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Question on Drop Shipping Business

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hendricks
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Question on Drop Shipping Business

Postby hendricks » Tue, 17 Apr 2018 9:08 pm

Hi,

I am planning to start a drop shipping online e-commerce store. I have no business experience whatsoever. I have only recently started reading up on the topic online, and I am hoping to get some insight.

I am a Singapore citizen. The proposed website will be hosted overseas. My products will be shipped directly from various suppliers in China to customers all over the world, except Singapore(reason to be explained below). For receiving payments, I intend to use a payment gateway like Stripe(has presence in Singapore) or a similar company, in which payment will be deposited into my Singapore bank account.

Therefore, kindly baring in mind that apart from me managing the website from Singapore, the website itself is hosted overseas, and none of my goods will be coming into or passing through Singapore, with regards to these questions:

Am I still required to register a business in Singapore to do this? I know no license is required to operate an online store, but I am not sure if registration of a business is required.

Secondly, this question may be somewhat related to the first, and I refer to https://www.guidemesingapore.com/business-guides/taxation-and-accounting/personal-tax/singapore-personal-income-tax-guide.
Tax treatment of income earned overseas
Generally, overseas income received in Singapore on or after 1 Jan 2004 is not taxable. This includes overseas income paid into a Singapore bank account. You do not need to declare overseas income that is not taxable.

Does that mean I won't be subject to any tax in Singapore, or will does that mean as I am physically working from within Singapore, and therefore will be subjected to tax? This question is related to why I may not wish to ship to Singapore in the meantime, to simply things, with no intention to evade any tax.

Thirdly, is a business/merchant account required at a Singapore bank to receive money from payment gateways like Stripe?

Thank you.

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Strong Eagle
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Re: Question on Drop Shipping Business

Postby Strong Eagle » Wed, 18 Apr 2018 10:20 am

hendricks wrote:Hi,

I am planning to start a drop shipping online e-commerce store. I have no business experience whatsoever. I have only recently started reading up on the topic online, and I am hoping to get some insight.

I am a Singapore citizen. The proposed website will be hosted overseas. My products will be shipped directly from various suppliers in China to customers all over the world, except Singapore(reason to be explained below). For receiving payments, I intend to use a payment gateway like Stripe(has presence in Singapore) or a similar company, in which payment will be deposited into my Singapore bank account.

Therefore, kindly baring in mind that apart from me managing the website from Singapore, the website itself is hosted overseas, and none of my goods will be coming into or passing through Singapore, with regards to these questions:

Am I still required to register a business in Singapore to do this? I know no license is required to operate an online store, but I am not sure if registration of a business is required.

Secondly, this question may be somewhat related to the first, and I refer to https://www.guidemesingapore.com/business-guides/taxation-and-accounting/personal-tax/singapore-personal-income-tax-guide.
Tax treatment of income earned overseas
Generally, overseas income received in Singapore on or after 1 Jan 2004 is not taxable. This includes overseas income paid into a Singapore bank account. You do not need to declare overseas income that is not taxable.

Does that mean I won't be subject to any tax in Singapore, or will does that mean as I am physically working from within Singapore, and therefore will be subjected to tax? This question is related to why I may not wish to ship to Singapore in the meantime, to simply things, with no intention to evade any tax.

Thirdly, is a business/merchant account required at a Singapore bank to receive money from payment gateways like Stripe?

Thank you.


You are a Singapore citizen. You will be earning money by running your business in Singapore. Therefore, you will pay personal income tax in Singapore.

"Income earned overseas" means income earned in another country and taxed in that country. For example, you go to Malaysia and work there for a year. You pay Malaysian income tax, no matter where you deposit your money. You pay no Singapore income tax because it was income earned overseas in Malaysia. In general, earned income is always taxed in the country in which you were resident while earning the income.

You may or may not need a _registered_ business entity but you will need a business entity. If you conduct your business solely in your name, then no registration is required and you file your personal tax return as an unregistered sole proprietorship. If you get paid by your payment processor in another name, then you will need to register a sole proprietorship or private limited in that name in order to have a bank account capable or receiving funds payable to that name.

It really isn't going to matter, in terms of your personal tax, whether you ship goods to Singapore or not. As you can see from above, it's where you are when you earn your money that counts.

If you do elect to ship to Singapore, then if your fulfillment agency is outside Singapore, the recipient of your goods will have to pay GST at the time importation and delivery of goods to the end customer in Singapore. If you take a shipment of goods into Singapore, then deliver them locally, you will then be responsible for collecting and remitting GST under the rules set by IRAS.

