Today I came across a post on a listserv I belong to asking how one would go about setting up a new EBay business on a small budget.

Instead of writing directly to the querant, I figured I'd put the info up here where it could be used by others as well...

*Disclaimer: I am not an eBay seller, so I cannot right now give very specific help with that aspect of the business, though I am familiar with online business in general and many of the same principles apply. My suggestion for anyone starting an eBay business is to seek out experts and eBay help specifically, and if warranted, check out additional eBay software, etc.*

Specifically, she was interested in the legal/financial side of setting up a new business online, and that I have some advice on.

Financial Management Software
First of all, unless you have some massive assets, complicated finances, or other special circumstances, I've found that for a small business, an accountant is generally not needed. I've found that a personal accounting software program such as Microsoft Money or Quickbooks and some tax software such as TurboTax or TaxCut will be sufficient. Some to look into:

Personal Accounting:
Microsoft Money
Quicken 2007
QuickBooks 2006 Editions.

Tax Preparation:
(choose one that is able to download data from your chosen accounting software. For a comparison of the two: TaxCut vs. TurboTax for Tax Year 2005 )

Business Entity Creation
You can easily start a business using your own name and including your income and deductions on the Schedule C on your 1040 personal income tax form.

However, you might want to consider registering a business name if you are using a company name that is not your own birth name. In that case you are supposed to at least file a DBA (Doing Business As...) form with the County Clerk's office in the county where your business address (or home office) is. It's a very simple form that you can get from a stationery shop. You need to have it notarized, then make a few copies and take it to the County Clerk's office to file. It costs about $120 or so (in New York, at least - check with your local County Clerk's office). Once you have your certified copy, you can use that to open a business checking account.

Other options include becoming an LLC or Corporation, which offer some legal protections, but are more complicated and costly to set up (LLC/Corporation in NY - $300 - $1000).

To be quite honest, I operated for several years without a DBA, and even though your Schedule C tax form requests listing a "business name", I never had any major problems. When I thought about doing a DBA, in order to open a checking account and be able to accept checks made out to my business name, I instead decided to go "whole hog" as an LLC for a few legal reasons. If you want to run a full-fledged retail (or e-commerce) operation, you'll need a business name for credit card processing and Sales Tax filings. (If you are using PayPal, this isn't necessary)

Oh, also, you should know that you can get a Federal Employer ID Number even as an "unofficial" sole-proprietor - you don't need to be LLC, Inc, etc.

If you don't mind the small hassles, I think it's very professional to operate with a proper business name and separate checking account. Many banks offer free business checking accounts.

Getting Financing
As a new business you could run into some problems trying to get small loans for your business from a traditional bank. When starting out, it's easiest to use a credit card, though you should be very careful about overcharging, since the interest is often usurious.

If you have a business Tax ID and name, you can get a business credit card. I would recommend checking out
Advanta, where I recently got a new card from. As a brand new business you might only qualify for one from Capital One, though they will give you a very small credit limit. (but, it's a start!)

Bookkeeping and Taxes
The advantage of having separate checking accounts and credit cards for your business is that you can keep your "business" and "personal" expenses separate (on paper, that is), and whether you use software or not, putting together your Schedule C deductions each year and getting a clear picture of your business income is easy.


  • Keep every business related receipt for 6 years (sorted by tax year)
  • If you use financial management software, keep up on your "data-entry" or you'll be in for a long day near tax time!
  • Set up your business related recurring expenses on your business credit card

If you follow this advice, you probably won't need to shell out $100 an hour for an accountant!


Originally posted to, transferred 12/11/2009