License Required for Starting an E-Commerce Business

Ashish M. Shaji

11 Dec, 2020

Buying products or services online is a convenient method of shopping without roaming in a market. Those days are gone when customers used to move to retail shops for shopping. The recent trend of online shopping has transformed shopping into the customer-oriented market from a trader-oriented market.

E-commerce is a trend in India for entrepreneurs to register their e-commerce business. Under an E-commerce business ^[1], there is trading of products or services through computer networks, such as the internet.

In India, the e-Commerce industry is witnessing tremendous growth because of the internet connection. E-commerce industries are set to record even a higher growth with the increase in internet service providers and with the 3G and 4G services at a very affordable price.

Staring an e-commerce business

E-commerce refers to the businesses conducted over the internet. Currently, m-commerce business conducted through smartphones has become very popular.

There are two ways to start an e-commerce business, one is through a proprietary e-commerce website and another is joining an established marketplace.

• Proprietary E-Commerce Website

This is the toughest way of starting an e-commerce business. It requires a web development team, online marketing team and payment gateway for receiving payments. It requires a high amount of investment efforts to build a successful business. Creating your own e-commerce website is a long-term initiative.

• Joining an Established Marketplace

It is considered as an easy way to start an e-commerce business. To join an e-Commerce marketplace as a seller, often requires only a bank account and GST registration to make the process easy and simple. Sellers can join multiple marketplaces to sell their products.

Following are the popular e-commerce/m-commerce marketplaces:

Requirements for Starting an E-commerce Business

Before starting an e-commerce business, it is required to incorporate a company or LLP to have the benefits of limited liability and it improves the functioning of the business. With the incorporation of a company or LLP Registration, it will ensure opening of a bank account in the name of a business or for obtaining a GST registration.

Marketplaces allow partnership firms and proprietorship firms to sell on their website. In the case of litigation, there will be no limited liability protection. In case promoter wants to start a proprietary e-Commerce website then it is preferred to start with a company because it can allow for equity funding which is good for successful e-commerce ventures.

GST Registration

GST registration is required to start a proprietary e-Commerce website and to become a seller on the e-Commerce portal. GST registration is required for selling goods in India.

Bank Account

After the incorporation of a private limited company or LLP, it is easy to open a bank account in the name of a business. Whereas in the case of a firm, it is required to obtain a GST registration first to open a bank account in the name of a business. It is required to open a bank account to list on e-commerce marketplace or to obtain a payment gateway for a proprietary e-Commerce website.

Payment Gateway

For processing the customer payments on the e-commerce websites, payment gateway would be required. It allows the website to accept debit card, credit cards, net banking, internet banking payments from multiple banks and credit card companies. Therefore to accept online payments, one payment gateway is sufficient. After receiving the payment from the customer, payment is sent to the bank account of the business in one or two working days. In the case of marketplaces, they will accept the payment through their payment gateway and credit the amount to a bank account of the seller.

It is very important to protect the business through the proper use of terms & conditions and with the privacy policy. In the case of a proprietary e-Commerce website, it is required for the businesses to draft terms & conditions, disclaimer, privacy policy on the basis of its activities and products sold online. In the case of marketplaces, a seller agreement is provided by the marketplaces to the sellers. It is required for a business to read the seller agreement.

Conclusion

The business licenses needed for an online portal depends on the type of products that are sold at the site.  You are advised to go through registration policies of different states as it differs from state to state. It will further help you to know regarding the licenses required for starting an e-commerce business.

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