With the existence of dropshipping, entrepreneurs no longer need to look for a warehouse to store their inventory. Dropshipping can make starting your own company more possible with its  increased accessibility. However, before you take the leap to start your own dropshipping company, it’s important to consider a number of legal factors first. 

What Is Dropshipping?

Dropshipping is a way of selling online that doesn’t involve the seller personally stocking and shipping the products. Instead, a third party does all or most of that part. So, when a customer places an order, the third party (rather than the seller) will go to their inventory, prepare the order and ship it directly to the customer. The seller plays no part in this process. 

Dropshipping can be a convenient way for business owners to outsource that aspect of running a company to another party. Despite the convenience of dropshipping, it does come with additional cost. If you’re thinking of running a dropshipping company, then it’s important to weigh the benefits of dropshipping with the potential drawbacks first. 

How Do I Start A Dropshipping Company? 

To start a dropshipping company, it’s important to make a good plan. We understand that in business, things don’t always go as planned. However, this doesn’t mean you should plan things out at all. 

A plan helps you stay on track. So, even if you need to make a few adjustments along the way, having all your ideas and research organised into a well put together business plan can make sure you don’t lose sight of your goals. 

Do I Need To Register As A Company For Dropshipping?

Yes, you will need to register your dropshipping company. To register your dropshipping company, you will need to fill out an application form with the Australian Securities and Investments Commission (ASIC). 

ASIC is the main regulatory body for companies in Australia. An ASIC company registration form can be done online, however you will need to be prepared with a few important details first. For instance, to start a company you’re required to know who your shareholders and directors are, how your company will be governed as well as the legal structure your company will have. 

Obviously, these aren’t light decisions. Determining your directors and company governance will play a huge role in your dropshipping company’s future. Moreover, knowing how to select the best legal structure for your company is something that takes a certain level of expertise and skill. There are a number of options, such as a Dual Company Structure or a Company Limited by Guarantee – deciding which way to go can be a tough situation to navigate. 

For that reason, we always recommend turning to a legal expert to help register your company. The registration process for your company is more than just an online application form – it’s going to be what forms the foundations for your company. A legal expert can ensure your company is set up the right way. 

Is Dropshipping Legal In Australia? 

Yes, dropshipping is legal in Australia. There are a number of popular dropshipping companies happily thriving in the Australian market. However, for your dropshipping company to stay legal, it will need to be compliant with all the laws that apply to it. 

So, what laws apply to a dropshipping company? 

The exact laws your dropshipping company will need to follow will depend on the specifics of your dropshipping company. ‘Dropshipping’ is a pretty broad term. Many of the regulations your company will be required to follow will hinge on the industry your dropshipping company specialises in, its size, location and much more. 

So, it’s always a good idea to chat with a legal expert before you start your dropshipping company. They can provide insight into the laws that will impact your specific company and provide guidance on the best way to follow them. 

There are a number of regulations that will apply to most dropshipping companies in general. Let’s talk about them below. 

Australian Consumer Law (ACL) 

The ACL determines how companies interact with their customers. There’s a number of regulations the ACL enforces which relate to matters such as: 

  • Pricing
  • Competition 
  • Product quality and safety 
  • Warranties and refunds 
  • Advertising
  • Deceptive and misleading conduct 

Essentially, the ACL is there to ensure consumer interests that are protected in the market. As a dropshipping company, it’s imperative that you’re aware of your obligations under the ACL and fully compliant with each of them. Not following through on consumer laws can lead to fines, legal penalties and a bad reputation for your dropshipping company

It’s important to keep in mind that while following the ACL’s rules is necessary to uphold the rights of your customers, the ACL also protects small businesses. ACL regulations relating to standard form contracts are there to protect small businesses from being taken advantage of – to learn more about this, get in touch with our legal experts today.   

Employment Law  

If your dropshipping company is going to be hiring employees, then you’ll be taking on the role of an employer. To be the employer of another person is a pretty big legal responsibility. As an employer, you’re under a legal obligation to ensure your employees are mentally and physically unharmed during work. 

Fulfilling this responsibility can take many different forms. For example, you will need to provide your employees with appropriate equipment, ensure all communication channels are being used professionally, provide your employees with the correct pay and other entitlements – the list goes on. 

Consider getting legal documents such as an Employment Agreement or Workplace Policies to aid in communicating the rights and responsibilities of your employees, so all parties can be on the same page. Experts in employment law can help you better understand your legal obligations towards your employees, so it’s a good idea to chat with one before you expand your dropshipping company’s team.  

Data and Privacy Law 

As a dropshipping company, a large part of your company, if not the entire company, will operate online. When you have a company that functions online, it’s imperative to prepare for data and privacy considerations. Functioning online comes with an additional set of risks, being well equipped is the best way to combat this. 

For a company with a website, a Privacy Policy is your best friend. A privacy policy let’s users know what kind of information is being collected from them and what is being done with it – if your website collects information, then you are legally required to have a privacy policy in place. 

In addition to this, your dropshipping company will also need to take reasonable steps to protect the information your company has access to, being prepared with plans such as a Data Breach Response Plan can help strengthen your company’s reaction to breaches. Moreover, it can show that you’ve taken data seriously, which can be great when it comes to assessing your liability. 

Talk to one of our legal experts today about your data and privacy obligations, they can provide you with the best insight to keep your company’s private intel safeguarded. 

What Legal Documents Do I Need To Start A Dropshipping Company?

Registering your company and making sure it’s legally compliant aren’t the only legal considerations you should prepare for when starting a dropshipping company. The legal documents you have will determine the strength of your company, how well protected it is and how easily it’s able to come out of unwanted disputes or conflicts. Basically, they’re pretty important. 

A few legal agreements you may want to consider getting include: 

Next Steps 

A dropshipping company can be a valuable business endeavor. However, it’s important to protect your company during the setup process by sorting out the legal matters. 

  • Dropshipping is a retail method where the seller doesn’t stock products; instead, orders are fulfilled and shipped directly to customers by a third party.
  • Starting a dropshipping company requires careful planning and structuring, including making a comprehensive business plan to keep track of goals and adjustments.
  • Registration of a dropshipping business in Australia is mandatory and involves submitting an application with the Australian Securities and Investments Commission (ASIC), requiring details about shareholders, directors, and company governance.
  • Legal compliance is critical, as dropshipping businesses must adhere to Australian Consumer Law (ACL), which covers pricing, product quality, advertising standards, and more.
  • If hiring employees, dropshipping companies must comply with employment law, ensuring proper work conditions, fair pay, and clear communication of rights and responsibilities.
  • Data privacy is paramount for online businesses; a dropshipping company must have a robust privacy policy and data breach response plans to protect collected information and comply with legal standards.
  • Key legal documents needed for a dropshipping business include Dropshipping Agreement, Website Terms and Conditions, Non-Disclosure Agreement, Import/Export Agreement, and Cookie Policy.

If you would like a consultation on starting a dropshipping company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

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