Please check our latest article on dropshipping.
Antonia Klatt
Last Updated on 27 December 2023Many people are attracted to the idea of becoming self-employed and building their own businesses. Dropshipping seems to offer an amazingly simple way to do this: You hardly need any start-up capital, you can register a business quickly and cheaply and you can actually get started. But is it really that simple? What should E-Commerce beginners expect when Dropshipping?

Dropshipping: how does the business model work?
The advantages of the business model are obvious: the product is only purchased when the customer places an order and is usually delivered directly to the end customer by the manufacturer or major supplier.
The online seller does not have to purchase the goods in advance and does not have to worry about warehousing, inventory management, and logistical issues. The dropshipping model is therefore also suitable for individuals who want to set up a part-time business. The financial requirements and the associated risks remain manageable.

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Preparing for dropshipping: what is important before registering a business?
Before the business is registered, you should think through and plan your business idea carefully. That includes, amongst others, your range of products offered for sale. Since there are already many online shops and many more products on offer, you should think about what makes your business special. Sometimes unoccupied niches result from unexpected social developments, new inventions, or legal changes.
Here it is advantageous to be attentive and watch out for a profitable market gap early on. Sound research and analysis of market data is essential when designing the company and the product range. After all, a certain offer only makes sense if there is a predictable demand for it.
Dropshipping suppliers
The seriousness and reliability of your suppliers is also of particular importance. Since you do not receive the goods yourself when dropshipping but they are sent directly to your customers, you can hardly influence the delivery process. So you have to be able to trust your supplier on many points, such as punctuality, care, and packaging quality.
Create business plan
A business plan is an important step in the process of building a dropshipping business because it can reveal gaps in your concept or calculation. That’s why it’s worth writing out carefully, even if you don’t want to apply for a loan or a start-up grant.
A good business plan shows how high the purchase prices are, what additional costs – such as taxes or customs duties – are incurred, and how the sales prices ultimately have to be calculated. If your customers are based in different countries, you may also have to take higher VAT rates into account.
Dropshipping and business: The most important questions
In order to give your company legal legitimacy, you have to register a business. All legal bases are summarized in the trade regulations of your country, in Germany for example in the Gewerbeordnung (GewO). According to §1 Abs. 1 GewO anyone can run a business. As a rule, registration is a prerequisite for self-employment. Exceptions are freelancers, such as writers, artists, or architects, and the so-called primary production, which includes agriculture and forestry, viticulture, and animal husbandry.
But the same applies here: If you sell your own agricultural products, you must have a trade business. With regard to dropshipping, the matter is clear: since it is a self-employed activity that does not fall under the exceptions mentioned and serves to make a profit, a trade registration is always required.
How can I register a business?
A trade is registered with the responsible trade office or regulatory office. In many cities, this is now also possible online. The fees for natural persons are between 15.00 and 60.00 euros, depending on the federal state. It is important to understand that in this case, you are also liable as a private individual. If the business does not run successfully and possibly ends in bankruptcy, the tradesman must be liable with his private assets.
Therefore, you should also think about suitable insurance in this case. Another option is to choose a different limited legal form, such as a German GmbH, AG, or UG. Of course, this also depends on the reserves and the individual willingness to take risks.
What documents are required for business registration?
- Business registration (i.e. the completed form)
- Personal document or, if applicable, the residence permit: People from the EU or Switzerland can easily register a business, but as a citizen of a third country you must be able to show a valid residence permit
if necessary, further documents:
- for companies: excerpt from the commercial register
- for legal entities (GmbH, AG, UG) that are in the process of being founded: notarized articles of association and the declaration of consent of the shareholders
- For some activities, official approval or permission certificates are required (e.g. when selling pharmaceuticals)
After you have registered your trade business with the Trade Licensing Office, the authorities will forward your report to the responsible tax office. If the foundation of a GmbH is concerned, the local court will also be informed. In addition, as a seller, you are obliged to join the Chamber of Industry and Commerce. There is an annual revenue-based fee for membership.
Shopify & Co.: Do you have to register a business for dropshipping via a platform?
The common providers such as Shoptify, Wix, or Jimdo offer software for creating the online shop and hosting it on their servers. Even if they often provide further support and know-how to implement your business, this has nothing to do with the legal requirements to be observed. If the intention is to make a profit, a trading company must be registered for each business!
Dropshipping: What should be considered in addition to the business registration?
Of course, for a functioning company, you need a lot more than a trade license. Below you will find an overview of important aspects that are important when it comes to dropshipping:
- Finding the right shop software: There is now a wide range of options for dropshipping entrepreneurs. It is all the more important to do thorough research and consider which software offers the right functions and interfaces.
- Once the shop system has been found, there are still a few legal things to consider: You should definitely comply with the imprint obligation and carefully work out your terms and conditions. A warning at the start of the company brings little joy!
- Commercial thinking: Before you get started, you should find pragmatic solutions to important issues. What order quantity should be available from the manufacturer? How do you deal with returns and warranty claims? How should the goods be packed and how should they be paid for?
- Making contact with major suppliers and testing deliveries: How long are the delivery times? And what is the quality of the goods when they reach their destination?
- Marketing strategy: How will potential buyers become aware of your offer? Here it makes sense to develop a suitable marketing strategy that also takes into account the costs of advertising.
- Which countries do you ship to and what VAT is charged?
Conclusion
Regardless of whether you want to operate your online shop via a ready-made solution such as Shopify, Amazon, or via your own website, you must register a business. This gives your company legal protection. While dropshipping has certain advantages compared to other entry-level E-Commerce businesses, there are still a number of things you need to find smooth solutions for.
This also includes determining the right price, which takes into account the different VAT rates and delivery thresholds of the respective destination countries. hellotax will help you with all matters relating to VAT and ensure that new markets are open to you – without additional hurdles!