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Etsy is an online marketplace where millions of businesses from around the globe sell their products. A buyer is able to search for what they want and a myriad of results will appear. Etsy sells everything, from home furniture to handmade soaps.
The individual businesses are referred to as ‘Etsy shops’, referencing the marketplace type structure of the website, where a multitude of different businesses come together and operate in the same place.
What makes Etsy a little different is that they do not handle the sale, marketing, creation, shipping or postage of any of the items listed on their website. All of that is taken care of by the sellers, and Etsy simply connects these businesses to customers. This is what makes it a marketplace.
What Kind Of Business Structure Can I Have On Etsy?
There are no set rules or restrictions around what type of business can sell on Etsy. All types of businesses are welcome to participate on the online marketplace from large companies to small, individual owned businesses. If you’re starting a brand new business and using Etsy as the medium to sell your products on, then consider the type of business structure you may want.
- Sole Trader: If you are running this business as an individual, then you will be deemed a sole trader.
- Partnership: If there are two or more of you running the business, then you will likely form a partnership business structure.
- Company: A company will suit a bigger business, where liability is limited from you as the company operates as its own legal entity. Setting up a company is not as simple as a sole trader or partnership structure however, it is still possible if you decide this is the best structure for your Etsy shop.
How Does Registration Work?
As soon as you have decided running an Etsy business is something you would like, registering your business is the logical next step. Firstly, you will need a business name (there is a particular process for this depending on your business structure, so make sure you’ve read into this!). However, if you are registering as a sole trader, you can use your own name.
Similarly, if you are in a partnership, the names of the partners can be used in the business name. If you want another name for your business, then the registration process can be done online through the ASIC Website.
Australian Business Number
Along with having a registered business name, it is imperative that you apply for your Australian Business Number (ABN). Much like registering your business, an ABN can be applied for online. It’s a relatively simple process and upon providing all the relevant information, you should receive your number instantaneously.
This number basically identifies your business in Australia. If you want to start a company structure, you’ll need an Australian Company Number (ACN).
What Should I Know About Copyright?
Intellectual property plays a key role when running an online business, particularly through platforms such as Etsy. You may have a brand name you wish to protect or have designed a logo for your business. Furthermore, your products may have an original design scheme that you have created.
Thankfully, you don’t have to register copyright in Australia. It automatically applies to your ideas that are presented in some material form. All of this is your intellectual property.
Etsy has their own Intellectual Property Policywhere they reserve the right to remove anything they consider to be violating their policy.
Copyright vs Trademarks
While copyright and trademarks sound like similar concepts, there are key differences.
Copyright is aimed at protecting original pieces of work, whereas trademarks are more catered to intellectual property. A trademark will protect any logos or signs that are significant to your business. In order to protect your business, it is worth Registering A Trademark.
Licensing
Etsy operates using a Licence Agreement with the sellers that use their platform. This just means that if you’re a seller, Etsy grants you a licence to use their marketplace to sell your products and connect you to more customers. However, this licence is subject to their terms and conditions.
For example, you agree not to use their trademarked IP, such as their trademarked photos or the Etsy logo.
What Legals Do I Need For My Suppliers?
It’s important to remember that Etsy is a marketplace, so they don’t manage your postage and supply arrangements. This needs to be handled by you as the seller.
So, what kinds of things should you be thinking about when it comes to your suppliers?
Supply Agreement
If you’re selling a product, then having a Supply Agreement with your vendor is essential. A supply agreement will detail the product being used, the length of the contract, how shipping and delivery is to be handled as well as a number of other important factors.
It’s important that your Supply Agreement is thorough with your delivery process as Etsy will not be responsible for anything that goes wrong.
Consumer Guarantees
Every good business has a plan for when things don’t go their way. As much as we like to imagine all our customers being completely satisfied, this is not always a reality. So, it’s important you have a process for when customers are not satisfied with their order – this is where consumer guarantees come in handy.
When running an online business, there is a higher risk of customers not being satisfied due to the product only being viewed online initially. So, once it is delivered, you could be receiving some complaints that they were expecting something a little different.
This is why having a plan for returns and refunds is always essential. Not only are customer guarantees a right by law for consumers, it demonstrates your business’ integrity and trustworthiness.
Fees
Etsy does not charge a fee to make an account with them. However, keep in mind that you will need to pay things like listing fees, transaction fees and currency conversion.
It’s also worth considering the fees associated with your suppliers.
Taxes
In Australia, taxes are charged on income that is accumulated through your Etsy business, just like any other entrepreneurial endeavour. Once a profit is being earned from your business, you will likely need to pay GST and income tax.
What Else Do I Need To Know?
Etsy is a fantastic place to sell your products online. Setting up is relatively easy and you’re opening yourself up to a whole new audience of potential customers. Before jumping the gun though, it is important to comb through the legal aspects of setting up a business, even if it is on an online marketplace.
But there are also some non-legal aspects to it. For example, consider the following:
- Business name – there are lots of Etsy stores out there, and these are essentially your competitors. You want to have a unique business name and a brand that stands out
- Invest in your photo quality – customers are browsing through options, and your photos are the first step to making you look appealing. So, try to get those high quality shots!
- Consider your global audience – the items you sell will need to appeal to a larger range of customers. For example, if you’re selling Summer-friendly clothing, how can you expand your range to appeal to countries that are currently in Winter?
The key takeaway here is that Etsy is a popular marketplace, so you also want to make sure your marketing plan is tailored to the results you want.
What’s Next?
Starting a new business venture or simply moving a pre-existing business to the online marketplace of Etsy is an exciting move! There are a number of considerations that need to be made to give your venture the best start possible. Talking to an experienced expert and receiving advice customised towards your unique business ensures you can be off to a smooth start.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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