Business, Legal & Tax Basics
The module nobody wants to read until they get a letter from the tax authority. The operators who build lasting businesses treat legal and tax structure as infrastructure, not an afterthought. This is when to start, what to do, and what to track.
Nothing here is legal or tax advice. What's here is the framework for understanding what you need to know so you can have a productive conversation with an accountant or solicitor. At any meaningful revenue ($50k+/year), professional advice pays for itself many times over.
When Do You Need to Register a Business?
| Country | Registration Trigger | Structure to Consider | Notes |
|---|---|---|---|
| United Kingdom | Any trading income — register as Sole Trader immediately or Ltd Company | Sole Trader (easy, taxed as income) or Ltd Co (better from ~£30k+ profit) | Self-Assessment required from first £. VAT registration required at £90k turnover. |
| Australia | Any income-earning activity — register for ABN immediately | Sole Trader (ABN) → Pty Ltd when profitable | GST registration required at $75k AUD turnover. At $200k+ without an accountant, you are already in problem territory. |
| United States | Any income — most states require registration | Single-Member LLC (flexible tax treatment, liability protection) | LLC in Wyoming or Delaware popular for ecom. Check your home state requirements too. |
| India | Any commercial activity above ₹20 lakh typically triggers GST registration | Sole Proprietorship → Private Limited when scaling | Consult a CA early — Indian tax structure for ecom exports has specific rules. |
What to Track From Day One
Before you have an accountant, you need to be capturing these things every month so the accountant has something to work with when you eventually hire one:
- All revenue: Shopify payouts (export monthly reports from Shopify → Finances → Payouts)
- All ad spend: Meta Ads Manager monthly billing export (invoices → download as CSV)
- All COGS: Supplier payments, app subscriptions, Shopify fees
- Bank statements: Keep a dedicated business bank account. Never mix personal and business money — it creates an accounting nightmare and can create personal liability issues.
- Any contractor payments: If you pay a video editor, VA, or freelancer — keep the invoice or payment record. Deductible.
Tool recommendation: Start with a simple Google Sheet with columns: Date, Description, Category (Revenue/Ads/COGS/Software/Other), Amount, Currency. Export Shopify and Meta monthly and log it. Five minutes per month now saves 20 hours of panic later.
The Tax Question Everyone Ignores Until It's a Crisis
If you made $200k revenue and spent $180k on ads, COGS, and tools — your taxable profit is roughly $20k (before deductions). The problem most early operators face: they see $200k in the bank account and spend it, then discover they owe tax on the portion they didn't deduct properly. Keep a separate savings account and move 20–30% of every payout into it. That's your tax reserve — don't touch it.
In the UK, once you hit £90k turnover you must register for VAT. In Australia, once you hit $75k AUD turnover you must register for GST. Missing this isn't optional — it's a legal obligation with back-penalties. If you're approaching these thresholds, get a VAT/GST-registered accountant before you hit them, not after.
The earliest you'll benefit from professional advice is around $30–50k in annual revenue. Before that, basic self-filing usually works. At $50k+, a specialist ecommerce accountant will save you more in tax optimisation than their fee costs. At $100k+, you should already have one. At $200k+ without one — you are in crisis territory regardless of what country you're in.
How to Pay Yourself
If you're registered as a sole trader, all profit is yours but taxed as personal income. You don't need to formally "pay yourself" — you draw from the business account. But keep records: how much you took out, and when. At tax time, your profit (revenue minus deductible expenses) is the number that gets taxed — not what you drew.
If you operate through a company, you pay yourself a combination of salary and dividends — the ratio that's tax-efficient in your jurisdiction. In the UK: low salary (at the National Insurance threshold) + dividends is the standard efficient structure. In the US: LLC distributions. Get an accountant to set this up correctly — the difference between efficient and inefficient salary/dividend splits can be thousands of pounds or dollars per year.
