Do I Need An LLC To Sell On Amazon? Free Guide 2023
An LLC business structure is not necessary to sell on Amazon. Amazon allows individual sellers to register and sell products without an LLC or any other formal business entity. However, forming a limited liability company can offer various benefits and protections for your online business, can protect yourself and other LLC members from legal actions, and offer tax benefits. Other structures to consider include sole proprietorship and corporation; each structure also allows for the legal entity to create a fictitious name or DBA (Doing Business As) to add additional layers for privacy.
What is an LLC?
Like sole proprietorship, a limited liability company (LLC) is a popular business structure that offers personal liability protection to its owners (called members). An LLC can belong to more than one person. LLCs are flexible, easy to form, and are good for tax purposes, making them an attractive option for small business owners and entrepreneurs. You can operate a single member LLC by yourself or create a multi-member limited liability company with an operating agreement. Once this is determined, set up the Amazon seller central account to sell products and services online, offline, or a combination of both.
Read More: Best Registered Agent Services 2023
Benefits of an LLC
When forming an LLC some benefits include limited liability protection for its owners, flexibility in management and ownership, pass-through taxation, ease of formation, and potential tax benefits. The operating agreement will help to determine tax burdens, profit sharing, etc. Sales tax laws vary by state, but generally, having an LLC does not directly impact sales tax obligations. As an LLC or sole proprietorship owner, you are responsible for complying with state and local sales tax laws and regulations. However, forming an LLC can help protect your personal finances in case of sales tax audits or lawsuits related to sales taxes. It’s important to consult with a tax professional or an attorney to understand your specific sales taxes obligations as an LLC owner. Additionally, an LLC can add credibility and professionalism to a business, making it more attractive to potential customers, partners, and investors.
Do You Need an LLC to Sell on Amazon?
You do not need an LLC for Amazon FBA (Fulfillment by Amazon) business. You also do not need a corporation or sole proprietorship status. To open an Amazon FBA account, you simply need to create a seller account on Amazon. Here are the general steps:
- Go to Amazon’s Seller Central website and click on “Register Now.”
- Follow the prompts to set up your seller account, providing information about your business, including bank account and tax information.
- Once your seller account is set up, click on the “Inventory” tab and select “Manage FBA Inventory.”
- Set up your FBA account by providing additional information about your products, such as their quantity and condition, and choose which Amazon fulfillment centers you want to send your products to. Amazon collect sales tax based on the residence of the buyer and of the seller. You may need a sales tax permit or license for your Amazon seller account.
- Prepare your products according to Amazon’s guidelines, and ship them to the designated Amazon fulfillment center.
- Once your products are received by Amazon, they will become available for sale on Amazon’s website.
When is The Right Time to Open an LLC for My Amazon Business?
The LLC is a separate legal identity and offers legal protection. While you don’t need an LLC to sell or start selling on Amazon, this can be helpful. Before forming an LLC for your Amazon business consider your business goals, liability risk, and tax considerations. Remember, the LLC becomes the legal entity for your business. If you plan on growing your Amazon business into a full-time operation or expanding into other markets, forming an LLC may be a good choice to protect your personal assets and create a separate legal entity for your business. You’ll also need separate bank accounts and to conduct a tax identity information interview in some states. If you’re concerned about personal liability for your business activities, forming an LLC can help protect your personal assets from lawsuits or other legal issues that may arise. Depending on your state and individual circumstances, forming an LLC may offer tax advantages such as pass-through taxation or the ability to deduct certain expenses.
Do I Need a Business License to Sell on Amazon?
Whether or not you need a business license to start selling on Amazon depends on several factors, including your location, the types of products you sell, and the laws and regulations in your state or country. In general, many states require businesses to obtain a business license or permit to operate legally. Amazon also collects sales tax; your state can tell you if you also need a sales tax permit.
Amazon is primarily an e-commerce platform so you will need a separate LLC to sell real estate or non-Amazon products and services. You may need a sales tax permit or business license, you should consult with your local government or a business attorney who can provide guidance on the specific requirements in your area.
