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is dropshipping legal

Is Dropshipping Legal? Making Sure Your Online Store Is Legit

You may have probably heard of dropshipping before but don’t fully understand what it is about and how it works.

In a nutshell, it’s an order fulfillment process that takes place online.

If your only concern is knowing whether is dropshipping legal or not, you can rest assured that it is, indeed, legal.

Before you decide to go into this e-commerce trade, though, it’s better if you first try to understand what it is and what its most common pros and cons are.

You can also look at this business startup checklist to give you an idea of what you need to do before jumping into the wagon.

Is Dropshipping Legal?

Before we go further about dropshipping’s legalities, let us first understand this e-commerce business’s basics.

Simply put, dropshipping is selling items online that you don’t have on-hand.

Here’s how the process goes: After receiving an order from a consumer, you then get in touch with a direct supplier, who gives you a discounted price of the product.

The third-party supplier will then send the item to the consumer. Your profit is the difference between the amount you received against how much you paid for it.

The problem is you don’t have control over the product’s quality and when your buyer receives it after the purchase.

As a seller, your main focus is to market and advertise the products and ensure that the consumers always feel your store’s online presence.

You act as the link connecting customers to suppliers offering the products they are looking for.

This dropshipping practice is very prominent in various online marketplaces that we regularly visit.

Now that you know it’s legal, don’t get too excited just yet. You may also encounter some legal issues along the way, depending on your supplier.

Legal Liability Issues

We are not saying that all dropshippers encounter legal liability issues with their businesses, but it’s better to be aware of it.

Remember that your direct supplier plays a significant role in the success of your dropshipping journey, so choose who you deal with carefully.

As a dropshipper, you are always dependent on your supplier to provide quality products and deliver them on time.

Be careful when choosing a supplier, as you might encounter unscrupulous and deceptive ones pretending to be legitimate businesses.

Keep in mind that you are also responsible for whatever illegal activities your supplier does because you are on the frontline of every transaction.

To reduce the risk of having problems with your suppliers, don’t forget to create a Dropshipping Agreement Contract before doing business with them.

is dropshipping legal: facts

Dropshipping Legal Requirements

Is dropshipping legal? We already know that it is.

Still, all entrepreneurs going into any type of business must comply with legalities for their venture.

Here are some dropshipping legal requirements you must consider and understand before creating an online store.

1. Business License

The first questions you would generally hear from new dropshippers is all about getting a business license.

Technically, you don’t need a business license to build a digital store and sell products online.

However, getting one is an excellent addition to your credibility as an online vendor.

2. Legitimacy

Another vital aspect to consider when starting your dropshipping venture is the legitimacy of your business.

Getting a business license only proves that your intentions are clean and you want to start a legitimate venture.

As your business progresses, you also need to process additional documents for your suppliers and other business dealings you might undertake.

3. Liability

Dropshipping means sourcing most of your products from overseas suppliers, which means you don’t have any idea or control over their quality.

As a seller, you will always be liable for how you conduct your business and all the products you sell on your platform.

Having a business license lessens your liability if one of your consumers complained about a product bought from your digital store.

You can also get Product Liability Insurance to further protect your business from legal and financial claims because of low-quality items bought from your platform.

4. Taxation

The taxation process may differ depending on each dropshipper’s geographical location, much like a business license.

At the same time, this factor is another vital element for your business to be recognized and prove its legitimacy.

Taxation is an evolving part of e-commerce; thus, it’s best to consult an accountant and a tax lawyer about this matter.

Optional Requirements

Sometimes, you might want to add other recommended elements for your business to act as extra protection if a problem arises.

1. Disclaimers 

Disclaimers are not legal agreements. They are statements meant for the consumers to understand your website and its policies better.

Disclaimers serve as reminders for your customers to understand your website’s limitations when handling disputes and complaints.

Choosing the type of disclaimers you need to put on your website depends on what kind of products you are selling.

Some standard disclaimers include affiliates, external links, legal, and health and safety.

2. Legal Agreements

Although not necessary, your online store should have definite Terms and Conditions. It’s an added protective measure to lessen legal risks.

It’s another way of letting your customers know how you run your business, especially when it comes to exchanges and refunds.

Online businesses require consumers to provide their data on the website for you to process their orders.

Most countries lawfully require digital stores to include a Privacy Policy on their websites to protect their consumers’ information against identity theft and other risks.

3. Refund Policy

Any type of business should have specific guidelines and policies, making it straightforward for every customer to know what to expect from the seller.

Online stores don’t need refund policies. However, there will always be exceptions to the rule where you will have to reimburse a customer.

Having this policy allows you to respond to a customer’s complaint in a legal manner where your business is protected while addressing the issue.

Unsatisfied customers can quickly spread negative reviews about your products and business, which will impact your credibility.

Ethical Marketing Practices

Whether personal or professional, we must learn how to observe and practice proper ethics in any dealings with other people.

Here are some marketing platforms where you can promote your products and how to do it.

Amazon and eBay

These are two of the largest digital platforms you can use for selling products online, where dropshipping is generally acceptable.