Hope that clears things up.

hendricks
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Re: Question on Drop Shipping Business

Postby hendricks » Wed, 18 Apr 2018 7:23 pm

Strong Eagle, thank you, I could not expect a better explained and worded answer. Most appreciated.

Redhat11
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Re: Question on Drop Shipping Business

Postby Redhat11 » Thu, 19 Apr 2018 8:48 am

woah, very detailed explaination. Concentrate on growing the business and make more profits. Make more and paying taxes will be negligible :) Tax in Singapore is also at a very reasonable rate compared to other countries.

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Re: Question on Drop Shipping Business

Postby viperjw » Fri, 18 Jan 2019 10:37 pm

Hello,

I am interested in setting up a dropshipping business and have questions how to get started.

I am a US Citizen and a Singapore PR living in Singapore. My plan is to setup a dropshipping business selling to the US with suppliers from China.

I read online it is advisable to register a company

I had four questions:
1. I'm just getting started with dropshipping and not sure if I will succeed. Do I need to register a company now or can I wait until the business is more stable before registering a company?

2. For registration of the company, as a US citizen and Singapore PR, I am able to register a company in either the US or Singapore. Which country would be advisable to register my company in? Which option would be better from tax and financially?

3. I am currently living in Singapore so was thinking it would be easier to setup the company and business bank account. However, in terms of payments, I was thinking there may be FX rate charges? Please advice.

4. As I am starting out in dropshipping and not sure if things will workout, what legal entity would u suggest? I've read sole proprietorship, etc.?

Thank you!

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Strong Eagle
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Re: Question on Drop Shipping Business

Postby Strong Eagle » Sat, 19 Jan 2019 2:01 am

viperjw wrote:Hello,

I am interested in setting up a dropshipping business and have questions how to get started.

I am a US Citizen and a Singapore PR living in Singapore. My plan is to setup a dropshipping business selling to the US with suppliers from China.

I read online it is advisable to register a company

I had four questions:
1. I'm just getting started with dropshipping and not sure if I will succeed. Do I need to register a company now or can I wait until the business is more stable before registering a company?


It's not just "advisable", you must have a business registered in order to do business. Once you are beyond the planning stage and need a bank account, or office space, or materials for your business, or you are actually finding customers and filling orders, you need the business entity. If your dropshipping business fails, you'll have a big loss on your P&L... but you do need that P&L... and that business entity.

2. For registration of the company, as a US citizen and Singapore PR, I am able to register a company in either the US or Singapore. Which country would be advisable to register my company in? Which option would be better from tax and financially?

3. I am currently living in Singapore so was thinking it would be easier to setup the company and business bank account. However, in terms of payments, I was thinking there may be FX rate charges? Please advice.


Since you are living in Singapore, you are almost certainly going to want a Singapore registered business. You'll certainly like your tax treatment much better. So long as you are a Singapore registered entity, with your shipments coming out of China (or Singapore), and you have no association with anything in the USA, other than the fact that you deliver to USA addresses, you probably won't need a USA business.

CAVEAT: US tax law is incredibly complicated when it comes to US citizens operating foreign businesses that do business in the USA. Were you to have any kind of entity or business presence in the USA, you would almost certainly require a US entity. You MUST contact a qualified US tax accountant and not rely on anything I tell you. My knowledge is based upon personal experience which may not be the same as yours.

4. As I am starting out in dropshipping and not sure if things will workout, what legal entity would u suggest? I've read sole proprietorship, etc.?

Thank you!


You'll always want a business entity that shields your personal assets (insofar as possible) from your business activities. That isn't a sole proprietorship. Since there is no such thing as an LLC in Singapore, you'll want to setup an exempt private limited. If you are setting up a business in the USA, you'll want a single member LLC. This entity files taxes as a sole proprietorship but gives you the liability protection of an LLC. In Singapore, if you are receiving money in the name of a business, you have to have that business registered, if accepting in your own name, you could be consider and unregistered SP.

Have you considered using a different platform to get started? Amazon? eBay? Your activities in the USA are really third party in those circumstances.

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Re: Question on Drop Shipping Business

Postby viperjw » Sun, 20 Jan 2019 11:27 pm

Thank you Strong Eagle for the detailed response.

