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Is Dropshipping Legal and Safe? (Rules and Risks)

Nowadays, dropshipping is one of the most popular forms of retail business. As it is a new type of communication between the customer and the seller, many people might ask about its legality, rules, and risks and generally wonder if it is safe or not. If you are one of this group, keep reading and find the best answer to the “is dropshipping legal or not” question.

Is dropshipping legal

When you are here, it means you are mainly searching for the answer to the “is dropshipping legal” question, and be sure that it is yes, dropshipping is completely legal. However, like all other fields, it is important to be careful about legal issues and requirements of dropshipping to build and run a safe eCommerce business, such as:

  • Getting a business license: 

While a business license is not necessary to create a legal dropshipping business, it would make many online store aspects, like getting a payment gateway or a branded email easier for you.

  • Prove your liability & legitimacy:

This point is a great idea for all online store owners, especially those beginners who want to build trust with consumers and other businesses. So, it seems helpful to register for a business license and reduce the risk of irresponsibility and illegitimacy.

  • Paying the right taxes:

Paying taxes is an unavoidable fact of life, so you should always pay sales tax on your products and profits and make your business plans safe.

  • Forming a business entity:

Also, it would be helpful to create a legal entity, rescue your personal assets, and protect yourself from liability.

  • Think about legal agreements:

One of the best points that would provide your dropshipping legality is to speak to legal counsel and prepare some common legal documents, such as terms and conditions, copyright policy, privacy policy, terms of sale, and return and refund policy.

What exactly is dropshipping?

In simple words, Dropshipping is a new way of online selling, in which you should not store or ship products. Instead, you just list products in your shop front, receive orders, forwarded them to the supplier, and he will ship them to the buyer. This way was first introduced in 1928 and became a lasting method beneficial for both retailers and suppliers after many trials. In this way, preparers focus on their business expertise, and retailers work on building strong relationships with customers.

General legalities and rules of dropshipping

In the first paragraph, in which I talked about the answer to “is dropshipping legal”, you read about some dropshipping general rules and legalities, and now to make it more clear, I suggest you read this paragraph and find a full list of legalities concerning your e-commerce store, such as:

  • Get a business license
  • Get Product Liability Insurance
  • Consult a lawyer or accountant about taxes
  • Try to get a business license
  • Choose a neat refund policy generator

What are the risks of drop shipping?

While the answer to the “is dropshipping safe” question is positive, there are some risks involved, and it would be helpful to know them so that you can avoid them as much as possible.

  • Intense competition:

First of all, there is intense competition, which means as a dropshipping entrepreneur, you should consider all details to become successful in this highly competitive industry.

  • Low-profit margins

The second point is the low-profit margin because as you know in drop shipping, you sell other people’s products with about a 20% average profit margin.

  • Lack of control:

Also, these online sellers would commonly nag about their lack of control over the supply chain.

  • Scammers:

While dropshipping is not a scam by itself, you should always be careful about a trusted partner and not working with all suppliers you find on Google.

  • Sudden stock shortage:

And finally, it would be the worst situation that your customer wants to order something, and suddenly you understand that the supplier has sold all of the supply. 

Also Read: What are FedEx Shipping Exceptions?

FAQ:

  • is dropshipping legal for under 18

You must be 18 years or older to register with one of the payment processing companies.

  • Is dropshipping safe?

Dropshipping is definitely legal and safe if you follow the rules and regulations.

  • What that your dropshipping store is legitimate?

There are many effective points, such as your website’s design and your marketing, refund, privacy policy, and so on.

  • Do you need a business license to dropship on Shopify?

No, dropshipping on Shopify does not require a business license, but there are other legal requirements you should be aware of.

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