Is Dropshipping legal? What You Need to Know in 2021

If your researching dropshipping for the first time it may seem like some sort of crazy loophole that people use to make money online - and your not wrong. Dropshipping is the easiest way to get started selling products online, and it works completely differently than the traditional online business.

It make you wonder if it's too good to be true...

Is Dropshipping Legal in 2021?‍

Yes, dropshipping is 100% legal.

Dropshipping has been around for decades and has been used by savvy entreprenuers to wrack up big sales numbers without taking care of a giant wharehouse.

So while the dropship model is totally legitimate, there are some risks that you assume when you start an online store.

Risks of Dropshipping

#1 Taxes on Dropshipping

For many, dropshipping is their first venture in entreprenuership. While they focus on finding the right product and growing sales, it's common for newbies to overlook the not so fun side of any business - taxes.

Just like any other business, you must pay taxes on your dropshipping income, even if it's your side hustle.

Taxes vary greatly by your country, state, and amount of revenue from of your dropshipping business. If your not sure what to seek help from a tax expert to make sure you don't find yourself in a pickle.

#2 Copyright Infringement

It's tempting to leverage a well known brand, sports, team or celebrity to boost your business, but the consequences can be harsh.

You should never use another brands logo or even worse hide disguise their product as your own.

I see this the most on print on demand shops. They snag a famous photo, logo, icon etc and throw it on a shirt. It start to sell like hotcakes so they scale their advertizing only to wake up to a cease and assist letter.

#3 Business License

You do not need a business license, LLC, corporation, etc to start a dropshipping business, but depending on your revenue it usually eventually makes sense to formally set up your business if it has consistant growing revenue.

Getting a business license also varies by location, so refer to your local authority for more information. If you are in the United States the Small Business Administration has a ton of resources on business licenses and formation.

#4 Liability

If you sell a product that ends causing bodily injury to someone you could find yourself on the wrong side of a lawsuit. This applies to all businesses, not just dropshippers.

For example, if you were one of the many who sold hoverboards when they skyrocketed in popularity you are probably familair with the hundreds that randomly caught fire and exploded. In many of these cases, the customer then blamed whoever they purchased the hoverboard from.

Even if you had nothing to with the building of the product you could still be caught in the crossfire. You should always think twice about what your selling and the potential risks.