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Launching Online Store for Foreign Clients: Why Sole Proprietorship Is Not the Best Option
Ukrainians are actively trying themselves in operating marketplaces of various types. Volodymyr Harkusha, Managing Partner of K.A.C. Group, explains what first important decisions when launching e-commerce through your own online store with a potential focus group of foreign customers should be made, when the product group has already been determined, the financial plan has been calculated and everything is ready for launch.
Ukrainians are actively trying themselves in operating marketplaces of various types.
We can conditionally distinguish two generalized types of online trading that our fellow citizens use: e-commerce on marketplaces such as Amazon, Shopify, Etsy, or their own online store with a full set of attributes necessary for its full functioning.
By the way, the second option does not deny the possibility of cooperation with the Shopify platform, where you can use international payment systems that integrate with Shopify (this will be discussed later). Let us concentrate separately on the option of opening your own online store.
Main Pros and Cons of the Online Store
K.A.C. Group has considerable client experience from developers of IT products, logistics companies to “craft” manufacturers of souvenir products, domestic clothing brands, etc.
Among the advantages of this type of online trading, we can highlight:
• completely independent work when modeling the website and its functionality;
• formation of one’s own customer base;
• more efficient response to changes in the market;
• possibility to build a long-term strategy and financial plans, as well as situational adjustments to them in the conditions of market changes;
• possibility to set one’s own terms of sale and not depend on the general rules of trading platforms.
One of the important negative points is trade logistics. Unlike cooperation with Amazon FBA, where goods are stored, packed and shipped in fulfillment centers, you will have to deal with this issue yourself. You will also have to independently resolve the issues of information protection and organization of financial mechanisms.
Where to Start
What do you need to provide for in order to create an online business focused on foreign customers? Let us consider a situation where a product group has already been determined, a financial plan has been calculated, preliminary marketing has been carried out and everything is ready for a startup. Based on the analysis of the practical experience of K.A.C. Group clients, it is worth dwelling on the following aspects.
The very first step is to choose a country for registering a legal entity. This is necessary for many reasons when it comes to building a systemic business. If it is assumed that the clients will be trading companies, stores, or if it is planned to sell goods from manufacturing companies, which is a mandatory condition.
The tax component is also important. It is necessary to take into account not only taxes and fees related to exports, but also the status of the person who must pay them, and a Ukrainian sole proprietorship is not the best option in this case.
International payment systems also insist on a legal entity when opening an account for an online store. The geographical advantages of the place of registration of a legal entity depend on the following aspects: location where the goods will be sold (whether there are restrictions in local legislation), taxes, payment system requirements.
From existing practice, the most popular choices are:
• Cyprus – 12.5% income tax, 0% defense tax for tax non-residents,
• Estonia – 0% income tax, 2% defense tax starting from 2026,
• offshore jurisdictions – 0% income tax, 0% defense tax.
The next step is to choose a financial mechanism. Today, foreign banks mostly do not want to have trouble with online trading. Therefore, the only alternative option is international financial payment systems, such as Payoneer, Ebury, PayPal, Wise and others.
The list of their financial licenses is almost identical to banks, up to the issuance of payment cards. The significant difference is that payment systems do not provide the opportunity to lend, place deposits, and their clients are not subject to the Directive of the European Parliament and the Council of 16.04.2014 “On the Deposit Guarantee Scheme”.
Still, payment systems, in the context of e-commerce, have many advantages compared to banks.
Firstly, they are flexible in approaches to the client and his business; secondly, they use client-oriented software; thirdly, they offer minimal (compared to banks) tariffs. In part, payment systems for users working in different currencies offer bank details in the countries where partners or clients are located, which reduces the cost of tariffs.
It is necessary to pay attention that when opening an account in a payment system, when passing the KYC (know your customer) procedure, you will need to:
• explain the sources of funds for starting a business,
• confirm experience in the declared field of business,
• provide information about potential partners and clients,
• provide your CV (resume).
In addition, there are technical aspects to pay attention to:
• declared turnover for the account,
• possible number of transactions,
• list of countries where the business will be conducted.
Moreover, you must provide these documents:
• international passport,
• documents confirming the applicant’s current address (utility bills),
• bank certificate confirming the applicant’s account,
• company documents,
• recommendations (depending on the case).
So, the online trading platform is registered and filled with virtual goods, the account in the payment system is opened.
Now it is necessary to make sure that when purchasing goods on the online store website, the client can pay by card, and the funds are credited to the account of the company – owner of the online store. That is, you have to set up payment crediting protocols and integrate the site with the acquiring system of the payment system, or a third-party one with which the payment system cooperates.
For example, Payoneer has its own acquiring/processing, when the entire financial cycle takes place without additional integrations. But it has a requirement: the legal entity must be registered in Hong Kong and have a turnover of at least $50 thousand per month. At the same time, most payment systems cooperate and integrate with well-known acquiring billing systems, such as 2Checkout, Stripe or the previously mentioned Shopify Payments.
It is necessary to pay attention to the fact that each acquiring system has certain restrictions on receiving and processing payments from some countries (see example here). To implement the acquiring system itself, it is worth involving IT specialists. Then we have a full-fledged working scheme for receiving funds: a website-acquiring processor with a merchant account in the payment system.
Some Additional Tips
Finally, when all the mechanisms of the online trading platform are configured, here are a few more tips. It is necessary to work out convenient delivery options with international services, such as DHL, FedEx and UPS, as well as New Post.
If we are talking about trading an original “craft” product, it is worth signing agreements on exclusive rights to sell it in certain countries (regions).
At the start of the process, it is logical to include logistics costs, possible customs duties, taxes in the cost of the product. Usually this adds 15−20%. It is necessary to constantly update advertising, do marketing analysis and, in principle, monitor the market, since an optimally configured sales mechanism, market advantages and prices are the key to success.
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