Do I Need a Business Licence to Sell on Etsy in the UK? A guide to selling on Etsy

Etsy is an online ecommerce platform that allows artists and craftsmen to sell the goods they make. This platform helps these artists to maintain their online store with no need to create a physical store for their goods.

As an artist, consider setting up an Etsy store, either to sell handmade wear or even crafts and you're wondering if you need to set up a company to be able to sell your goods on the marketplace, then carefully go through this article for your answer.

A limited company is needed to continue earning more than 1000 pounds annually, however, if you're earning less, then it is not mandatory to have a business or company structure.

You can start up an Etsy store as a side hustle or a full-time business as many individuals earn a high income from selling their goods on Etsy and this is less stressful and economical since you must not have a physical store to back up your business.

In this article, we've compiled a comprehensive guide outlining the eight essential steps you must take to embark on your journey into the Etsy marketplace.

Skills You Need to Sell on Etsy

Esty is great for artists, designers, artisans and craftsmen to make money online by putting out their products for sale on the platform. This means that you need a skill you are very good at to be able to sell in the competitive marketplace

Before you start your shop, check out what other shops are doing well and who your competition is. If five other shops are selling similar stuff, think about how you can make yours different or better. You could even consider selling a completely different product. To make it in a competitive market, your business needs something special that sets it apart.

If you're feeling unsure about your skills in any of these areas, don't stress. As long as you can make unique products, you can improve your abilities while running your Etsy business. Plus, there are loads of online tutorials and courses available to help you enhance your skills. So, don't worry if you're not an expert right from the start. You'll have plenty of opportunities to learn and grow as you go along. Just focus on creating unique products and keep trying to improve on your products.

Starting an Etsy business is more than just a casual hobby or side hustle; it requires a good business plan if you're looking to turn a profit. Before starting your business on Etsy, take the time to put the following into consideration:

1. First off, what's your brand name? It's the face of your business, so choose something unique and a name that can reflect your brand style.
2. Next, think about the overall design and aesthetic of your brand and Etsy shop. This sets the tone for your customers and helps establish your identity in a competitive marketplace.
3. Identify your unique selling points (USPs) and niche. What makes your products stand out? Find your niche and capitalize on it.
4. Consider what craft supplies you'll need to run your business smoothly. Having the right tools and materials is important for success.
5. Always consider the start-up costs and running expenses involved. Budget accordingly to avoid financial difficulties down the line.
6. Decide how many items you'll sell and at what price point. Balancing quantity and pricing is key to profitability.
7. Determine your business model and legal structure. Are you a sole proprietor, LLC, or something else? Understand the legal implications of your chosen business structure.
8. Educate yourself on the rules and regulations governing e-commerce businesses. Compliance with rules and regulations is very important to avoid fines or penalties.
9. Consider whether you'll need professional help, like an accountant or assistant, to manage your business operations effectively.
10. Develop a good and effective marketing plan to promote your products and build your online presence. Social media, email marketing, and collaborations can all help attract customers.

Remember, success on Etsy requires careful planning and attention to detail. With millions of products in the competitive marketplace, it's essential to get your niche, focus on it and differentiate yourself from the competition. So, take the time to lay a solid foundation for your business.

Starting an Etsy shop is straightforward and doesn't cost anything upfront. While there's no fee for setting up your shop, you'll pay a small fee for each listing and a 5% commission on sales. If you use Etsy's payment system, there's also a processing fee per transaction. Keep these costs in mind when pricing your items.

To get started, visit etsy.com and create an account. Once you've set up your shop, customize it with your preferences and choose a catchy name. Then, start listing your products with high-quality photos and detailed descriptions.

But launching your shop is just the beginning. Running an Etsy business involves ongoing tasks:

1. Optimize your shop to appear in search results.
2. Promote your shop on social media to attract customers.
3. Package and ship your products securely and on time.
4. Keep creating new products to keep your shop fresh.
5. Offer creative sales and discounts to attract shoppers.
6. Take care of administrative duties like bookkeeping and customer service.

Remember to keep track of your expenses by saving receipts for materials, equipment, and other costs. These expenses can often be deducted from your taxes, so it's essential to stay organized. By staying on top of these tasks, you can set yourself up for success and grow your Etsy business over time.

Setting up an Etsy store is quite straightforward, but if this is your first time going into e-commerce, it might seem a bit overwhelming. Moreover, with over 4 million Etsy sellers globally, ensuring that you establish your Etsy shop correctly from the outset is important. e.

The 8 Essential Steps You Must Take to Embark on Your Journey into the Etsy Marketplace

Here are the eight steps you must take to kick-start your Etsy journey today.

