Quick Guide to Forming an LLC for Your Amazon Seller Business

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(This article was final published on Feb 21, 2017. It's been updated for accuracy and completeness.)

Launching your Amazon Sellers account is a big deal! It's the start of a business venture that could turn into a serious source of income for you lot, especially if you find the right product niche.

For whatsoever entrepreneur though, at that place's some back office tasks to consider similar protecting your business assets and managing your finances. While these aren't every bit exciting every bit selling, they're crucial in setting upwardly your business for the long term.

And, one of the most frequent questions we hear from new Amazon sellers is whether you demand a business organisation license.

The curt reply to the questions is technically no. You don't demand to license or register your business to be able to sell products online including for Amazon.  Simply, registering your Amazon concern as a Limited Liability Corporation (LLC) is a simple and inexpensive procedure that has some major payoffs for your finances and reputation.

Let's await at when forming an LLC tin can make sense for an Amazon Business.

Why Ready Upward an LLC?

An LLC, or Express Liability Company, is a formal business structure that offers personal liability protection. An LLC is a "divide legal entity," which means that your business assets are split up from your personal assets. Then, whatever issues with your concern (like getting sued) won't put your personal avails (i.due east., your house) at risk.

While selling online is relatively low chance, it's always better to exist on the safe side.

The Advantages of an LLC for an Amazon Business

While yous're not legally obligated to create an LLC, you'll miss out on these benefits:

Heave Your Reputation

Customers are more likely to buy from established companies with business organization names. Ane way of demonstrating yous're serious about your business is to form an official business organization entity such as an LLC.

Likewise, forming an LLC protects your business name. No two business entities can have the same name in the aforementioned state.

Protects Your Personal Avails

This is the main reason to form an LLC. Information technology gives you peace of listen about keeping your personal assets (like your firm) protected. After all, you don't desire whatsoever unforeseen challenges (debts, obligations and other liabilities) in your Amazon business to accept a toll on your personal finances.

Easy to Set Up and Manage

You lot can ready an LLC for your Amazon seller concern in a couple of hours using an online business formation company. It'southward so overseen by your country government. There'south much less complication and paperwork than a corporation.

Inexpensive

Most pocket-sized business owners like an Amazon seller choose to prepare an LLC because they're simple to manage and inexpensive. You'll pay a old filing fee (and some states require an ongoing fee every 1 or ii years). On average, an LLC fee costs $89.

You'll get the same advantages for larger corporations, simply without any of the expensive rules, regulations, legal compliance, and paperwork needed with other types of business structures.

Simplifies Finances

With an LLC, you can create a separate depository financial institution account for your business. Separating your business finances from your personal makes tracking your income, outgoings and profits articulate and curtailed.

This will as well brand tax season for your business crystal clear when you accept an business relationship with only business expenses, instead of mixing personal and business expenses in one business relationship.

Taxation Benefits

Different a corporation that pays its own taxes, an LLC is a "laissez passer-through" taxation entity. When your Amazon seller concern makes a turn a profit, the income "flows through" to your personal tax return and is taxed as normal. This tin can go on your accounting costs down.

You also won't exist "double taxed" — larger corporations have to pay tax on their profits and and so individuals pay taxation again when they receive stock dividends. LLC businesses are not subject to this double taxation.

Manage Business Partners

It's easy to add new concern partners to an LLC. And, y'all can use an LLC operating understanding to outline daily operations and set upwards rules if whatever conflicts arise in the futurity. You lot can plan out duties and responsibilities and how to resolve whatsoever disputes.

How to Setup an LLC for Your Amazon Seller Business organization

Follow these piece of cake steps to set up up your own LLC for your Amazon business.

1. Name Your LLC

You'll need to create an original name for your Amazon Seller business concern. If you already have an thought for a retail brand or name for an ecommerce store, that could be perfect for your LLC proper name (given that it's unique).

You should carry a business concern entity name search in your state to ensure you don't choose a business name that already exists. You volition need to include a "designator" in the proper name of your business to show it's an LLC. This is unremarkably through including a suffix of "LLC" or "Express Company." For example: "Perfect Widget Solutions, LLC" or "Ruffpets, Limited Visitor."