This is very helpful indeed. I will probably try to get the legal stuff sorted out first before starting up the online business

I will research online for a US tax accountant to address my questions. If there is anyone who knows of any recommended US tax accountants and also what will be the approximate cost to hire one, that would be great too.

With regards to managing the finances of an online business, I am very new to this. Are there any must things one should look out for especially not getting into trouble with the law (i.e. any specific way one should record a sale, expenses, in the US /Singapore)?

I didn't consider Amazon or eBay for a few reasons:
1. Some similar products which I wanted to dropship are on Amazon
2. I wanted to build a shop known for a particular niche

Thank you!

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Re: Question on Drop Shipping Business

Postby The Ref » Mon, 21 Jan 2019 7:34 pm

I have considered doing a drop shipping business to Australia & NZ but finding the right product that has enough profit to overcome the issues here with having to have a local director and employment rules is the challenge.
(anyone with good product idea or contacts is welcome to PM me)

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Strong Eagle
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Re: Question on Drop Shipping Business

Postby Strong Eagle » Mon, 21 Jan 2019 10:26 pm

viperjw wrote:Thank you Strong Eagle for the detailed response.

This is very helpful indeed. I will probably try to get the legal stuff sorted out first before starting up the online business

I will research online for a US tax accountant to address my questions. If there is anyone who knows of any recommended US tax accountants and also what will be the approximate cost to hire one, that would be great too.


You can PM me for my US (Texas) based accountant. She handled my Singapore and other Asian businesses for years. Expect a free review, a few hundred bux for an initial consultation and recommendation.

With regards to managing the finances of an online business, I am very new to this. Are there any must things one should look out for especially not getting into trouble with the law (i.e. any specific way one should record a sale, expenses, in the US /Singapore)?


Look up GAAP... generally accepted accounting principles. The world uses some variation of GAAP. Your needs will be simple. Any accounting package or online service will give you what you need to stay in compliance. A few easy pointers.

a) Maintain sequential invoice numbers and keep track of all of them.
b) Recognize revenues in the period in which the service/product was delivered.

I didn't consider Amazon or eBay for a few reasons:
1. Some similar products which I wanted to dropship are on Amazon
2. I wanted to build a shop known for a particular niche

Thank you!


Observation: Your problem will be people finding your website and then generating traffic to it.

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Re: Question on Drop Shipping Business

Postby Ronald Cover » Fri, 12 Apr 2019 3:33 am

Thank you all for the answers! You very comprehensively answered questions on the legal side. But I also have questions and they are more practical. How do you organize your business? Do you resell goods and take on the role of an intermediary? Or you open your online store. I have so far little experience with this, but I would like to get serious about it. Now I have an example of these PrestaShop modules https://myspammymodules.com/. I want to try to open an online store. What do you think about that ?

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Re: Question on Drop Shipping Business

Postby sundaymorningstaple » Fri, 12 Apr 2019 9:56 am

SE, I think our friend Ronald is also DylanWT. Additionally, his IPs are bouncing all over the place. Methinks Ronald belongs on a bench outside on Micky D's

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Strong Eagle
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Re: Question on Drop Shipping Business

Postby Strong Eagle » Sun, 14 Apr 2019 12:46 pm

Ronald Cover wrote:Thank you all for the answers! You very comprehensively answered questions on the legal side. But I also have questions and they are more practical. How do you organize your business? Do you resell goods and take on the role of an intermediary? Or you open your online store. I have so far little experience with this, but I would like to get serious about it. Now I have an example of these PrestaShop modules https://myspammymodules.com/. I want to try to open an online store. What do you think about that ?


What do I think about that, Ronald, or Dylan, or whomever you are? SMS is right. You are one and the same. I think you're a spammer.

One IP address you post from, 23.95.97.17 in New York, lists your IP as "forum spammer" and "forum spammer again".

Another IP address you post from, 176.38.153.82 in the Ukraine, is listed on at least one blacklist site for spamming. What am I to think.

And yet another IP address of yours, 192.207.62.245, originates in California. That hosting site is found on a bunch of spam blacklist servers.

And here we have you, Ronald. First you post a link to a top ten review that has nothing to do with the question that was asked. And now we have you posting your own website, "trying" to open a website store that already ready exists. And for a guy living in Singapore, you really do use a number of VPN's, yes? What's a body to do?

So, I've whacked your link in the post above, deleted your post with the useless reviews, and I am issuing you a warning. Your account is still open, you're free to post, and you're on the tic toc watch list.

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