Do I Need an LLC to Start Dropshipping?

Starting a dropshipping business can be a great way to enter the eCommerce market. Dropshipping is a method of selling products online where the retailer (you) does not keep any physical inventory. Instead, when an order is placed, the retailer sends the order to the supplier who then sends the item directly to the customer.

Because the business owner does not have to buy or store any inventory, the cost of launching a dropshipping business is one of the lowest of almost any kind of small business.

Of course, this low barrier to entry also means there is a lot of competition. That can be seen as a negative to some, but it also means that dropshipping is clearly profitable and if you can find the right mixture of appealing products and clever marketing, you can have success running a dropshipping business.

In this article, we’ll go into further detail explaining just how to become a dropshipper and what it takes to create a dropshipping website.

We’ll also answer some common questions people have when looking to start a dropshipping business in 2023.

How Does a Dropshipping Business Model Work?

A dropshipping business is a type of online eCommerce store. This means that you will have products listed on your website that online customers can browse and purchase.

The difference between this and a traditional online store is that with dropshipping, you do not actually fulfill the orders yourself. Instead, you use a separate company that produces, stores, and then ships the items to your customers.

You collect the money via your store and pay the dropshipping supplier with that money. Whatever amount you charge over what the supplier charges you is your profit.

For example, if your dropshipping supplier is charging you $5 for an iPhone case and you sell it for $15, you keep the $10 as profit.

The customer is generally not aware of this dropshipping arrangement due to the white labeling of any documents or even branding on the item itself. This means that your business name and logo are on any invoice or paperwork that is included with the order.

So when the customer received their order, it appears as though it came directly from you.

Is Dropshipping Still Profitable in 2023?

Dropshipping is not exactly a new business. It has been around for decades and based on current trends, it’s not going away any time soon.

You may have read elsewhere that it’s too late to start a dropshipping business in 2023. The problem with that sentiment is that people have been saying the same thing about the dropshipping business model for over 10 years. Yet, dropshipping continues to grow as an industry, and new businesses are launched every day that turn into successful money-makers for their owners.

While it is true that dropshipping is much more competitive in 2023, this also means there are more markets, products, and customers than ever before.

With proper planning, dedication, and clever marketing, you can still make money with a dropshipping business in 2023.

Do I Need an LLC to Start Dropshipping?

As with any business, you need the legal protection that only a properly registered business entity like an LLC can provide.

An LLC protects you as the owner from personal liability in the unfortunate event that someone sues your business. An LLC can also have tax advantages as well as other benefits when it comes to bookkeeping or obtaining business accounts and other services.

This may seem like a complicated process, but doola offers complete LLC services that make setting up your business a simple task even for those who have never created an LLC before.

With doola, you just answer a few short questions about the business you want to start and we do the rest. There are no credit checks or background checks of any kind and you can complete the entire process online right from your phone or computer.

Steps to Start a Dropshipping Business as a Beginner

We’ve outlined how a dropshipping business works, but now we want to go into detail with each step you’ll encounter along the way.

Choose a Dropshipping Business Niche

This is not only the first step, it’s one of the most important. Choosing the right niche can often be the difference between having success or struggling to find customers or products.

You’ll want to research items via Google and even other retailers to see what items are trending.

A key point here is to be as focused on a specific niche as possible. You don’t want to sell general products or a wide range of products. Instead, focus on a very specific niche that you understand well.

The more narrow your niche of products, the easier it is to reach targeted customers.

Competitor Research

Once you have your idea, research other businesses selling those same or similar items. Look at their pricing then look at how they market their items and business.

Make sure to sign up for their email newsletter or other marketing promotions. This gives you insight into how they are running their successful business in the niche that you want to enter.

Find a Dropshipping Supplier

This will vary depending on the products you choose to sell, but you will need to find a dropshipping supplier to fulfill your orders once your site is up and running.

