3 Legal Considerations Before Starting An FBA Business

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The e-commerce sector is on a continuous ascending trend for the last couple of years and it doesn’t show any signs of stalling anytime soon. However, it is rather difficult to carve a path for yourself as a beginner since the competition is fierce in most areas.

The good news is you don’t have to start from scratch. You can use the resources and notoriety of the US’s largest e-retailer as a take-off ramp. And yes, we are talking about Amazon! In September 2021, Amazon had around 98 million users on its mobile app alone, which makes it the second-most popular shopping app in the US after Walmart’s.

So why not use all this shopping power to your advantage? 

What is an FBA?

A Fulfilled By Amazon business model allows third-party sellers to use Amazon’s resources (platform, warehouse, and shipping services) to promote and sell their products. 

In a nutshell, for a fee (established according to the type of products you sell and volume), Amazon will let you post your products on their site and use their warehouse for storage. This makes your products Prime eligible and Amazon will ship them out when you get an order.

FBA Business Legal Consideration

Now, this sounds like the ideal business model for beginners in the world of e-commerce, but there are a few legal considerations you have to keep in mind. 

1. Register as a Business

While you can be an individual seller on Amazon, if you are serious about starting an e-commerce store, you have to register as a formal business. This will help protect yourself as an individual and your assets. 

Now, since there are several business types out there, it’s best to talk with a law firm like Heer Law in order to understand which type works best for your interests. A lawyer who is familiar with this business model can provide extremely valuable guidance for a beginner. 

2. Choose an Insurance Provider

Once you are a corporate entity, you also have to think about getting proper insurance. Otherwise, you leave your business open to various lawsuits like a breach of contract or injury claims for a defective product (among others).

FBA sellers need to think about business insurance that covers any civil legal costs, product insurance, and cargo insurance (if you plan on sourcing products from overseas). You may not need all of these, but you need a reliable insurance plan that covers your business needs and liabilities.

3. Find Your Product

With an FBA, you can sell four types of products:

  • Retail arbitrage – where you buy local products at a deeply discounted price and sell them on Amazon at full price;
  • Wholesale – where you contact various manufacturers and try to get a deal for buying in bulk. Again, you sell on Amazon at full price;in-bulk
  • Private labeling – where you place your brand label on existing products
  • A product of your own creation – where you create, manufacture, and sell your own products.

In most situations, Private Labeling is the one that fares the worst while the other options can bring some interesting income. However, if you have a product you created, it is a great way to get things started. 

Wrap Up

An FBA is not the right answer for everyone, but it is a great way to start an e-commerce business. Plus, you can connect your Shopify store with Amazon, so you can have your own store and get a boost from Amazon as well. 

Overall, it helps to think outside the box and Amazon has lots of resources you can tap into to get more revenue your way. 

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