Is Drop Servicing Legal or Is Drop Servicing illegal?

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Is drop servicing legal
Is drop servicing legal?

Yes, drop servicing is legal! But like every other business out there, there are many rules and regulations limiting how you can use the drop servicing business model.  

The drop servicing business model may seem too good to be true because of its low entry barrier since you won’t be investing in the product upfront.

However, there are things you need to put in place to avoid future legality.

Keep reading to learn more about the legality of drop servicing, how legitimate it is, and some tips on how to run the business properly.

Perhaps you skipped the intro of this article. Yes, drop servicing is completely legal and it’s not illegal.

However, depending on your country’s regulations for different online businesses, you might want to look into those regulations.

But running a drop servicing business isn’t illegal. It is more like outsourcing a job or service you couldn’t do yourself.

Take for example, In many states in the US, you need to acquire a license to run certain kind of online businesses.

So make sure you look into the requirements of the country you live in as well as the freelance platform you’ll be selling on.

A good example is Upwork and Fiverr. Look into their terms and condition to see their do’s and don’t.

You may also be required to incorporate your business in the US to use stripe if you’re a foreigner.

Business incorporation is one of the first steps you should take when starting your drop servicing business.

If majority of your business clients are the US, then you’ll need Stripe and PayPal to receive payment on your website.

Stripe has a package called Stripe Atlas for people that want to use stripe but do not live in the US.

How Does Drop Serving Work?

The main reason behind the question “Is Drop Servicing Legal?” is because the business model looks too good to be true.


Because you sell service you can’t provide yourself to clients that need it by having it done by other people.

This business model allows you to run a 6 figure business by matching buyers and sellers of services together.

Just think of it as the popular dropshipping.

But this time around you’re not dropshipping physical products but services. Hence the word “drops servicing”.

how drop servicing business works
How drop servicing Work: Infographics

Take for example; you’re promoting an advertising agency for small businesses. For each of them that want your service will have to pay you directly.

Now, after receiving payment from these business owners, you can then from the payment pay another freelancer to have the job done.

A good example of these freelancer websites includes,

  • Fiverr
  • Toptal
  • Jooble
  • Upwork
  • Flexjobs
  • SimplyHired
  • Guru
  • Behance
  • 99designs
  • Dribbble
  • People Per Hour

And the most interesting part is that you can buy their services at a relatively cheap price compared to how much you’re charging your clients.

So basically a client pays you for a service and you pay another freelancer to get the job done for you.

Your profit, however, will be the price your client pays you minus how much you pay the freelancer who gets the job done for you.

Pretty smart isn’t it?

Look at the image below to see how it works and your potential earnings per client…

dropservicing business potential earnings

Drop Servicing Legalities

Now that you know that drop servicing is legal lets look at the legalities you need to know in other to be able to run your business successfully.

#1. Do I Need To Register My Drop Servicing Business?

Well, this depends on the business regulation in your country.

However, wherever you live, you can register a business in any of the countries where Stripe works!

 That’s how you will get access to stripe and use it to receive payment on your drop servicing website.

If Stripe is not supported in your country, that means you need to have a registered in the US or any country where Stripe is supported.

Mind you, this is only for people that want to run their drop servicing business with their personal website.

So for those that want to use stripe to receive payment on their website, this is how it looks like:

  • client makes a payment for your service with a credit card
  • The money goes to your Stripe account
  • You create a Payoneer account and add it to stripe
  • Money in your Stripe account is transferred to your Payoneer account
  • From Payoneer, withdraw to your local bank account.

So, yes, you need to register your business in the US if the majority of your clients are there and if you need to receive payment with stripe.

To set this up here’s the breakdown of what you need to do:

  • Register your drop servicing business in the US
  • Open your Stripe account
  • Open a Payoneer account and apply for a virtual USA bank account
  • Connect your USA bank account to Stripe

I have a detailed guide on how to do this, you can check it out here.

#2. Do I Need To Pay Tax For Drop Servicing?

Yes, depending on your country’s tax law. If you’re in the US you’ll have to pay taxes for your drop servicing business.

It might look frustrating because the drop serving business model itself is a method to raise profits.

But it is what it is.  

You have to pay taxes on drop servicing, and it can prove to be a huge risk to your business if you don’t.

However, you do have to check with your state. It’s best to consult a lawyer or accountant on taxation just to be sure you know what you’re doing.

#3. Copyrights Infringement

To avoid this kind of legality, you’d want to make sure every service you’re delivering to your clients are original.

This is common if you happen to fall within the following drop service niches:

  • Video
  • Music
  • Visuals
  • Content creation
  • And few others.

