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How To Start A Retail Business Online

By August 31, 2022 No Comments

We know that sourcing products, marketing, and lead generation have all been covered ad nauseum for those looking to become an online retailer. So, we’re going to focus on the back-office business side of online retail.


We get asked all the time – how do I start a retail business online? There are several steps, but the first thing you need is to establish a foundation.

For starters, meet with a CPA and an attorney. And yes, we recommend having one of each on call. As your business grows, you’re going to need some people in your court (no pun intended).

If you meet with them from the start, they’re not going to charge you a crazy amount for an hour consultation to help you pick your entity type (legal and tax) and to highlight any pitfalls ahead that you can avoid.

This is one of those times where it’s much more expensive to have to fix something that you screwed up than to learn the right way to do things from the start of your online retail business.

Here are a few other things that should be on your todo list from the start:

  • Register your online retail business with the IRS.
  • Register your online retail business with the Secretary of State.
  • Open a business checking account.
  • Talk with an insurance agent about purchasing business insurance.
  • Register for a sales tax license, if needed. It’s illegal to collect sales tax without one.

Set Up Your Operational Systems

Whether you’re selling on Amazon, Shopify, Etsy. eBay, your own site, or one of the many others, figure out which platforms you’re going to use for your online retail business.

Next, you need to vet payment processors. We recommend at least two to avoid any hiccups in your cash flow from customers. One should serve as your primary payment processor, and the other serves as a backup to protect yourself.

Once you’ve locked in your shopping carts and payment processors, go into your shopping carts and make sure that your sales tax settings are appropriately set for your business.

Set Up Your Accounting Systems

1.Cloud Inventory System
One of the most important accounting systems for online retailers is a cloud inventory system, especially if you’re selling on multiple platforms. This is great for online retail operational efficiencies.

2.Accounting Software
You need a way to keep track of everything you’re doing in your retail business online. We love Xero and QuickBooks Online! Check out this video to compare the two.

3.Sales Tax Manager
If you’re collecting sales tax, we highly recommend using Avalara to help manage sales tax and the payments and filings that come with it to stay compliant.

Optimize Your Online Retail Performance

Is it profitable to start an online store? Well, that depends on your business…and that’s for you to track!

After you figure out how to start a retail business online, you need to track how it’s performing. Start by checking out the ways tools can help you track and optimize your performance.

For example, your cloud inventory system should offer great analytics when tracking profitability by SKU and profitability by order.

In addition, you need to track cash flow. If you’re spending a lot of money on inventory and not enough is coming back in, you could really get into a cash crunch. And no one wants that, especially if you’re newly starting a retail business online.

Keep Learning

Starting a retail business online has a learning curve like any other business. As an entrepreneur, it’s important to keep expanding your knowledge and staying up to date with what’s new.

If you’re unfamiliar with some of the financials aspects of online retail, we encourage you to check out these books:

More Resources For Your Online Retail Business

For more helpful resources, check out our ecommerce blog content and our ecommerce YouTube channel.

In need of an ecommerce accountant for your business? Click here to learn more about Acuity’s ecommerce accounting practice.