Step 1: Registration

After registering, check your email to confirm your account, and then proceed to sign in. To create a seller account, locate the drop-down menu next to the shopping basket icon located in the top right corner of the page. Within this menu, you'll find an option labelled "Sell on Etsy". Click on it. This action will redirect you to the "Sell on Etsy" page. On this page, you'll notice a prominent black button that reads "Open Your Etsy Shop".

Step 2: Choose Your Etsy Shop Preferences

Upon clicking "Open Your Etsy Shop," you'll be directed to a page where you can specify your Etsy Shop preferences. As a shop owner, you'll need to make selections in the following areas:

1. Shop language: This sets the default language for your product descriptions. It's essential to choose wisely because you won't have the option to change this language later on. However, you can always add more languages to your shop at a later time.
2. Shop country: Here, you'll designate the country where your shop is based. It's worth noting that Etsy isn't accessible in every country, so if your country isn't listed, you may have to wait. Alternatively, you might explore setting up a UK business as a non-resident to work around this limitation.
3. Shop currency: This determines the currency you'll use for pricing your products. Rest assured, customers from other countries will see the prices displayed in their currencies for convenience.

Once you've chosen your shop preferences, the next step involves selecting a description that best fits your business. You'll be presented with the following options:

1. Selling is my full-time job: Choose this option if you're dedicated to running your shop as your primary source of income.
2. I sell part-time but hope to sell full-time: Select this option if you're currently selling part-time but aspire to transition into full-time entrepreneurship.
3. I sell part-time, and that's how I like it: If you prefer maintaining a part-time selling status, this option is the one for you.
4. Other: If none of the above descriptions accurately represent your business model, you can choose this option and provide your description.

At this stage, you won't need to finalize your shipping prices. However, it's crucial to consider your shipping costs or explore the possibility of offering free shipping. Offering free shipping serves as a significant incentive for buyers and enhances the credibility of your business.

Step 3: Choose Your Etsy Shop Name

If you're in the process of registering your Etsy shop, chances are you've already brainstormed a potential name. However, it's essential to keep in mind that Etsy has specific guidelines regarding shop names that you must adhere to:

1. Your shop name can have a maximum of 20 characters.
2. It must be unique, meaning no one else on Etsy can have the same name.
3. Your shop name can only consist of Roman letters and numbers, with no spaces allowed.

Once you've settled on a name, you can verify its availability using Etsy's shop name checker tool. Unfortunately, if your desired name is already claimed by another shop, you'll have to go back to the drawing board. While you may tweak your original choice slightly, it's crucial to ensure that the new name is distinct enough from existing ones to avoid confusion.

As a business owner, you might be contemplating the possibility of establishing a separate e-commerce website for future sales or even opening a physical retail location. In such instances, it's important to verify the availability of the web domain corresponding to your chosen shop name. Additionally, it's advisable to conduct a check on Companies House using a business name checker to know if the name is available for official registration. By performing these checks, you can ensure consistency across your online and offline presence and avoid potential conflicts with existing businesses.

Step 4:  Craft Your Branding and Shop Logo

When selecting your shop name, it's essential to consider the branding and logo design for your shop. While you can tackle this step after finalizing your name, some names naturally lend themselves to more effective branding and logo creation.

Given the multitude of shops on Etsy, competition is fierce, even for sellers offering unique products. That's why your logo and branding play an important role in helping your shop stand out from the crowd. Since you're embarking on the journey of setting up an Etsy shop, making the design of your branding a manageable task. As you establish your shop, you'll need to develop several key assets, including:

1. A shop logo sized at 500 x 500 pixels
2. A cover photo with dimensions of 3360 x 840 pixels
3. A banner image measuring 760 x 100 pixels
4. A profile photo at 400 x 400 pixels.

Etsy provides built-in photo editing and design tools that you can access post-setup. However, if you already have your assets prepared, you'll simply go to the process of setting up your shop. If you feel uncertain about designing your branding elements, there's an abundance of online tutorials and logo services available to provide guidance and assistance.

Step 5: Craft and Enhance Your Etsy Listings to Align with the Search Algorithm

With numerous Etsy shops vying for attention, the majority of your sales are likely to originate from searches conducted in the Etsy search bar. To capture the interest of potential customers and increase visibility in search results, it's essential to optimize your listings for search engines and make them appealing to prospective buyers. Before launching your Etsy shop, familiarize yourself with the fundamentals of search engine optimization (SEO) to enhance the likelihood of your listings ranking favourably.

