Drop shipping for your Delaware Company

DropshippingHere at Harvard Business Services, Inc. (HBS), a growing number of our clients are forming new Delaware companies for the purpose of creating an ecommerce platform that uses drop shipping as its method of distribution. A retail business that does not keep the products it sells in stock, drop shipping companies are popular among our domestic clients and non-U.S. clients, including those from Canada, Australia, the United Kingdom and India. Forming a Delaware company allows a drop shipping company to conduct business around the world.

Because a drop shipping company sells products stored in another location, your Delaware company can operate from essentially anywhere in the world. Clients establish a business relationship with a third-party provider or multiple providers, purchase products and, in turn, provide them to their own customers.Products are shipped from the third-party provider to the customer directly, and do not have to be stored physically in your own business location. If your drop shipping business can offer a wide range of products, this model can create success for your company in the long run.

When selecting vendors for your drop shipping business, it is important to consult with the suppliers, verify the product, and review their current policies. When it comes to drop shipping, ecommerce regulations can change on a daily basis. Our clients work with big-name suppliers such as Amazon, Ebay, Shopify and Walmart, just to name a few. In fact, companies such as Ebay, Walmart, and Amazon are registered Delaware Corporations.

To meet your customers’ requests, it is critical to keep up-to-date information regarding the total product your wholesalers have in stock. Keep in mind that your customers may purchase multiple items, but from different vendors. So that separate shipping fees don’t delay the completion of your customers’ orders, anticipating this type of order is key.

One hurdle for some non-U.S. clients is opening a bank account for their drop shipping business. A bank account can be opened anywhere in the world, and does not have to be in the U.S. or in Delaware.  Typically, banks require a business owner to show up in person with the approved formation documents and the tax id (EIN) number for the company. This can be a challenge for our International clients. Some International clients are able to travel to the U.S. to open an account. Others have success finding a branch of an American bank located near them to facilitate the opening of an account for a drop shipping business.

Typically, clients contact a few banks to determine what documents and information they need to open the business bank account prior to visiting the bank they select.  

While there are many internal decisions involved in starting a drop shipping business, forming a Delaware company and growing a successful online business is an attainable goal.

If you plan on forming a new Delaware company or if you have any questions regarding this process, we can be reached at 1-302-645-7400 or 1-800-345-2677 ext. 6900 or via email at info@delawareinc.com. We can also be reached via skype at delawareinc.

*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.

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There is 1 comment left for Drop shipping for your Delaware Company

Miles Fidelman said: Thursday, March 31, 2022

What are the tax implications? What is the locus of business when one takes orders online, drop ships, and has funds deposited to a bank account in Delaware, or in some other state where one might have a physical office?

HBS Staff replied: Friday, April 1, 2022

Hello Miles,

Typically if you are not physically operating business here in Delaware the only two things you are subject to are the annual Delaware Franchise Tax and the annual Registered Agent Fee. For any other taxes you may be subject to it would be best to speak with an Accountant.

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