end of the day, eBay is like any other market, and success requires being competitive in a market filled with other sellers. As such, being familiar with how other sellers price and describe similar products to your own merchandise will help you hit the ground running when you begin selling. The business is also ideal for those who enjoy a flexible schedule and are motivated self-starters.

What happens during a typical day at an eBay Business?

Part of the attraction of being an eBay entrepreneur is that your daily activities will vary and do not need to be conducted in any particular order. However, a typical day often involves a great degree of research about what you intend to sell, including how other sellers describe the product, how much they charge for it, and how much it will cost to ship it. This research helps you creatively describe and competitively price your product in order to stand out from the competition.

Other daily activities include verifying payments that have completed, answering seller questions, and shipping products within the specified time frame of your listing. Finally, it is important to maintain a steady stock of things to sell. This may entail attending local auctions and garage sales as well as buying wholesale products so you can "buy low, sell high."

What are some skills and experiences that will help you build a successful eBay Business?

Among the best skills to help someone build their eBay business include existing marketing skills. Everything from choosing a sensible username to writing evocative descriptions of products being sold involve the same skills that go into traditional advertising and marketing.

Extensive experience using eBay as both a buyer and a seller can help someone make the transition to entrepreneur. Similarly, a familiarity with Paypal (particularly familiarity with having a business account) can help new sellers understand how to receive and process payments via the most popular eBay payment method.

Finally, experience in advertising your services via social media as well as more traditional methods (such as sending newsletters to previous buyers) can help ensure that you have a steady stream of both new and returning business.

What is the growth potential for an eBay Business?

Ultimately, the growth potential of an eBay business is limited only by the time and scope of the seller. Most sellers begin by selling in their spare-time and transition to a full-time business after building considerable part-time success. Growing the business typically involves finding some kind of niche in which the seller both has special familiarity and in which they can easily obtain items to sell online. Nothing keeps the particularly successful eBay seller from finding a partner to help the business grow, but the nature of said business (typically being run from people’s homes) precludes having a large staff housed in a standing office.

Not sure if an eBay Business is right for you? Try our free Business Idea Generator and find your perfect idea.