Ask the experts: Drop-shipping, intellectual property and insurance questions answered

  • 20 Jan 2020

Our experts are on hand to answer all your queries about setting up on your own. Christopher Allen, a Start-Up Adviser at FSB Legal, tackles the latest reader questions

Can drop-shipping help my business?

Drop-shipping allows you to operate as intermediary between customer and supplier. You decide what you want to sell and create an online shop. When a customer places an order, it will be sent to the manufacturer to be processed and distributed. There are several advantages and disadvantages: 


 Low start-up costs: You do not own stock or equipment 
 Location: You can operate online, so do not have to pay rent or find suitable premises
 Range: You can offer a wide range of products without requiring space or having dead stock if items are not sold

 Low margins: Due to the amount of competition, you will have to reduce your prices to be more appealing
 Suppliers: If you do not secure a deal with several suppliers, you may not be able to fulfil an order 
 Payments: PayPal has the right to withhold payments for up to 21 days after the customer receives the item
 Refunds and returns: You may incur postage and packaging costs if an item is returned or refunded.

What do I need to know about intellectual property? 

This is the process by which an individual can protect property relating to their business, such as names, inventions, designs or things you write or make. 

 Trade marks: Typically include a recognisable sign, design or expression that distinguishes a specific product or service from others. Sometimes followed by a ‘TM’ logo, which identifies it has a trade mark attached, or an ‘R’ logo, meaning there is a registered trade mark attached
 Patents: Provides exclusive rights for the creation of an invention that includes a product, process and the way it works. An example would be the Apple iMac patent
 Design rights: Protects your design for specified periods; also applies to shapes and the configuration of products  
 Copyright: Applies when you create artistic work such as music, photography, film etc. Prevents other people or businesses from copying, distributing, renting, showcasing or using your work on the internet without your consent.


It is advisable to research if the item you are planning to protect is available to use by searching online sources such as Companies House or the Intellectual Property Office. 

What insurance do I need for my business?

Business insurance is mostly optional, with some exceptions. However, it is recommended you have some form of protection. FSB members have access to FSB Insurance Services for advice. You may require:

 Building insurance: Covers you against threats such as fire, theft, flooding, explosion and damage to the building
 Contents and equipment insurance: Covers items 
such as laptops, printers, business equipment and accidental damage
 Goods in transit: Protects against loss or damage in transit
 Commercial vehicle insurance: Covers vehicles against theft, fire and damage
 Employer’s liability insurance: Protects employers from being sued for injury, illness or disease incurred by employees while at work
 Professional indemnity: Used by professionals such as doctors to cover them against negligence claims
 Public liability insurance: Protects the business if a member of the public or third party is injured or dies while on the premises or when you are working in their property
 Business interruption: Covers the loss of income suffered after a disaster.

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