Starting a dropshipping business in Singapore - advice needed

[Jadexpat]

Hi all, I've been thinking of starting a dropshipping business in Singapore, however i do not have much knowledge on how to start a business. Really hoping to get some advice.

I read that you have to incorporate your business in order to do a dropshipping business, so i have the following questions:-

1. Is it advisable to use an LLP instead of Pte Ltd? Pte Ltd comes with too many compliance costs (e.g. secretarial and accounting services) while LLP does not require all these. I don't really want to have all these compliance costs when i am not even sure if the business will work.

2. Is it possible to test out and get a few sales first before registering my business, or is that not legal?

3. I am thinking of dropshipping in the US (from US suppliers to US customers). Would there be a requirement to start a company there too?

Thanks in advance

[sundaymorningstaple]

I believe you will also incur a tax liability there as well, both State & Federal Taxes as well as a tax liability to Singapore because you are actually working from Singapore. Also, be advised there is no tax reciprocity between Singapore and the US so you will be paying at least double taxation and possibility triple depending on the state of registration.

[Myasis Dragon]

Hi all, I've been thinking of starting a dropshipping business in Singapore, however i do not have much knowledge on how to start a business. Really hoping to get some advice.

I read that you have to incorporate your business in order to do a dropshipping business, so i have the following questions:-

1. Is it advisable to use an LLP instead of Pte Ltd? Pte Ltd comes with too many compliance costs (e.g. secretarial and accounting services) while LLP does not require all these. I don't really want to have all these compliance costs when i am not even sure if the business will work.

2. Is it possible to test out and get a few sales first before registering my business, or is that not legal?

3. I am thinking of dropshipping in the US (from US suppliers to US customers). Would there be a requirement to start a company there too?

Thanks in advance

Let's start at the beginning, shall we? I see you are "Jadexpat". Are you a Singapore citizen or PR? If yes, read on. If not, then you have a much more difficult task because not only are you going to form a business, you're going to try and convince the gahmen to give you a work permit for your business. There are hundreds of threads in these forums on trying to get an employment pass for your own startup.

LLP means "limited liability partnership". If there is only one of you, then you cannot form a LLP. Your only choices are pte ltd or a sole proprietorship. And if you're not a citizen or PR, then pte ltd is probably the only way you'll ever get to a work permit.

You must be registered in order to operate a business. You cannot open a bank account without a registration, and that means you cannot accept payments in the name of a company. In short, step 1 in any business is to become legally registered.

US taxation is complex and no definitive answer can be given with the limited information you have supplied. But, in general, if you have no US employees, and no US presence, you will not pay US taxes. You can sell directly to end customers, either other retailers or end users. You can sell into distributors who handle distribution, warranty services, etc. Beyond this, your exact proposal for selling and payments would need to be known.

[Jadexpat]

Hi all, I've been thinking of starting a dropshipping business in Singapore, however i do not have much knowledge on how to start a business. Really hoping to get some advice.

I read that you have to incorporate your business in order to do a dropshipping business, so i have the following questions:-

1. Is it advisable to use an LLP instead of Pte Ltd? Pte Ltd comes with too many compliance costs (e.g. secretarial and accounting services) while LLP does not require all these. I don't really want to have all these compliance costs when i am not even sure if the business will work.

2. Is it possible to test out and get a few sales first before registering my business, or is that not legal?

3. I am thinking of dropshipping in the US (from US suppliers to US customers). Would there be a requirement to start a company there too?

Thanks in advance

Let's start at the beginning, shall we? I see you are "Jadexpat". Are you a Singapore citizen or PR? If yes, read on. If not, then you have a much more difficult task because not only are you going to form a business, you're going to try and convince the gahmen to give you a work permit for your business. There are hundreds of threads in these forums on trying to get an employment pass for your own startup.

LLP means "limited liability partnership". If there is only one of you, then you cannot form a LLP. Your only choices are pte ltd or a sole proprietorship. And if you're not a citizen or PR, then pte ltd is probably the only way you'll ever get to a work permit.

You must be registered in order to operate a business. You cannot open a bank account without a registration, and that means you cannot accept payments in the name of a company. In short, step 1 in any business is to become legally registered.

US taxation is complex and no definitive answer can be given with the limited information you have supplied. But, in general, if you have no US employees, and no US presence, you will not pay US taxes. You can sell directly to end customers, either other retailers or end users. You can sell into distributors who handle distribution, warranty services, etc. Beyond this, your exact proposal for selling and payments would need to be known.

Hi Myasis Dragon,

Really appreciate your detailed reply.

I'm a PR.

In your opinion, would sole proprietorship be risky for a dropshipping business? I'm thinking of selling wellness products (e.g. soap, essential oils, environmentally friendly products, etc.) As opposed to food products etc. i suppose this would have a relatively lower risk?

As for LLP, i could rope in a friend. I think may be a better idea since it's separate legal entity. But are there certain compliance needed such as a partnership agreement?

Any thoughts on this? And in your opinion, is dropshipping a worthwhile venture?

Thanks once again

[Myasis Dragon]

I am of the opinion that you don't operate a business that can leave you open to substantial liabilities without the protection of a corporate shield. Therefore, I would not recommend a sole proprietorship. But, that's me. Lots of other people do run a business as a SP. If you have no real assets that can be taken from you, it probably doesn't make much difference. I would encourage you to look at local businesses in Singapore on any street... the vast majority are all pte ltd's.

There is not much point in forming an LLP... you still need to register and file LLP tax returns... you need a partnership agreement in place of articles of incorporation... you need the equivalent of meetings and minutes to record the business of an LLP... there's not much savings in terms of costs or hassle.

