Auction Power Guide

I’m an experienced Ebay user who has sold some stuff over the time on and off, but lately it is becoming more like a business and I have found that I can make a lot of money off from it. I know that I need a business license, possibly a reseller/auctioneer license for my city and will start up a home-based business of re-selling on Ebay.

I know that it would be best and easier to get a business checking account (I presume it has to be after getting the license, to show the bank proof to open the account). For what I do (buying and re-selling), a business credit card would be helpful. I have like 8 personal credit cards (only a few of them are actually used – the rest are $0 balance) and excellent credit. But how does my income get used for that? I work part-time (but full-time hours) for a retail chain as my main job. But my online re-selling would almost pay what my regular job does if I were to go full-scale on my online selling. When applying for a business checking/credit card account, can I use my personal income and business income combined? Otherwise, I have no real income to report since the business license will just be established right before opening the checking account. You’re not supposed to do business before the business license, so…how should this work?

Also, once I DO get a business checking or credit card account, there obviously won’t be anything in the checking account (apart from their required minimum to open the account) unless I pull from my personal savings gained through my retail job and put it in the business checking. Then that seems to throw things out of whack though, doesn’t it? What about when I need to use the income generated from my home business to pay personal bills and such for making a living? Is it okay to just draw that out or do I need to meticulously log each withdrawal for personal use, too?

There are a lot of questions in this topic to cover in a Y!A post. It really depends on how you plan on classifying your business and whether you plan on selling other people’s items or only your own items. You’re more than likely, if it is just going to be out of your home, best off just going at it as a sole-proprietor which makes your life a lot easier. If you plan on selling a massive amount of items or other people’s items on consignment (or you buy it from them for the purpose of reselling it) then you may start to want to look at shying away from the sole-proprietor and going at it as an llc or s-corp.

Unless you’re planning on incorporating (c-corp) your business or bringing in partners all of your personal income and income generated from the Ebay business are one in the same. They may be earned in different ways, but in the end the IRS doesn’t really care where the money in your bank account comes from if you are operating as a sole proprietor, llc, or s-corp; they only care that they get their share. This is a common misconception with people starting up small businesses like this and one I see a lot with the few small businesses that I help out with accounting wise. For a record keeping standpoint and making the tax returns go more smoothly it is definitely easier to keep money generated from work and a small business separate, but it doesn’t make any real difference as far the IRS is concerned for the majority of sole-proprietors; you claim all of your income on the same tax return at the end of the year; it just goes in different areas and on different forms.

If you want to do it the right way (as far as record keeping goes), regardless of how you plan on registering your business, then yes, you would want to use a separate checking account for your business. Most banks can open a business account as soon as you have the state registration number. As far as funding that? You’ll be using your personal income to start it off, it doesn’t matter really (as long as you aren’t incorporating). If you are going to track all of your expenses and incomes from the new business well then you can classify the money used to start up the business as an owner’s contribution.

You can use all of the income generated from your Ebay business for any expenses you want, just keep records of what you use it all for – record them as personal or business expenses. You also need to remember any income you generate from your new business you’re going to have to pay taxes on and how these are taxed, again, fall in to whether you plan on incorporating or not and there are some differences in taxes when it comes to sole-proprietorships, llcs and s-corps.

To sum it all up, no matter how you plan to register your business: Get the license. Use your personal money to start the new bank account. Dedicate one of your old, unused credit cards as one you use ONLY for the Ebay business. Keep decent records of your transactions – at a minimum at least keep track of money made on sales, money spent on the items you sold and have yet to sell, money spent on business expenses, and money spent on personal expenses. Most importantly: after obtaining the license and deciding how you plan to run your business (sole-proprietorship, llc, s-corp, c-corp), to have a consultation with a reputable accountant (CPA or CMA preferred) to sit down with you and go over EXACTLY what you will be responsible for as far as taxes and how you will be filing returns and point you in the right direction.