Before delivery any of this to your clients make sure there’s a way for you to test the authenticity of the job.

If not, this can cause a big issue between you and your client.

For content writer, always make sure you run your content through plagiarism tool before sending over to your clients.

Your Drop Servicing Website Legalities

This however is not a must, but it’s required if you’re going to be running an advert with your website.

Plus, they will make your drop servicing website look more trustworthy and legit.

And finally, when issues arise with any of your clients, pages like refund policy will come in handy.

So, it’s always better you have them set up already before any issues arise.

This however is not a must, but it’s required if you’re going to be running advert with your website.

Plus, they will make your drop servicing website look more trustworthy and legit.

And finally, when issues arise with any of your clients, pages like refund policy will come in handy.

So, it’s always better you have them set up already before any issues arises.

#1. Refund Policy

Not like there’s a strict law that requires a drop servicing website to have a refund policy, but it’s required to build trust between you and your clients.

The truth is no one is safe from ordering a defective product online and same thing applies to some services.

But when your clients see this on your websites it increases their trust to do business with you which is going to be a win-win situation for both parties.

Another thing you need to know about Refund Policy is that some ad platform might not allow you to run ads with them if there’s no refund policy on your website.

So to be on a safer side, make sure have a refund policy on your website and equally get your customer trust.

You can use the refund policy generator I use on all of my websites. Click here to use it.

#2. Privacy Policy

Privacy policy, on the other hand, explains how your website collects, uses, discloses, and protects customers’ data.

This is a must for every drop servicing website.

The reason is because the drop servicing business model is a business that collects customer data.

While your clients are interreacting with your website, they will need to drop their personal information like email addresses, phone numbers and few other information.

Based on the country they are coming from, some countries will require that you disclose the kind of personal data you’re collection for privacy purposes.

And since your business is not limited to only one country, you’ll need to add your privacy policy.

This privacy policy generator can also help you do that.

#3. Terms and Condition

This is a legal document on your website that protect your business or company by stating your business rights if customers choose to interact with you.

It simply specifies the your business rights and that of your customers if the use or buy your services.

Although is there’s no law stating you must have this on your website before you can run your drop servicing business.

However, having them keep you safe in terms of any legal issues that might arises with your customer or of any kind.

Just make sure you specify what your business is all about, once everything is clarified you’ll be on the safer end.

You can also use this tool to generate your website terms and condition.

Pros & Cons of Drop Servicing

Since there’s no business without good and bad benefit, it think it’s fair we look at both the good and side of running a drop servicing business.

#1. Low Start-Up Cost

You don’t have to invest in any service skills; everything can be outsourced to a third-party service provider that can get the job done easily.

Your only start-up cost should be for creating your single-page website where you display the service you’re providing.

#2. High Ticket Sales

This is one of the beauties of starting this online business. One single sale can make you up to $2000 total profits.

While compared to dropshipping you’ll have to sell hundreds of products to make that single sale.

#3. Recurring Income

Another interesting part about this is the recurring income. You get to make money online on a monthly basis with no additional cost.

Some client can decide to place you on a monthly payroll for providing a service for them.

And all you do is outsourced it to a third party and get paid per month while doing the same thing over and over again.

#4. No Skill Required

You’re practically doing nothing in this business because every single process can be outsourced and completely automated.

You don’t even have to find clients yourself; you can outsource that to someone else.

Cons of Drop Servicing

Not all is sunshine and rainbows when it comes to running this online business. It also comes with its own set-backs, which is normal for every business.

Freelancer Work Demands

Your freelancer could have pending works on ground that needed to be done when you have an urgent service to be rendered.

The best way to avoid this is by having more than one good freelancer that can do the work for you.

Also, make you sure you’ve tested these freelancers or go through their reviews in other to be sure of who you’re outsourcing your work to.

Your clients cannot know you’re outsourcing the job… so it’s very important you deliver TOP quality service.

Drop Servicing FAQ

Yes, drop servicing is a legit business you can start from any part of the world. Just make sure to check if there is any legal requirements you need to adhere to base on your country of business.

Yes, drop servicing is a very profitable business since you don’t have to invest in upfront products. However, just like every other business, you need to learn and master the business model in other to succeed.

Yes, you can drop service on Fiverr and other freelance website. You just need to be aware of the competitive pricing on Fiverr.

Is Drop Servicing Legal? – Final Though

As you can see, drop servicing is very much legal and the best part is that the market for it can never be saturated.

Compared to dropshipping, drop servicing market is still very much green.

So if you’d ask me, I’d say this is a business model you can jump on to make quick cash without any upfront investment.

To succeed however, you need to know how to source for clients. For that, you should read this post on getting clients.

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