Dropshipping is an entire subject in itself. I was part owner of a warehouse dedicated to drop shipping companies (and now bought by Amazon - yay!). You ship pallets of your merchandise to the drop shipper, who, for a fee, handles orders, returns, warranty, etc. Or, sometimes, manufacturers of product will also have drop shipping facilities that you can use for a fee. It all depends on the merchandise and the company.

The big question is: How to you make yourself known? How do you differentiate your product? What is your market? Have you created a business plan (if not, you are freak up)?

If I were to venture into the business, I'd start with Amazon... you shipt product to them... they fulfill your product... you're in their catalog... yes, you pay them lots of money for each sale... but you find out if you've got anything that someone wants to buy. Where else are you going to advertise and sell? From your own website? Good luck.

[Cooper79]

Hello!
This topic worries me today too!
That's all what I know
LLP (Limited Liability Partnership) v Pte Ltd (Private Limited Company):
An LLP provides a limitation of liability similar to a Pte Ltd, but it can be more flexible in its management and has fewer formal requirements. However, LLPs in Singapore are required to provide reporting and comply with certain legal requirements. Before choosing, it is better to consult with an accountant or lawyer to understand which formalities are suitable for your business.
Dropshipping to USA:
If you plan to dropship in the US using US suppliers, in most cases you will not need to open a company in the US. You can start a business from abroad. However, there may be a tax aspect to this.

[NicholsonPercy]

Would operating as a sole proprietorship be dangerous for a dropshipping company, in your opinion? Selling health products—such as soap, essential oils, eco-friendly goods, etc.—is something I'm considering doing. I would think this would have a comparatively lesser danger than food goods, etc.

[Pal]

Sole prioprietorship has lots of liabilities. Especially for consumer products.

If you are serious in your business, incorporate a Pte Ltd or LLP.

Would operating as a sole proprietorship be dangerous for a dropshipping company, in your opinion? Selling health products—such as soap, essential oils, eco-friendly goods, etc.—is something I'm considering doing. I would think this would have a comparatively lesser danger than food goods, etc.

[sundaymorningstaple]

Do a search of our archives here. There are numerous threads and discussion of the merits/demerits of the dropshipping business. Everybody and their brother was trying to get into it. Only a very few made any money over the aggravation factor.

[Lisafuller]

It's a trend more than anything. Not a legitimately viable/profitable business.

[Strong Eagle]

It's a trend more than anything. Not a legitimately viable/profitable business.

Not really correct. There are a lot of successful dropship businesses, and the fulfillment center business is booming. Hedge funds have been setup to purchase viable dropship companies.

What is true is that people with a small budget will find it difficult to get brand/name recognition and to compete in a world filled with similar products. Amazon is one of the biggest fulfillment operators... the trick is to get near the top of search results. People hoping to make a go of a drop shipped E Commerce website of their own making will have a particularly tough go. It's really much better to use an online "mall" like Shopify to get your brand out.

Anecdotally, the son of a friend of mine in the USA ran a dropship business for more than two years, selling toy guns and swords after Walmart, Toys R Us and others quit selling these kinds of toys. On a part time basis as a student he made more than $50,000 ordering Chinese made toys and hiring a fulfillment center to handle the orders.

[Lisafuller]

It's a trend more than anything. Not a legitimately viable/profitable business.

Not really correct. There are a lot of successful dropship businesses, and the fulfillment center business is booming. Hedge funds have been setup to purchase viable dropship companies.

What is true is that people with a small budget will find it difficult to get brand/name recognition and to compete in a world filled with similar products. Amazon is one of the biggest fulfillment operators... the trick is to get near the top of search results. People hoping to make a go of a drop shipped E Commerce website of their own making will have a particularly tough go. It's really much better to use an online "mall" like Shopify to get your brand out.

Anecdotally, the son of a friend of mine in the USA ran a dropship business for more than two years, selling toy guns and swords after Walmart, Toys R Us and others quit selling these kinds of toys. On a part time basis as a student he made more than $50,000 ordering Chinese made toys and hiring a fulfillment center to handle the orders.

I'm sure there are success stories, but for the most part I know it to be a bust.

[Strong Eagle]

I'm sure there are success stories, but for the most part I know it to be a bust.

Like any business, those with a plan and a clear understanding of the ecosystem in which they operate are usually more successful than those who simply shoot in the dark. And I agree, most people who start drop shipping businesses have visions of sugarplums dancing in their heads, salivating over a relatively low capital investment that produces sterling returns, or so they think... like the fellow that started this thread.

But, drop shipping and e-commerce companies appear to be the future for retailing. Absolutely massive warehouses are being built in droves around all major cities, to handle fulfillment center activities.

Here's a hedge fund company that invests in and buys up e-commerce companies. I don't recommend it, only put it up as an example to show you that the drop shipping industry is much larger than you might imagine. Most e-commerce these days is drop shipped, even well known brands.

https://open.store/

Here's a hedge fund that takes the process from a different tack: https://pinonhillcapital.com/why-pinon-capital/

These folks want to sell you their bonds, which in turn they use the proceeds to buy or invest in e-commerce businesses. Note that they say it's a "trillion dollar industry".

Even brick and mortar stores that used to handle their own shipping have moved to the drop ship model, either utilizing their own warehouses or those of a fulfillment center. It's hard to beat the economy of scale.

In the USA, about 50 percent of all new businesses fail within the first 5 years. Drop shippers will be no exception, and might be higher because of a failure to identify the market segment, develop a marketing plan, and control fulfillment costs. Drop shipping is most assuredly a legitimate business model but like all businesses, requires a sound approach.

This is but one giant warehouse northwest of Houston... Zoom in... those long things surrounding the building by the hundreds are 18 wheeler semi-trailers.

https://maps.app.goo.gl/dz49mLVYwZkn7bJX6