How to Start an E-Commerce Business

Choose a Legal Structure

An e-commerce business carries product liability exposure depending on what you sell, which makes an LLC or corporation a common choice to separate personal assets from a claim related to a defective or misrepresented product. See how to choose a business structure for the full comparison.

Register the Business and Get an EIN

File your formation paperwork with the state if you're forming an LLC or corporation, then apply for a federal EIN, which is always free directly from the IRS and typically required to set up a business bank account and most payment processors. See how to start a business: step-by-step guide for the general process.

Set Up Your Online Store and Payment Processing

Choose an e-commerce platform and a payment processor that can handle your expected transaction volume and the specific payment methods your customers expect. Most payment processors require your EIN, formation documents, and a business bank account before approving a merchant account, so complete your formation steps before you expect to go live.

Register for Sales Tax Where You Have Nexus

If you sell taxable goods, you generally need a sales tax permit in your home state before your first sale. Beyond your home state, many states require registration once your sales into that state cross an economic nexus threshold, a dollar or transaction-count trigger that applies even without a physical location there, following the framework states adopted after the Supreme Court's 2018 Wayfair decision. Thresholds and taxability rules differ by state, so check each state where you sell significant volume, rather than assuming your home state's rules apply everywhere. See how to register for state taxes for the registration process itself.

Follow the FTC's Rule on Shipping Time

The FTC's Mail, Internet, or Telephone Order Merchandise Rule requires a seller to have a reasonable basis to expect it can ship within the time frame advertised to the customer, or within 30 days if no time frame is stated. If you can't meet that deadline, the rule requires either getting the buyer's consent to a revised shipping date or providing a refund for merchandise that hasn't shipped yet. Build this into your order fulfillment process, particularly if you rely on a supplier or manufacturer whose own delays are outside your direct control.

Disclose Clearly if You Use Sponsored Content or Reviews

If your e-commerce marketing includes paid influencer posts, affiliate reviews, or any paid endorsement, the FTC's Endorsement Guides require a clear and conspicuous disclosure of that material connection, placed where the audience won't miss it, not buried in a caption or comments section.

Set Up Accounting for Online Sales

E-commerce accounting typically needs to reconcile payment processor fees, multiple sales channels if you sell on more than one platform, and sales tax collected separately from revenue. See how to set up business accounting for the general setup.

Plan Your Returns and Customer Service Policy

A clear, published returns policy reduces disputes and chargebacks, and it's worth deciding on before your first sale rather than improvising a response to the first return request. State your policy clearly on your site, since an unclear or hidden policy is a common source of customer complaints and payment processor disputes.

Economic Nexus Thresholds Change and Differ by State

There's no single national sales tax rule for online sellers; each state sets its own economic nexus threshold and taxability rules, and these can change. Monitor the states where you have meaningful sales volume rather than assuming your initial registration covers you indefinitely.

A Supplier's Delay Is Still Your Responsibility to the Customer

If you rely on a manufacturer, supplier, or fulfillment center, their delay doesn't exempt you from the FTC's shipping rule toward your own customer. Build buffer time into your stated shipping estimates, and have a process ready to notify customers and offer refunds if a delay happens.

Payment Processor Holds Can Affect Cash Flow

A new e-commerce account, especially with high order volumes early on, can be subject to a payment processor's reserve or hold policy while it assesses risk. Plan for this possibility in your early cash flow rather than assuming all processed sales are immediately available.

International Sales Add Customs and Tax Complexity

Selling to customers outside the United States introduces customs duties, international shipping rules, and potentially other countries' tax registration requirements. Research this separately before expanding beyond domestic sales.

This Is Not Legal or Tax Advice

Sales tax nexus rules, consumer protection requirements, and payment processing terms are detailed and change over time. Talk to a tax professional about your specific nexus exposure, and review your payment processor's and platform's terms directly.