By Cliff Ennico
It's the most commonly asked question eBay and Amazon sellers ask me: "I've been selling on eBay/Amazon/Etsy/wherever for a while, but I don't know if I should treat it as a hobby or a business." Sooner or later, every online seller has to make the fateful decision: should I do this only occasionally for the fun of it, or should I consider making a part-time or full-time living doing this? Sometimes the decision is made for you, as when so many people are asking you to sell their stuff on eBay that before you know it you've made $50,000 or more in profits and you almost have to treat it as a business.
Here are 20 signs, David Letterman-style, that your online selling activities are getting a wee bit beyond the "hobby" stage.
- 20. You've run out of things in your attic and basement to sell online, and your friends, neighbors, parents and children are complaining stuff goes missing each time you visit them.
- 19. After putting your garbage out by the curb on pickup day, you drive around the neighborhood to see if anybody is throwing away anything interesting.
- 18. You've taken out classified ads in the local newspapers and have placed one-page "flyers" in all of your neighbors' mailboxes offering to help other people clean out their attics and basements - for a fee, of course.
- 17. You begin haunting local funeral parlors, like Paul Newman in "The Verdict", offering your online selling services to bereaved relatives who just can't bear the thought of cleaning out Mom's house.
- 16. You're personally acquainted with every estate, divorce and bankruptcy attorney in your community.
- 15. A hedge fund wants to invest in what you're doing.
- 14. You consider building out the shed in your backyard, or adding a third story to your center-hall colonial, so you'll have more room to store your inventory.
- 13. You keep your Yorkshire Terrier chained to your inventory at night so you can deduct him as a "guard dog" (hey, they're mean little guys, you may actually get away with it).
- 12. The first things you read in the newspaper every morning are the liquidation and creditors' notices in the "legal" section of the classified ads page.
- 11. You carry rolls of hundred dollar bills to garage sales, arriving just as the homeowners are putting out their stuff, and offer to buy everything they have, sight unseen.
- 10. You own the complete works of Marsha Collier, Lynn Dralle, Skip McGrath, Danna Crawford and other online selling gurus (if you don't know who these folks are, you probably aren't quite "there" yet).
- 9. You're on a first name basis with every employee of your town dump, the head of the local trucker's union, and every freight liquidator, customs broker and factory outlet within a 50-mile radius.
- 8. You arrive at 6 a.m. for your local library's annual book sale with 36 empty liquor boxes and three undocumented "day laborers" to help you pack up your truck.
- 7. You have so many student interns helping you create your listings the local community college has named a faculty chair after you.
- 6. You know exactly where you can find motor vehicles that were "formerly owned by drug dealers".
- 5. You know which brands of perfume, housewares and other consumer goods are being discontinued by their manufacturers within the next six months - and which distributors are likely to have overstocks of these items.
- 3. The local kids can't play basketball in the street anymore because they're too busy dodging UPS trucks going to and from your home office.
- 2. You're setting up a charitable foundation to teach convicts in your state prison system how to use eBay Selling Manager™, Auctiva™, Sellbrite™ and other online selling software.
And last but not least . . .
- 1. You make at least one penny in profit each year from your online selling activities.
When you start selling things online, you have to take yourself seriously as a business. eBay, Amazon, Etsy and other online retail platforms will expect you to operate in a professional, businesslike manner, and to treat your buyers with respect. If even a couple of buyers post "negative feedback" saying they didn't have a good experience with you, you may well be kicked off the site.
Here are a couple of tips for getting started:
- Have your accountant obtain a federal tax identification number (EIN) for your business.
- Register for state sales, use and other business taxes - your accountant can also do this for you, probably for free.
- If you plan to have lots of shipments each week, set up a "private mailbox" arrangement at your local UPS Store and use that instead of your home as your business address.
- Consider forming a corporation or limited liability company (LLC) for your business - a local attorney can do this for you for a fee in the $500 to $1,000 range.
- Set up a bad debt reserve so you can take a deduction on your taxes when buyers fail to pay you on time, return stuff other than the stuff you sent to them, or threaten to post negative feedback online if you don't let them keep your stuff AND their money.
Cliff Ennico (cennico@legalcareer.com) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest books are 'Small Business Survival Guide' (Adams Media, $12.95) and 'The eBay Seller's Tax and Legal Answer Book' (AMACOM, $19.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. COPYRIGHT 2019 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.
