Is Dropshipping Legal? Risk & Benefits Of The Business Model

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You may have experienced, or know someone who has experienced an online rip-off, which leads to questions like: Is dropshipping a scam? Is it a real business? Is it legal?

Yes, dropshipping is a legal business, but like any other business, there are details that you need to pay attention to, legal stuff that can lead to troubles. In this article, we are giving the best tips to prevent getting you in any trouble related to dropshipping legal issues.

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Dropshipping is a business partnership but without contracts between parties. In this business, the seller doesn’t need to meet up with the supplier, you just look for a supplier for a product.

I’ve explained in detail what dropshipping is, and how to set up a store in 7 simple steps.

In this article, we will answer some questions that doubt the creditability of this awesome business model.

And like everything else in life, dropshipping has legal challenges, I will be going through them besides the opportunities that this business offers.

Is Dropshipping Legal?

Yes indeed. There are no laws or policies by any government organization that make the business unlawful.

You just need to enroll with eCommerce platforms that encourage dropshippers.

A very best example of that kind of eCommerce platform is Aliexpress eBay and amazon. For sure, different platforms have different rules for dropshipping.

? Related: What Is Dropshipping? And What Is Dropshipper? (Open in a new tab)

Most countries have legalized dropshipping. In the USA for example, there are some legal requirements to start a dropshipping business, which indicates the seriousness of this business model:

You need to comply with the relevant tax laws, especially if you are dropshipping from outside the US.
Have a USA reseller permit.

The same goes for the UK. Every dropshipping business must do a VAT registration before start selling to customers.

Many countries have taken action and legalized this business, you need to learn more and familiarize yourself with those policies, to cut down the road on any troubles in the future.

What Are The Legal Challenges That Can Cause Problems In Dropshipping?

Unreliable Suppliers:

Choosing the right suppliers is critical for building brand creditability.

Some suppliers are not verified, trusted or reliable, which will more likely cause errors in the process.

As I’ve mentioned earlier, this is a business partnership agreement, you will be having your unique policies on your site, and so if the suppliers fail to deliver as per your guidelines, customers will raise their issues with you.

They don’t know the source, the supplier, they know you!

A reliable supplier can painfully cost you tons of money, because some may cancel the order and ask you to return their money.

To avoid these obstacles, always try to stick to suppliers with a good rating, feedback and amount of orders, which can be a good indicator of their creditability. Your first priority should be the customer experience in your store.

?So if you want to get in direct touch with reliable trustworthy suppliers in your niche check out these two supplier directories:

Spocket: (Learn more about Spocket)
Salehoo: (Learn more about Salehoo)

2. Selling fake products:

Again, when you choose to work with a reliable supplier, you won’t even have to pay attention to such detail, because you know that this supplier is trusted by thousands of other drop-shippers like you, verified and deliver what they promise.

Unreliable suppliers can deceive you into selling counterfeit items as you do not come into contact with them. This will end you up in jail.

3. Trademarks and licenses:

Some countries require you to register for a certificate before adopting such a business.

Like any other business, you need to pay attention to small details, focusing on the copyright stuff.

If you want to promote a product with a trademark, it’s better for you to ask for the invention certificates and the needed legal papers that can protect you later on.

I recommend Stay away from existing brands, because this can limit your choices. Since that you are not a licensed reseller, the risk of using their logo is not worth it. Save yourself a lot of troubles, and stick to products where a recognizable logo doesn’t matter so much.

4. Taxes

Before starting your business, you need to gain knowledge about how to be tax compliant and avoid issues with tax agencies.

This is serious stuff and can result in putting you in jail.

Some countries, like the UK, impose a tax on online businesses, so that’s why you need to be aware of the tax liabilities for e-commerce in your country before you start.

? Important: How to start a Shopify online store in 2020? (Open in a new tab)

Dropshipping Simplified In Bullet Point Steps:

The seller (You) will set up an online storefront.
The seller selects a product niche to dropship and sell.
The seller will find a reliable supplier to ship products from his warehouse directly to customers.
The seller places the images of the chosen products on his store, showing the exact features through the product description.
Someone will find an item they like while surfing your store and place an order.
You the seller will receive the order, containing their information (address, name, phone number, etc…)
You forward the order to the supplier, with a payment-cut for the item.
The supplier will handle packaging, shipping and delivering the item directly to the buyer.

Are you considering starting your own dropshipping business store?

? Read our article here that shows you how to start a Shopify store in 2020 in 7 simple steps. (Open in a new tab)

Conclusion

Dropshipping is a legal business, but like any other business, there are details that you need to pay attention to, legal stuff that can lead to troubles, and in some cases to the jail.

So choosing the right supplier can prevent getting you in any troubles related to legal issues.

There are certainly many eCommerce resources that help you succeed in your dropshipping business.

For me, I had a huge success with Shopify and Salehoo, built up amazing relationships and connections with reliable suppliers, and got the chance to choose among 8500+ trustworthy suppliers.

? Check out our full Salehoo review to learn more about this powerful research tool. (Open in a new tab)

Luckily, with Shopify, you can set up an online store in a matter of hours. (Claim your 14-day free trial)

Feel free to share your thoughts in the comments, and don’t forget to claim your free course?

Because you, our readers are precious to us, we’ve come up with this amazing course, that can teach how to launch your own Shopify store without paying big bucks to some guru! Do not forget to grab your seat, It’s FOR FREE!