Primarily, you have to abide by their rules on handling dropshipping if you want to use these websites.

Thus, it’s crucial to learn and comprehend their policies and requirements for online selling. Today, we will run through some of their guidelines to give you an idea.

1. Ethical Violations

One of the biggest mistakes you can make as a seller is to acquire your product from another popular digital platform and sell it on these two websites at a higher price.

It’s an irresponsible marketing practice, as you take advantage of the customer’s trust and violating the websites’ policies.

2. Correct Way To Use the Website

The correct way of selling on Amazon and eBay is to look for manufacturers and suppliers who can provide unique products for your store.

Shipping timeline fulfillment is vital when using these online platforms. Thus, it’s crucial to have an excellent relationship with your suppliers and consumers alike.

There are also other things you need to consider when selling on this digital marketplace, like:

  • Abide by their return procedures
  • Comply with their legal agreements and policies
  • Follow their packaging rules and documentation

Eventually, you will realize that it’s better to build your online platform and follow specific guidelines according to your ideals.

Email Marketing

Sooner or later, you will notice that your followers have increased, and your website is starting to gain traffic.

One way to better promote your business is through a newsletter subscription to update your customers and provide exclusive offers.

However, make sure you also check anti-spam laws in your area to guarantee you are not violating anything.

Standard Legal Compliance Practices To Consider

Below are some of the generally known practices when using email marketing for your e-commerce website.

  • To provide the customers the option to receive further email communication from your website
  • To prohibit using misleading header information
  • To prohibit using false subject lines
  • To establish that you are sending an advertisement
  • To provide your business address
  • To explain the process of declining additional email communication from your platform
  • To immediately acknowledge the customer’s refusal for further email communication from the website
  • To continually monitor what your admins did on the website
  • To collect and safeguard the consent information
  • To be aware of any changes made about the policy

do you know if is dropshipping legal

Product Legalities

Most online sellers want to sell popular products to attract consumers. However, they can get into legal trouble if they don’t have the permission to do so.

Be aware of the following issues to avoid legal battles if these recognizable brands sue you.

1. Infringement or Breach Scenarios

Under this scenario, we will look at two violation examples that might cause legal battles between you and the concerned product’s company.

Copyright and Trademark

A trademark is any legally registered words or symbols representing a particular company’s brand or product.

On the other hand, a copyright is the absolute legal right provided to the creator of the word or symbol, authorizing them and others to use it accordingly.

These two intellectual properties are technically the same, although each one is protecting a specific asset.

Trademarks protect anything that symbolizes the brand, like its logo, while copyright protects artistic and literary creations, like books and music.

Counterfeit, Knockoffs, or Replicas

This second infringement scenario is the different categories related to either copyright or trademark violations.

It’s crucial to know each category’s difference, as they come with a specific legal consequence depending on the seller’s involvement.

Counterfeit products are created to look the same as the original, falling under both trademark and copyright infringement.

Allowing the customers to believe that they are buying an original product is a fraudulent practice that may lead to a lawsuit.

Knockoffs and replicas have a more subtle approach to copying a product from a famous brand to work their way around laws about counterfeiting.

Manufacturers usually copy the design of a famous brand but without the name or logo. Though it’s still deceiving, they are not considered illegal.

For those who wish to sell items from these famous brands, the law requires you to get a Reseller’s License to make it legal.

2. Prohibited and Restricted Products

It’s effortless to post and sell anything on your online store and digital marketplace.

However, you must be aware of specific laws about prohibited and restricted products.

A seller must have the proper credentials and documents to sell these items. Make sure you have a full understanding of the products before posting.

You can sell some restricted products online, provided you have a license, like food, liquor, and medicine.

Having a license to sell these products prove that you manufacture and distribute these items according to standards.

Prohibited products are banned items you cannot sell anywhere. Still, the list of both prohibited and restricted products vary according to your geographical location.

Below are some of the most common prohibited product categories you need to be careful of:

  • Animals and plants
  • Aerosol sprays
  • Cash
  • Drugs
  • Intellectual property infringements
  • Medical waste or poison
  • Pornography 
  • Precious metals and stones
  • Weapons
  • Illegal products from the originating country

Make sure to thoroughly check each item before posting anything on your platform to avoid legal conflicts.

Is Dropshipping Illegal?

Is dropshipping illegal? No, it’s not as long as you don’t sell prohibited items we have identified earlier.

Make sure you always observe excellent ethical business practices with all your transactions to avoid legal complications.

If you want to venture into something you are not familiar with, do extensive research on the subject. Look for recommended tools and websites to use for your business.

Additionally, make a comprehensive business plan to follow and use it as your guide to help you grow your business.

Last but not least, look for legitimate suppliers for your business and start building trust and confidence from your customers.

About the Author Ramesh Dontha

I am an entrepreneur, writer, and blogger. I build businesses and love to share my experiences of my successes and failures. My mottos is: Live with purpose, Be Passionate about that purpose, Persevere through ups and downs and keep exploring Possibilities.

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