Maybe you’ve seen advertisements on websites, or heard stories about a guy who made his fortune as a cheap domain reseller – buying and selling domain names as a business, instead of just for personal use. Maybe you already have a domain reseller account with your Internet service provider (ISP), just waiting to be used. But is it a good idea to buy and sell domains as a business?

Luck of the Draw?

There’s a lot of hype attached to the domain reselling business. CNN reported that “business.com” was sold for $7.5 million in 1997, and in 2003 “men.com” was sold for $1.3 million, but these are unusual cases involving very specific domain names, and most domain investors will never get that lucky. Partly this is because it’s difficult to value domain names, and partly this is because of misconceptions that all “good” names are taken. In addition, the availability of country code domains has opened up the domain naming field, allowing people to buy and sell domains with short names and new extensions.

What Makes One Domain More Valuable Than Another?

As stated above, valuation of domain names is extremely tricky. This is because the market to sell domains is driven by the perceived scarcity of “good” names. Most business owners, whether their companies are large or small, prefer a name ending in .com over a name in any other top level domain. As well, memorable combinations of relevant words that can easily be used in a domain name are already in use. Adding to the price increase is the fact that while more than 17 million domain names have been sold, not every one of them is necessarily good. Generally, in order to be saleable, domain names, in addition to ending in .com, must also be fairly generic. “Law.com” “tv.com” and “business.com” are classic examples. (CNN paid several thousand dollars for the tv.com in the early 2000’s.) The reality is that most of these domains will never be resold, and will end up being released for registration at the standard rate of $10-$30/year. The notion that highly priced domains must be one word is a myth, however. Word combinations can be extremely valuable if the words are relevant especially considering their value in terms of  search engine optimization. “BookBuyer.com” might be worth purchasing, but “BookSink.com” is essentially nonsense, even if it is short. For this reason, while it is recommended that people seeking to buy and sell domains stay within highly commercial industries (law, loans, books, cars, etc.) it is important that they choose their domains wisely.

What You Need to Know

If you do have aspirations to sell domains, there are certain things you need to know. First, it’s essential to have a domain reseller account. This is a special bulk account through one of the domain reseller programs offered by such domain registrars as BulkRegister and Dotster. Such an account allows you access to listings of domains about to expire, as well as discounts on bulk registrations (generally minimums of 50 at a time). Most of the major domain registrars offer such programs to those who wish to sell domains. Free information rating registrars can be found in online domain reseller review lists, such as the one at RegSelect.com. In addition, it is important to remember that statistics are against making big money as a cheap domain reseller. According to igoldrush.com, of the approximately 20 million .com, .net, and .org domain names sold, perhaps 20,000 of those will be resold within a given five-year period, and of those 20,000, 90% of them are worth 4 figures or less (with most falling into the ‘less’ category).

Other Alternatives?

There are, of course, other ways to buy and sell domains than using the services attached to registrar-owned domain reseller programs. One is to contact large corporations directly, if you’ve secured a recognizable domain that is relevant to their brand or industry, but this is not generally terribly affective. Additionally, there is always ebay. While most products sold through the online auction house are tangible goods and services, they do allow domain sales, and the use of ebay allows investors to do additional marketing of the domains they own.

So Is Domain Investing Worth the Risk?

If you are looking to make a quick buck, domain investing may not be the industry for you. If, however, you enjoy a good gamble, and have the money to spend, reselling domains can be lucrative. Thanks to the afore-mentioned country code top level domains (like .us and .de), valuable names are still available, but successful reselling takes patience and a lot of research to find quality names, and quality marketing techniques. The bottom line is this: if you are seeking to be rid of a single domain you no longer use, your best bet is to either let it lapse, or go through a cheap domain reseller, and let them market it for you. If you want to buy and sell domains as an investment, commit to a high-end domain reseller account at your registrar of choice, and take advantage of their services and support.

Marcus Peter