Some popular examples of wholesale business are textile products distribution, non-dairy wholesaler, beauty product supply, agrochemical wholesale distribution, paper, and stationary distribution, kitchen utensils, electrical appliances, medicine distribution, rubber and latex distribution, children toys, and many more.
Key Takeaways
- The main purpose of a wholesale business is to sell products in bulk quantity to other businesses
- Dealers, store owners, and customers are the three main elements of a wholesale business
- Identifying the right suppliers can make or break your wholesale business
- Using inventory software for your wholesale business can reduce your stress and increase work efficiency
What is a Wholesale Business?
A wholesale business is a type of business where the seller distributes goods in bulk to other businesses. A wholesaler may supply a single product or offer a variety of goods. Not every wholesaler is a manufacturer; the main purpose of a wholesale business is to distribute products.
How To Start A Wholesale Business
If you are planning on starting a wholesale business then below are some useful tips for you. These tips will ensure you have a successful wholesale business.
Identify The Market
The first step to starting a wholesale business is to identify the market. You have to conduct research to identify the ideal market for your products. You have to find the right dealers, store owners, and other customers who are ready to supply products for your business. Don’t forget to check out the competition for your business. This is very important because competition can be fierce in the wholesale business.
Select The Location Of Your Office And Warehouse
Now you have to choose a suitable place for your business office and warehouse. If you are planning on opening an office in the big city then you have to spend a large amount of money. In this type of situation, you can keep your office and warehouse separate. However, to maintain the warehouse you have to hire efficient and honest staff and ensure that your inventory doesn’t get misplaced or pilfered.
Identify The Suppliers
This is a very important aspect of a wholesale business. Before starting your business make sure you identify the suppliers who will be willing to appoint you as a wholesaler for their products. Some companies will ask you to meet their sales target while others have no requirements. So think carefully before you choose the suppliers.
Set Up A Website
A website is very important for a wholesale business. Through a website, you can easily communicate with the suppliers as well as do branding for your company. Moreover, a website also attracts the retailer who might be interested in selling your products. You can also start selling wholesale on Amazon, which is considered the world’s largest marketplace.
Know The Return Policies
When choosing the suppliers make sure you check the policies of different manufacturers and how they plan to handle any goods returned to them due to defects or for any other reason. Also, check the after-sale service of the suppliers.
Use Inventory Software
You should consider using inventory software for your warehouse. A simple inventory control software package will help you keep track of your products like which products are for shipment or which products have returned for manufacturer defects, etc. Inventory software will help you rotate the products efficiently and help you earn more money.
Payment Policy
You must have a strong payment policy to have complete control over your finance. The transactions of a wholesale business are large compared to other businesses therefore a payment policy is required. Moreover, a strong payment policy will help your business stays on track in the coming years.
File State Documents and Fees
Depending on your state and business structure, you will need the below information:
1. Business name
2. Business location
3. Ownership, management structure, or directors
4. Registered agent information
5. Number and value of shares (if you’re a corporation)
| Business Structure | Document | Description |
| LLC | Articles of organization | Articles of organization are a simple document that describes the basics of your LLC. It includes business information like the company name, address, member names, and the registered agent. |
| LLC | LLC operating agreement | An operating agreement describes the structure of your company’s financial and functional decisions. It defines how key business decisions are made, as well as each member’s duties, powers, and responsibilities. It’s widely recommended to create one to protect yourself and your business, even if your state doesn’t mandate it. |
| Limited Partnership | Certificate of limited partnership | This simple document describes the basics of your limited partnership. It notifies the state of the partnership’s existence and contains basic business information like the company name, address, and partner names. Not all states require it, and some states call it by a different name. |
| Limited Partnership | Limited partnership agreement | A limited partnership agreement is an internally binding document between all partners that defines how business decisions get made, each partner’s duties, powers, and responsibilities. It’s widely recommended to create one to protect yourself and your business, even if your state doesn’t mandate it. |
| Limited Liability Partnership | Certificate of limited liability partnership | This simple document describes the basics of your limited liability partnership. It notifies the state of the partnership’s existence and contains basic business information like the company name, address, and partner names. Not all states require it, and some states call it by a different name. |
| Limited Liability Partnership | Limited liability partnership agreement | A limited liability partnership agreement is an internally binding document between all partners that defines how business decisions get made, each partner’s duties, powers, and responsibilities. It’s widely recommended to create one to protect yourself and your business, even if your state doesn’t mandate it. |
| Corporation (any kind) | Articles of incorporation | The articles of incorporation — or a certificate of incorporation — is a comprehensive legal document that lays out the basic outline of your business. It’s required by every state when you incorporate. The most common information included in the company name, business purpose, number of shares offered, and value of shares, directors, and officers. |
| Corporation (any kind) | Bylaws or resolutions | Bylaws (called resolutions for nonprofits) are the internal governance documents of a corporation. They define how key business decisions are made, as well as officer and shareholders’ duties, powers, and responsibilities. It’s widely recommended to create one to protect yourself and your business, even if your state doesn’t mandate it. |
Do A Wholesale Business Need Federal Tax ID Number
Your business will need a federal tax ID number if it does any of the following:
1. Pays employees
2. Operates as a corporation of partnership
3. Files tax returns for employment, excise, or alcohol, tobacco, and firearms
4. Withholds taxes on income, other than wages, paid to a non-resident alien
5. Uses a Keogh Plan (a tax-deferred pension plan)
6. Works with certain types of organizations
Federal Licenses And Permits
| Business Activity | Description | Issuing Agency |
| Agriculture | If you import or transport animals, animal products, biologics, biotechnology, or plants across the state line. | U.S. Department of Agriculture |
| Alcoholic beverages | If you manufacture, wholesale, import, or sell alcoholic beverages at a retail location. | Alcohol and Tobacco Tax and Trade BureauLocal Alcohol Beverage Control Board |
| Aviation | If your business involves operating aircraft, transporting goods or people via air, or aircraft maintenance. | Federal Aviation Administration |
| Firearms, ammunition, and explosives | If your business manufactures, deals, or imports firearms, ammunition, and explosives. | Bureau of Alcohol, Tobacco, Firearms, and Explosives |
| Fish and wildlife | If your business engages in any wildlife-related activity, including the import or export of wildlife and derivative products. | U.S. Fish and Wildlife Service |
| Commercial fisheries | If your business engages in commercial fishing of any kind. | National Oceanic and Atmospheric Administration Fisheries Service |
| Maritime transportation | If you provide ocean transportation or facilitate the shipment of cargo by sea. | Federal Maritime Commission |
| Mining and drilling | If your business is involved in drilling for natural gas, oil, or other mineral resources on federal lands. | Bureau of Safety and Environmental Enforcement |
| Nuclear energy | If your business produces commercial nuclear energy, is a fuel cycle facility, or is involved in the distribution and disposal of nuclear materials. | U.S. Nuclear Regulatory Commission |
| Radio and television broadcasting | If your business broadcasts information by radio, television, wire, satellite, or cable. | Federal Communications Commission |
| Transportation and logistics | If your business operates an oversize or overweight vehicle. Permits for oversize and overweight vehicles are issued by your state government, but the U.S. Department of Transportation can direct you to the correct state office. | U.S. Department of Transportation |
References:
1. https://www.wallstreetmojo.com/wholesaling/
2. https://www.marketingtutor.net/wholesale-definition-types-examples/
Last Updated on October 7, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.
