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Ecommerce Marketplaces and Legal Formalities

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So have all your documents in order before venturing to sell on ecommerce marketplaces. If your business is legally compliant you can sell on ecommerce marketplaces without any hassle. You may also use Artificial Intelligence-based business automation platforms like Eunimart for consolidated control over your Payment Reconciliation and a detailed record of all expenses.

Legal formalities are the first obstacles to overcome for any business before selling on ecommerce marketplaces. Just like any other business, ecommerce business has legal requirements. The difference in degree comes with the type of product one is dealing with. The most stringent laws govern the healthcare industry including medicinal drugs. So follow the statutory regulations and see that your ecommerce business is legally compliant with the laws governing ecommerce in India. To protect the business, disclaimers, terms and conditions, privacy policies would all have to be strategically drafted and maintained.

 

There are many marketplaces to choose from and they help you to increase sales and create awareness about your brand. There are solution providers to help you with legal formalities too, which might vary slightly depending on the marketplace. So get help and get started with selling on ecommerce marketplaces. It is advisable to not overlook any aspect of legal formality that may apply to you while selling on marketplaces and may make you vulnerable and liable to prosecution.

 

As mentioned, online marketplaces require that individual sellers comply with their rules and get into a seller’s agreement and it is important for you to go over their terms and conditions before agreeing to the same. In fact, to sell on an ecommerce marketplace, compliance to certain legalities is compulsory.

 Each marketplace has its own legal formalities so it makes sense to check up on the marketplaces individually. For example, the difference in document requirements is given below for three different ecommerce marketplaces:

FlipkartVAT/ TIN/ PAN in the Company’s name, Trademark certificate for certain categories and Cancelled cheque leaf.
SnapdealVAT/ TIN, Cancelled cheque leaf, PAN copy in the Company’s name.
AmazonVAT/ TIN/ Pan copy, Trademark certificate, Brand undertaking in company letterhead with seal and stamp, PO not older than 3 months and 2 images of products showing the brand logo.

They also insist on payments through payment gateways and the money gets credited to your account directly.

 

The following are the legal requirements before venturing to sell on marketplaces:

  • It is advisable to float a company with Limited Liability Protection as this will help in the ease of doing business. An LLP ensures that all the legal formalities as opening a Bank Account, obtaining a VAT or Service Tax Registration are obtained with minimum obstacles. Even though partnership or Proprietorship firms are allowed to operate on marketplaces there is said to be no limited liability protection if there is any litigation.
  • The choice is definitely up to the owner and people do open private limited companies but for that, certain formalities are essential. The formalities for such type of a firm is: 

a) Registration and approval of the name, 

b) Office address, 

c) At least two directors with their identification number as DIN

  • A copy of the MOA as well as AOA

 

  • A minimum of Rs 1 lakh capital, and digital signature certificates where required. 
  • Fulfillment of these formalities will then incorporate the firm as a registered body.

The other requirements are of tax compliances with a PAN, TAN (TAX DEDUCTION ACCOUNT NUMBER), TIN ( TAX IDENTIFICATION NUMBER), VAT and Service Tax or Professional Tax numbers as may be required.

Note: The most popular and the most hassle-free of course is a proprietary firm which is eligible for equity funding. It does not have as many formalities to be adhered to as the above except for a Current Account in a bank, Personal Income Tax Returns, and Intellectual Proprietary rights protection.

 

Let us examine each of the requirements individually before you go to the actual marketplace requirement.

 

  • Bank Account: A Bank Account is the primary requirement and can be easily opened with a VAT in case of a Proprietorship firm. The important thing to note is that this is essential for selling on an ecommerce marketplace.
  • Obtaining a VAT is easy through an online process from the website of the State’s Sales Tax Department.
  • A payment gateway is essential for any online ecommerce business because it can accept many forms of online transactions. The payment once received from a customer is disbursed into the seller’s account through the payment gateway. 
  • Maintenance of Cyber Law due diligence is necessary compliance too. Besides, it is also important to ensure data protection, security, confidentiality and privacy protection for customers.
  • Ensuring that all types of taxes of the land are paid and adhered to is a necessity. It is not just income tax but Professional Tax, Sales Tax, Value Added Tax are all necessary to your business besides sticking to RBI norms of doing business.
  • Adherence to Intellectual Property Rights in case of using logos or content is a necessity.
  • There is also something called “The Internet Intermediary Liability” which is liable to be invoked against ecommerce websites unless the regulations are followed strictly. 
  • It is also advisable to apply for a GST which is a centralized system of taxation that can even do away with the option of obtaining multiple VATs. In fact, today it is a necessity when businesses want to open bank accounts.

So have all your documents in order before venturing to sell on ecommerce marketplaces. If your business is legally compliant you can sell on ecommerce marketplaces without any hassle. You may also use Artificial Intelligence-based business automation platforms like Eunimart for consolidated control over your Payment Reconciliation and a detailed record of all expenses. 

As George Washington said “Laws made by common consent must not be trampled upon by individuals”, so to ensure smooth sailing, adhere to the laws of ecommerce marketplaces and let your business flourish.