E-Commerce Business – License Required for Start-ups

Buying products or services online is a convenient method of shopping without roaming in a market. Those days are gone when customers used to move to retail shops for shopping. The Recent trend of online shopping has transformed into customer oriented market from a trader oriented market.E-commerce is a trend in India for entrepreneurs to register their e-commerce business. Under E-commerce business, there is a trading of products or services through computer networks, such as the internet.

In India, e-commerce industry is witnessing tremendous growth because of internet connection. E-commerce industries are set to record even higher growth with the increase in internet service providers and with the 3g and 4g services on very affordable prices.

E-commerce refers to the businesses conducted over the internet. Currently, m-commerce business conducted through smartphones has become very popular. There are two ways to start an e-commerce business one is through proprietary e-commerce website and another is joining an established marketplace.

  • Proprietary E-Commerce Website

This is the toughest way of starting an e-commerce business. It requires web development team, online marketing team and payment gateway for receiving payments. It requires a high amount of investment efforts to build a successful business. Creating your own e-commerce website is a long term initiative.

  • Joining an Established Marketplace

It is considered as an easy way to start an e-commerce business. To join an e-commerce marketplace as a seller often requires only a bank account and GST registration to make the process easy and simple. Sellers can join multiple marketplaces to sell their products.

Following are the popular e-commerce/m-commerce marketplaces are:

  1. Flipkart
  2. Amazon
  3. Snapdeal
  4. Shopclues
  5. PayTM

Requirements for Starting an Ecommerce Business

Before starting an e-commerce business, it is required to incorporate a company or LLP to have the benefits of limited liability and it improves the functioning of the business. With the incorporation of a company or LLP, it will ensure opening of bank account in the name of a business or for obtaining a GST registration. Marketplaces allow partnership firms and proprietorship firms to sell on their website. In the case of litigation, there will be no limited liability protection. In case promoter wants to start a proprietary e-commerce website then it is preferred to start with a company because it can allow for equity funding which is good for successful ecommerce ventures.

GST Registration

GST registration is required to start a proprietary ecommerce website and to become a seller on ecommerce portal. GST registration is required for selling goods in India.

Bank Account

After the incorporation of a company or LLP, it is easy to open a bank account in the name of a business. Whereas in the case of a firm, it is required to obtain a GST registration first to open a bank account in the name of a business. It is required to open a bank account to list on ecommerce marketplace or to obtain payment gateway for a proprietary ecommerce website.

Payment Gateway

For processing the customer payments on the ecommerce websites, payment gateway would be required. It allows the website to accept debit card, credit card, net banking, internet banking payments from multiple banks and credit card companies. Therefore to accept online payments, one payment gateway is sufficient. After receiving the payment from the customer, payment is sent to the bank account of the business in one or two working days. In the case of marketplaces, they will accept the payment through their payment gateway and credit the amount to a bank account of the seller.

It is very important to protect the business through the proper use of terms & conditions and with the privacy policy. In the case of a proprietary ecommerce website, it is required for the businesses to draft terms & conditions, disclaimer, privacy policy on the basis of its activities and products sold online. In the case of marketplaces, a seller agreement is provided by the marketplaces to the sellers. It is required for a business to read the seller agreement.