Pro Tip: If needed, you can register a DBA (Doing Business As) if you would similar to behave business under a name dissimilar than your LLC. However, most LLCs don't need this. You tin can use your LLC name as your brand name and take check and other payments under it.

ii. Provide the Accost for Your New LLC

Your new business organisation will demand to take a designated address. If you're running a visitor from home, this tin be the same as your abode address. If you lot have a distribution center, it could be that. If you take multiple locations, information technology would be the accost where your "head office" is. This must be a physical street accost, non a P.O. box.

3. Assign a Registered Agent for Your LLC

Every LLC must have a registered agent. For smaller LLCs, this might be the same person equally the managing director or possessor. The registered agent is but the person who receives official legal and tax correspondence and has responsibility for filing for your Amazon Seller business organization. A number of online business organization formation companies will designate a registered agent for you as role of the germination package.

4. Provide the Names and Addresses of LLC Members

The LLC members are the people who own and run your Amazon concern. They can take profits out of the business concern to pay themselves. About states crave you to list the names and addresses of all members when you register the LLC. You can register these addresses as street addresses or P.O. boxes.

5. State the Purpose of Your LLC

Some states require you to explain the purpose of your visitor. This does not limit y'all to engaging solely in that type of concern — it's fine to expand into new areas later on. Because you're selling on Amazon, y'all can state your purpose as an ecommerce retailer.

six. File the Articles of Organization

In one case you've gathered all the information together for your LLC, you'll demand to file formal documents with your state agency. Again, unremarkably online germination companies will practise this part for you.

8. Get a Federal Tax ID (EIN)

Y'all can't open up a business organization business relationship at a banking concern without a Federal Tax ID, too known every bit an EIN. It'southward completely free to apply for an EIN with the IRS online.  Be sure to secure your EIN before heading into a bank to open your account.

Who Can Class an LLC?

Almost anyone in skillful legal continuing who has the right to live and work in the U.Southward. is able to form an LLC.

But, non all businesses can operate equally LLCs. For case, businesses dealing with banking or insurance are typically prevented from forming every bit an LLC. At that place are also restrictions from state to state, for example California prevents some types of professionals from starting LLCs.

Fortunately, at that place are no rules preventing you from starting upwards an LLC if you're selling on Amazon.

Where to Course Your Amazon Seller LLC

If y'all program to manage and deport your business from your abode state, it makes sense to grade your LLC there. As an Amazon seller, you'll be selling across the country (and possibly around the world). That doesn't demand to influence where y'all form your LLC.

Although in that location can exist some advantages to forming an LLC in Delaware, Nevada or other "business friendly" states, in near cases those benefits won't utilize to your LLC.

Additionally, you will need to file as a "Strange LLC" if y'all bear business in other states. And then if, for case, you incorporate in Delaware then conduct business in North Carolina (similar opening a brick-and-mortar shop), you'd have to file and pay fees to the government of North Carolina.

When to Form an LLC

If you're already running your Amazon business and haven't officially formed a business entity for information technology yet, it's a good time to form an LLC.

If you lot're starting an Amazon business in the futurity, taking a few minutes right now to make sure you lot grade your business organisation properly will give y'all peace of mind, and let y'all get on with growing into a thriving Amazon Seller when you launch.

Ongoing Responsibilities for an LLC

One time your LLC is formed, you will have ongoing responsibilities yous demand to deport out. These include:

  • Filing an almanac written report with your land's secretary of state.
  • Reporting income earned (or lost) by your Amazon seller LLC on your personal tax return. Each member of an LLC will need to do this.
  • Paying an almanac fee, varies past state.
  • Providing business organisation reports as needed to other LLC members. (This is not a legal requirement, merely a best practice.)

Managing Your Amazon Sellers Account

After that, here's a few other back office tasks to call back about when managing your Amazon Sellers account:

  • Staying compliant with sales tax and other tax tips
  • Amazon's Marketplace rules and regulations
  • Managing Amazon'south Payout Schedule
  • Basics of Amazon'southward Sellers Insurance
  • Preventing Amazon Business relationship suspensions