5 Steps to Start a Business & Purchase Wholesale

It’s easy to set yourself up to buy goods from wholesalers. You can do it from your home office. Follow these steps and PRESTO, you’re ready to go in search of suppliers.

1. Apply for an EIN (Employee Identification Number) at The IRS
You can apply for a number online. It’s instant!

Be sure to read Top 5 Reasons for Rejection of an Application

No need to become a corporation now – unless you have employees or plan to sell a product that may trigger a lawsuit. Sole Proprietor will work fine for starting out, it’s easy to upgrade if you decide to take your business to the next level and become a corporation.

2. Apply for a Tax ID number in the state you live in.

After applying for an EIN, wait a few days before applying for a State Tax ID number. Your state will need your EIN so you want to be sure the IRS has it in their database.

Google your state’s Revenue Department (example Florida).

Since I live in Minnesota (definitely NOT a sales tax free state) I went here: http://www.taxes.state.mn.us/. On the front page under the Business header is a link to Register for a Minnesota Tax ID Number. If you are fortunate enough to live in a sales tax free state you will need a disclaimer form. You can find this on your state’s Revenue Department website.

3. Get a credit card just for business.

Wholesalers want you to establish a credit history before giving you terms – like Net 30 Days. They want you to pay up front with a credit card the first few times you place an order.

I like to have a card that gives cash back. This only works if you never carry a balance. If you plan to carry a balance, even for a short period, go for the card with the lowest interest rate.

4. Choose Business Name

If you plan to sell online on your own website or eBay you need to answer these questions:

  • Is a domain name available for the name I want?
  • How about eBay? Can I create a user name that is the same as my business?

If you are a Sole Proprietor you don’t need to run a check on your business name. But, if you plan to become a corporation later, you should run a Business Name Check in your state. You cannot legally use a name that someone else is already using in the state you live in. To run a check, go to Google and type in Corporate Name Check Your State (example Wisconsin).

5. Open a Business Checking Account

It’s best to have a separate account for all business transactions. If you are not a corporation, tell your bank you want to set up a DBA (Doing Business As) account or they may not deposit checks made out to your business name. Get your business name on your checks. I like to use small, local banks, because I find them more helpful getting my businesses off the ground. Don’t pay more than $10.00 per month for a basic business account.

Congratulations! You are now a business. You are free to seek out wholesalers and buy until your hearts content. Be careful out there, many businesses call themselves wholesalers but their prices do not reflect that. They are usually middlemen and take advantage of people who don’t know better. Anyone who advertises We Cater to eBay Sellers is probably too expensive and million other people will be selling the same junk.

To find out more about how you can start your own internet based business check out Skip McGrath’s site.

Skip even offers a program for buying wholesale.

15 thoughts on “5 Steps to Start a Business & Purchase Wholesale”

  1. Thanks! This is a great article. I have been looking for exactly this information for awhile. I especially loved the simple explanation about why incorporating isn’t necessary to start with.

  2. I think this is a great article and very informative, but what i think that you left out was all the legal things that they may need to know and the best place to get that info is from a lawyer because like you said there are a lot of people out there that will take advantage of first timers. And also a business plan from a professional.

  3. Great tips, Christine!

    One question: why are the Tax ID number and EIN necessary? Can you clarify?

    Otherwise, this is very helpful. I guess if you are planning on hiring employees, or incorporating, its best to hire a lawyer and and accountant who is familiar with the laws in your state.

  4. What about determine whether the business idea is a viable one – create a business plan, research the competition, and obtain financing? The other night I was watching “the Big Idea” and someone was on there who didn’t know how to write a business plan so they used a napkin and wrote out their thoughts. Chances are if you can’t write the plan you are going to have trouble managing your own business.

  5. Hey this article was amazing, but i was curious if you or some could direct me on what tax forms to use, or how to figure out what necessary steps are for collect tax and filing everything after item is sold.

  6. I think it is a useful information. It is also important to make a business plan before you start the business. That way you know how you are going to sale, where you are going to sell, what your profit is going to be, what is the minimum you need to sell a month in order to cover your expenses. And the most important thing: whether it is worth or not.

  7. I think that it is great to be able to buy products but you first need to make sure that you can sell what you buy. Look at your past expeirence, look at all the business contacts that you have made. What do they need, will they buy a product or service from you. The easiest sale to make is to people you know. it is hard to get the first customer and start a viable business from scratch. If you can start by getting sales very quickly, your chances of being successful improve greatly.

    If you need additional ideas on thinks to consider when setting up a business, look at my blog which talks specifically about setting up or buying a business http://blog.thebusinessplace.com/

  8. I find that starting a business from scratch is only worth doing if you have a new process or product that hasn’t been tried before and that has a market with a reasonable size. In this case you will not be competing with more established and knowledgeable competitors and you will have the time to develop a competitive advantage and be very successful. Most entrepreneurs start businesses in very competitive environments with no real competitive advantage. As a result most startups fail for lack of competitiveness. If you want to have your own business and don’t have a new process or products then consider buying an established business. The chances of success are higher because the business has a track record of success. In most cases the price paid for the acquisition is worth it.
    you can check this blog for more info about the business purchase process: http://blog.torontobusinessbroker.com

  9. A credit card is essential for starting wholesale in a worthwhile amount, I use alibaba for stock purchases and it works well.

  10. Thanks for the article.

    Also, it may help to know that in the state where I live you need only go to the town where you live and get a Business Certificate for doing a business in a name other than your own name.

    After that you can go to the bank and open an account in the name of the business. You will do this using YOUR personal SS#.

    Next, you can contact the business where you want to buy stuff wholesale and get their application for opening an account.

    Fill it out as they request. Show them your Bank Account info.
    La Voila… now you can save money on your purchases.

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