How to Setup an E-Commerce Business?
Bill Gates once said: “If your business is not on the internet, then your business will be out of business.”
The E-Commerce industry is ushering in the next wave of change for the UAE economy and if you’ve been thinking about venturing a foot into its world of infinite profits, then the clock is ticking…the time is ripe to start your own E-Commerce business in the UAE.
Following Steps will help you to Setup E-Commerce Business:
Step 1: Decide on the Perfect Business Plan and Model
The first thing you have to do is to think long and hard about narrowing down on the perfect E-Commerce business plan and E-Commerce business model.
There are two types of business models that you can opt for. You can go with either a single vendor or a multi-vendor E-Commerce store.
A Single Vendor Marketplace is a site where a single seller sells its products to multiple customers.
A multivendor marketplace is an e-commerce platform that empowers multiple vendors to sell their products from one storefront. For Example Amazon, ebay etc.
Step 2: Register your E-Commerce Business
It is mandatory to have a trade license in UAE. Incorporating an e-commerce company in UAE is easy, but you can’t flout the laws and regulations while doing so. The UAE authorities do not allow any random person to launch an e-commerce store and start selling products. If you want to set up an online business in UAE, you have to apply for an e-commerce license.
How to Obtain an E-Commerce License in UAE?
Google reveals that 92% of the population in the UAE has internet access. So, factors like the increasing usage of the internet, favorable tax environment, etc. show that having an e-commerce business in UAE can be profitable. You need to go through the following steps to obtain an e-commerce license.
- Decide a legal structure for your business.
- Identify whether to go for free zone or LLC company.
- Register a trade name & get trade the license.
- Draft an Memorandum of Association (MOA) and local service agent agreement as required.
- Registration of Rental Agreement.
- Import/Export requirements.
- Opening a corporate bank account.
Step 3: Mandatory VAT Registration
A person resident in the U.A.E. is required to register for V.A.T. if any of the subsequent follow:
- The entire price in their taxable materials made within the U.A.E. and imports into the U.A.E. surpassed AED 375000 over the preceding 12-month period; or
- The individual anticipates that the total value in their taxable elements made within the U.A.E. and imports into the U.A.E. will exceed AED 375,000 inside the subsequent 30 days.
The principal categories of supplies and imports that need to be taken under consideration for the functions of the required registration threshold, and the voluntary registration threshold, are:
- Materials of goods or services made inside the U.A.E. in the direction of enterprise.
- Any goods or services that the individual has imported into the U.A.E. that would have been subject to V.A.T. had they been furnished in the U.A.E. The person need to not include in this calculation the value of any supplies which might be both exempt from V.A.T. or are outside the scope of UAE VAT.
Your business must be registered with one of the ports and customs authorities so that you can receive an importer’s code. UAE imposes 5% customs duty on imported goods which are to be sold in UAE.
Step 4: Effective Accounting
Whichever e-commerce platform you will sell on, implementing industry-specific accounting practices is vital to helping you achieve your business goals. Unfortunately, e-commerce platforms like Amazon do not make it easy but with the right bookkeeping and accounting service, you will be able to understand the numbers and start using management accounting to help you make more informed business decisions.
Important things for Accounting to Run a Successful E-Commence Business
- Keeping track of your cash flows
- Managing Inventory
- Credit and Commission (Under the cash basis of accounting, you should record a commission when it is paid, so there is a credit to the cash account and a debit to the commission expense account.)
- Delivery Partner & Logistics
- Marketing Cost (Online Marketing & Offline Marketing)
- Other Costs & Expenses (Other expenses are expenses that do not relate to a company’s main business. As well as operating costs, the company needs to consider other expenses including interest expense and losses from disposing of fixed assets.)
- Tax Rates & Payments
- Calculating the Break-Even Point
- Balance Sheet
Step 5: Payment Gateways
You need to set up payment gateways for your online business to become profitable, as it will allow the processing of credit cards, debit cards, net banking, and cash card transactions through the E-Commerce website.
Some of the popular payment gateways are PayPal, PayU, and RazorPay etc.
Step 6: Logistics
On time delivery is key to the E-commerce industry for which identifying logistics partner becomes mandatory. Also the cost of logistics should be well-defined to derive costing and profitability of product and services.
Horizon Biz Consultancy Services
Horizon Biz Consultancy is experienced in business setup and accounting for e-commerce. Our UAE and India based, qualified accountants are experienced working with Amazon, eBay, noon, Stripe, Shopify, Paypal, Magento and many more popular e-commerce platforms. Plus, we’re used to working with E-Commerce sellers who sell in countries all over the world and therefore need to take into account numerous different VAT rates, tax implications of a different part of the world and understanding of each sector’s performance.
We can provide you UAE’s best Business Setup, Accounting, Taxation, Finance Consultancy, and other allied services. We are working since 6 decades. And years of experience will never let you down. We have an exciting offers and discounts for you.
You can contact us directly. Our Experts will help you out!
Save your business’ time and money both, today.