Drop Shipping Business Advice Needed

Discussion in 'Business & Tax Advice' started by RareLordz, Feb 8, 2013.


How am I progressing?

  1. Right Direction!

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  2. Wrong Direction!

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  3. Getting There!

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  1. RareLordz

    RareLordz Newbie

    Feb 8, 2013
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    My Business Concept/Attempt

    Been lurking for some time. Finally got the balls to make an account because I feel the BHF has the experience to help me at my first shot at entrepreneurship.

    Okay Guys, Lately Myself and group of friends have decided to make a e-commerce dropshiping clothing business. It took about a month to make the website and we had a good hype built up from social network advertising. When release time came around we made a good amount of sales to say it was our first time. We in took about 1k sales. That converted into 300-400 in income. It did not work out all to well though, after all the hype from getting sales we soon discovered that our seller for dropshiping was fraudulent from reviews we had read.

    I quickly refunded everyones money and even had to issue 3 partial refunds due to lack of funds, to prevent a calamity. After that experience I have shut the website down with the excuse "We will reopen soon we are fixing technical errors and restocking." I now realized the need for a LLC so I got that done and set just need the operational agreement. I also registered for a EIN. I saw that paypal was really bad on chargebacks, limiting accounts, So im now deciding to open a business bank account and use a credit card to buy from dropship vendors instead of paypal.

    My questions are: Am i going in the right direction, Can you critique me and make recommendations , Is it better to use a cc payment processor as opposed to paypal ( for alibaba purchases. They do not accept PayPal ), I have learned that it takes a day or two for money too transfer from one back to another from payment processors, Is that too long to process a purchase from a customer?

    My DropShip Process Concept from the aforementioned information:
    • Sell Item
    • Collect Money through cc processor
    • wait for money to transfer to business bank account
    • Purchase item with cc and get it dropshipped
    • Keep Profit.

    Also any information on how taxes associated with business work (Tax/IRS/Business Newbie | Senior in High School).
    Have I bit off more than I can chew?
    Thank you for reading my thread I hope you can provide me with beneficial information that will help in my endeavor!:eek:
  2. MTUser2010

    MTUser2010 Jr. VIP Jr. VIP

    Oct 21, 2010
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    Good job on sorting out your initial problem. It does seem that many drop shippers are fraudulent, or if not that are offering to sell to you an item at above (100% above) what you could buy it for on eBay. I think that you need to think carefully about your operational agreement for your LLC if there are still the same partners. Having an LLC will not help you if you have not planned how expenses are shared and who gets the profits. Setting one and registering it with your state is the easy part. :)

    Yes paypal is bad for holds, holding some percentage of your earnings as a kind of slush fund to fix imaginary or real problems, but your idea does not fix this. When you use a CC processor, you typically authorize them to deposit and debit your account. So if you get a chargeback, you get a better shot at responding to it than you would with paypal, but the processor will still debit your business account for whatever amount the chargeback is until the matter is resolved in your favor.
  3. k1112

    k1112 Newbie

    Jan 5, 2013
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    I think if your selling brand name clothings that 90% of the drop shippers are not genuine , you might be better off finding something else or selling no brand clothing