Business the eBay way; JOHN PENMAN explains how to take advantage of the internet revolution that makes it simple to bring customers to a new business.

STARTING your own business is a tough enough proposition at the best of times, so anything that makes it easier is good.And when you are miles from your target market, anything that reduces the cost of getting to your customers is a godsend. So when eBay launched, the opportunity arose for millions to begin trading using the auction site.

Using the internet, they could reach a wide audience and reduce start-up costs. But it can be too easy to forget you are actually running a business.

The website has spawned a number of small businesses making money by buying items and selling them online for a profit. In the UK there are said to be at least 10,000 businesses selling on eBay. The attraction is that it is easy - all you need is a computer and a digital camera. But like any form of business, there is red tape involved.

Most small businesses and start-ups need advice on how to utilise eBay to start their own legitimate internet trader business. When should they start paying tax? At what point should they register as an official company? What licences/permits do you need?

Simon Smith, general manager of accounting software specialists MYOB, said: 'The tax authorities have woken up to eBay and if you tell yourself you aren't running a business, you simply won't get away with it.

'There are rules and if you don't know about them, that's not going to be an excuse. eBay is a great way of starting a business. You reduce the cost, get to customers cheaply and have a trusted system. But you have to treat it like any other business and keep information the relevant authorities will demand.'

WHAT TO DO

1 Set up accounts at wholesalers, preferably a credit account. Then buy from the wholesaler, sell on eBay, get paid and pay the wholesaler 30 days later.

2 Open an account with eBay and get their free listing tool for your adverts.

3 Open a paypal account, or another online banking account, so you can take payment via credit card. Examples are www.paypal.com and www.nochex.com

4 Within three months you must contact the Inland Revenue and tell them you are starting a business. You must either form a limited company or inform them you are a becoming a self employer. Each will mean differences to your VAT and class of NI.

5 Look for deductions that can offset income, such as equipment purchases and expenses for business, entertainment and travel.

6 Keep good records of everything bought and sold.

7 Buy a software package that will help with tax, payroll and business accounting requirements.

WHAT TO AVOID

1 Never mix your eBay business account with your personal spending.

2 Do not assume eBay will track or report taxes for its sellers. It's your responsibility to comply with government regulations.

3 Don't use the cash method of accounting. Use the accrual basis method - a sale is entered when the invoice is generated, not when cash is collected. Expenses occur when materials are ordered.

4 Don't ignore licenses and permits. For example, if you sell food you MUST abide by health regulations.

5 Don't misrepresent goods, or you'll be liable for penalties under the Sales Of Goods Act.

6 If you have an increase of income you must put on the tax. If you expect your income to exceed pounds 58,000 you must also register for VAT.

7 Don't think you can avoid VAT by selling internationally. It is also likely you'll need an export permit and register with the Customs and Excise.

WORK FOR RESULTS: Whether you're at school, college or already working -\312and no matter what your age - a vocational qualification can enhance your job prospects or help you to climb the career ladder

- For more information contact MYOB on www.myob.co.uk