Aliexpress is a popular marketplace to find dropshipping products. There are also apps like DSer which help you integrate your store with various dropshippers.

Do the Math

Once you have chosen a few products, it’s time to compare pricing and calculate your total costs for each item to be delivered. Include any fees or services you have to pay to make sure your profit margin actually leaves room for a profit.

Make sure to include things like shipping and processing fees as well as any expenses related to attracting customers, like advertising.

Set Up Your eCommerce Store

Now it’s time to start building a dropshipping website. You have the option of building your own from scratch, although many people choose a service such as Wix or Shopify which has integrations built in to make setting up a dropshipping site much easier.

These integrations include things like easily connecting your store to a payment processor or connecting with popular dropshipping suppliers.

These sites also offer a way to build a store and use these integrations without the need for coding or programming knowledge.

Register Your Business

You’ll want to take extra care to properly register your business as this is a legal requirement and certain steps need to be followed. If you’re unsure about how to register your business, Doola has you covered and can walk you through the entire process online in just a few minutes.

The most common business registration will be an LLC, which is a Limited Liability Corporation. These can be set up as sole-proprietorship or partnerships, as well as a corporation.

doola can also help you obtain all the paperwork and identification needed to then register a bank account in your business’s name.

Market Your eCommerce Store

This is the key step when it comes to actually receiving sales. Since dropshipping companies don’t need to spend time with inventory or filling orders, they need to focus on marketing and driving sales instead.

There are many options when it comes to marketing and you should try to find unique ways to put your own spin on each one. Things like paid advertising via Google or Facebook are common, but make sure to start slowly so that you understand what works and what doesn’t before investing more money in paid advertising.

Social media sites like Tik Tok or Instagram can also be great places to market your products, either for free via posts or via paid advertising.

Make sure to also set up new social media accounts for your brands and begin posting helpful or fun information to attract followers and potential customers.

Manage Your Business Finances

Once you start receiving orders, you’ll need to carefully track your business finances. How much money you’re spending on advertising or processing fees must be monitored to make sure you’re always turning a profit. If there is an issue, you can quickly increase prices or reduce costs as long as you’re keeping close tabs on your finances.

doola is a great resource for those new to running their own business and who need help with finances. We offer a complete suite of business management tools like bookkeeping, tax compliance, and even banking setup.

Analyze Your Business Growth

Whatever site or service you choose to host your business and collect payments, there should be analytical tools included to chart how customers are navigating your site.

If you are running any advertising campaigns, these analytics will need to be studied as well to calculate how much you are spending per customer.

Services like Google Adwords will have this type of analytics built-in. Facebook ads and other platforms will also have similar free analytics included when setting up your account.

Ready To Start Your Dropshipping Business?

Dropshipping is still a great way to easily start a business in 2023 with a minimal initial investment. In fact, not many other businesses offer the same easy start-up costs as a dropshipping business.

If you’re ready to get started and take that next step toward running your own business, let doola help you get off to a great start with fast business registration and even help with setting up your banking and other services.

With doola, you can have your business registered and legal to do business in all 50 states in just minutes.

Contact us today and see how easy and affordable it is to start your new dream business.

FAQs

 How much does it cost to start a dropshipping business?

Dropshipping businesses can cost very little to start relative to other business types. Generally, it is recommended you will want to have about $1000 to cover various fees and charges associated with start-up costs and running the business for the first months or so.

How much can you make as a dropshipper?

There really is no limit to how much you can make. While many dropshippers do it as an easy way to earn extra income, many others earn a six-figure income every year from dropshipping.

How can a beginner start dropshipping?

After researching what products you want to sell, you’ll want to properly register your business so you can set up your banking and payment processing.

Doola is a great way to quickly complete this process and often it only takes a few minutes.

How hard is it to start a dropshipping business?

As long as you follow the steps outlined above and take a methodical approach, starting a dropshipping business can be very easy to get started and run successfully.

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