When creating Etsy listings, be sure to include the following components:

1. Listing details: This include your product title, accompanied by a comprehensive description detailing the creator, creation date, and materials utilized.
2. Photos and videos: While one image is mandatory for all Etsy listings, you have the option to include up to ten. Maximizing the number of images not only adds confidence in potential buyers but also allows you to showcase product dimensions, if feasible. Incorporating videos can further distinguish your offerings and showcase product quality.
3. Stock and pricing: Maintaining accurate pricing and inventory records is critical for your shop's success. Your pricing structure should factor in the cost of materials, labour, and shipping expenses. Additionally, implementing industry-standard practices and assigning a Stock Keeping Unit (SKU) to each product streamline inventory management.
4. Variations: If your products are available in multiple sizes or colours, utilize this feature to offer variety to customers. Similarly, if you offer personalized products, this section can be utilized to accommodate customization options.
5. Delivery and shipping settings: Etsy simplifies shipping logistics through its shipping calculator, which calculates shipping costs based on your location. Specify whether you offer free shipping for domestic and international orders, and provide accurate dimensions for packaging purposes.

We recommend saving each listing as a draft before publishing to ensure accuracy and minimize errors. Additionally, take the time to review and preview each listing to verify its completeness and accuracy before making it publicly available.

Etsy suggests creating a minimum of ten initial listings to increase visibility within the Etsy community. If you lack sufficient inventory, focus on optimizing your existing listings to maximize their effectiveness. Additionally, consider leveraging social media platforms such as Instagram or Facebook to promote your products and attract potential customers.

Step 6: Establish Your Business Entity

Moving forward with registering your Etsy shop involves setting up Etsy payments. However, before proceeding, you must determine whether you will operate as a sole trader (sole proprietorship) or establish a limited company.

Your decision will significantly impact various aspects of your business operations, including taxation and legal responsibilities. Here's a breakdown of the key differences between being a sole trader and forming a limited company:

1. Sole Trader: Operating as a sole trader means there is no legal distinction between you and your business. Consequently, you are personally liable for any debts incurred by your business. Tax obligations are managed through self-assessment tax returns.
2. Limited Company: Opting for a limited company structure establishes your business as a separate legal entity. As a result, you enjoy limited liability for business debts, shielding your assets. Taxation is handled separately through corporation tax, and you have the flexibility to pay yourself a salary and dividends from company profits. While registering as either a sole trader or a limited company is relatively straightforward, the process can seem stressful. Utilizing the services of a reputable formations company, can ease the registration process and provide peace of mind.

Step 7:  Etsy Payments

Now that you've completed the registration process as either a sole trader or a limited company, it's time to set up Etsy payments. Within the payment settings section of your registration, you'll encounter options specific to your chosen business structure: sole proprietorship or incorporated business.

For sole proprietorships, you'll be required to provide:

1. Your full name
2. Date of birth
3. Address
4. Phone number
5. Country.
6. Limited companies, on the other hand, must have the following details
7. Legal business name
8. Official company address
9. Business registration number
10. Contact details.

Once you've inputted your business particulars, the subsequent step involves adding your bank account information for receiving payments from Etsy. While any bank account can be utilized for this purpose, it's advisable to create a business payment account to maintain a clear separation between personal and business finances.

Following the setup of your bank account details, you'll proceed to configure your preferred payment method for Etsy fees. This means entering the same details required for any online purchase. Additionally, opting for auto-billing ensures timely payments and helps prevent any oversights in fee settlements.

Step 8:  Officially Launch Your Etsy Shop

Before you announce the grand opening of your Etsy shop to the world, there are a few final tasks that require your attention

1. Revise Your Etsy Bio: Take the opportunity to update your Etsy biography, which serves as an introduction to yourself and your shop. Including a brief bio and a photo of yourself can enhance your shop's credibility and serve as a trust signal for potential customers.
2. Establish Shop Policies: Allocate some time to carefully review and set up your shop policies. This includes defining essential aspects such as the processing time for orders, shipping policies, accepted payment methods, and a clear returns/exchange policy. Ensuring clarity and transparency in your shop policies helps to ensure trust and confidence among your customers, contributing to a positive shopping experience.

Are you Ready to Make Your Business Official?

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Conclusion

Possessing a skill is very important if you're thinking about creating an online store on Etsy. You have to make sure that when your earnings surpass £1000, you will officially create a business structure to be able to efficiently trade.

As a trader on Etsy, you can also choose to create an offline store or even create a business website for your store as this facilitates originality of your business and continuity. If you have any questions on selling on Etsy, don’t hesitate to contact us here, and we’ll do everything we can to help.