Amazon LLCs Vs Amazon Sole Proprietorship
An Amazon LLC offers personal protection for its owners, other benefits, and ease of formation, making it a popular choice for a small business owner. In contrast, a sole proprietorship has no legal separation between the sole proprietor and owner, offers no liability protection, and is taxed as personal income.
The Top 2 LLC Services
|ZenBusiness||Northwest Registered Agent|
|Award||Best Overall||Most Affordable|
|Price||Starting at $49/year||Starting at $39/year|
|Detail||Read Review||Read Review|
Through ZenBusiness you can search for available trade name, business name, DBA names, create articles of incorporation, find out the needed documentation for your state and federal filings and registrations, obtain an EIN, build the business web presence through domain names, email, and domain privacy protection.
ZenBusiness offers three tiers for members ranging from $49/year to $299/year. For each tier there are additional charges which will not be included; these include an EIN filing charge (one time, $70), a worry free guarantee service ($129 per year), and a 25% discount on agent services, any state filing fees.
Northwest Registered Agent is primarily a Registered Agent Service but their suite of tools does offer additional business services at a reasonable price. The initial cost is $39 to file the LLC paperwork; all other charges are due as per your state’s regulations. There is a separate option, called Pay In Full. With this option, which costs $225, Northwest will file the LLC, and provide agent services for one year, however, all other charges from state fees, etc., will still apply.
Northwest will scan up to five regular documents each year for free; after the initial five there is a charge for additional services. This is also different from other providers as many will only scan and send legal documents.
Both services can help file paperwork for LLC, sole proprietor, and other structures needed to operate a business.
Read More: Best LLC Services 2023
LLCs are pass through entities through which a company can receive other benefits, hire employees, and be personally protected from legal action. An S Corporation also offers some benefits, but the tax implications will be different; the IRS website can help you decide which entity is right. Amazon FBA is a service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. Amazon then picks, packs, and ships the products to customers on behalf of the seller. Amazon seller business also offers customer service and handles returns for the products stored in their warehouses. This service enables the online business to benefit from Amazon’s vast customer base and infrastructure while delegating many of the logistical tasks to Amazon. You don’t need an LLC for Amazon FBA business, but the business entity can be helpful. You will need a business license to sell, and cannot use your personal tax return, and will need a physical address for the business. In the end, you must create the business structures – sole proprietor, LLC, or corporation – that make the most sense for you.
Frequently Asked Questions (FAQs)
No, you do not. Amazon FBA is a service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. Although forming an LLC for Amazon FBA may be helpful it is not required.
You should first set up a new business bank account. A business bank account is a financial account that is specifically designed for business transactions. It allows businesses to separate their personal and registered business finances, making it easier for the business owner to track expenses, manage cash flow, and file taxes. Business bank accounts typically offer features such as check writing, debit cards, online banking, and bill pay, and may also offer higher transaction limits and lower fees than personal accounts.
As an Amazon seller, you can deduct the cost of the goods, Amazon fees, marketing and advertising costs, supplies and equipment, and professional services. Most business owners can also deduct the local business licenses fees, but you should check with your local government agency to determine this deduction.
The LLC structure is used more than other business structures because it is simple to set up, even with many business partners, and offers a secure way to conduct business. An LLC can make a legitimate business even more attractive to buyers, making a more profitable Amazon business for the seller.
You don’t need a registered agent to sell on Amazon, but there are documents you will need for your amazon sellers account: If you have employees you will need an employer identification number, depending on your state you will need a sales tax ID number, and Amazon sellers need a federal tax id unless they are sole proprietorships, in which case they may be able to use a social security number.
Amazon sellers pay sales tax, fulfillment fees, and advertising fees; some also pay monthly subscription fees. Also, most must purchase a business license (renewable annually) whether selling online or in a physical store.
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IRS. Sole Proprietorships | Internal Revenue Service. Irs.gov. Published 2020. Accessed May 6, 2023. https://www.irs.gov/businesses/small-businesses-self-employed/sole-proprietorships
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IRS. S Corporations | Internal Revenue Service. Irs.gov. Published 2018. Accessed May 6, 2023. https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
Internal Revenue Service. Internal Revenue Service | An official website of the United States government. Irs.gov. Published 2019. Accessed May 6, 2023. https://www.irs.gov/