tl;dr – Technically no, but we strongly recommend it for liability purposes. You do not want to end up personally liable for your business.
I. Introduction
Selling on Amazon can be a great way to add some vacation money to your savings or quit your day job. Getting started with the proper foundation is the key to success. People often ask… Do You Need an LLC to Sell on Amazon? That question is a little more complicated than it seems…the answer is maybe. Below we will look at the options and the reason you may or may not want to start off with a LLC.
II. Do You Need an LLC to Sell on Amazon?
- Simple answer is NO, you don’t have to have a LLC to get started.
- A LLC is a legal tax structure that stands for Limited Liability Company.
- The LLC is a proper company setup with the biggest advantage of limiting you from liability of the company.
- The LLC (when treated properly) shields you personally from things that could go bad in your business. These issues could be financial or legal.
III. Pros and Cons of Having an LLC for Amazon Selling
Do You Need an LLC to Sell on Amazon? Pros of having a LLC are vast. When people ask do you need a llc to sell on Amazon, the answer in our opinion is YES. Selling on Amazon doesn’t seem very dangerous on the surface but we need to have a deeper look at the liabilities that may come from any business. Are you selling supplements or foods people may get sick from, or are you selling clothes? Are you selling dangerous power tools that people can hurt themselves with or are you selling video games? Product liability is one aspect to consider when selling anything online or offline.
Another aspect to think about is the financial liability. If you are used or go bankrupt as a business, will that effect you personally? Are your personal bank accounts, your house or cars up for grabs? With a LLC, you limit most of that financial liability as long as you treat your business as a real business. Each state has different rules as to what could be up for grabs when financial issues occur and you are doing business under your personal name.
Are there any cons to having a LLC? There are a couple that come to mind. First issue is the fees to open and maintain a LLC. Again, each state is different on the costs to open a business and whether or not they require yearly fees to maintain it. Most people will likely use a CPA to deal with their tax filings when it comes to business though you don’t have to. There are a couple ways to be taxed as a LLC. The simple and generic LLC is considered a pass through entity. All of your profits go directly to your income. This will increase your tax liability. You may consider a LLC filed as an S-Corp.
IV. Steps to Set Up an LLC for Amazon Selling
- Setting up a LLC is different in each state. We recommend using a filing service or lawfirm that can help guide you through this process and ensure the proper filing and paperwork needed.
- We recommend KKOS Lawyers if you are looking for an affordable law firm to help you set up your LLC.
V. Alternatives to an LLC for Amazon Sellers
There are a couple other alternatives to a LLC, so do you need an LLC to sell on Amazon? Let’s talk about the alternatives:
- Sole proprietorship – This is doing business under your own name.
- Advantages: Usually free to get started. Easier to file taxes
- Disadvantages: LIABILITY. You are personally liable for your business.
- S-Corporation – Similar to a LLC but has a tax advantage
- Advantage – similar to a LLC but add in a little bit more tax savings
- Disadvantage – tax filing will cost a little more. You will need to setup W2 payroll.
- C-Corporation – Much more than you need. We wouldn’t consider this option until you are making lots of money.
VI. Frequently Asked Questions (FAQ)
- Q1: Do you need an llc to sell on Amazon?
- Answer: Technically no but we highly suggest one if you are wanting a true business.
- Q2: What are the benefits of having an LLC for Amazon FBA?
- Answer: Liability protection
- Q3: Can I change my business structure on Amazon once I’ve started selling?
- Answer: You can start selling under your own name and graduate to a LLC later if you’d like.
- Q4: Are there any tax advantages to having an LLC for Amazon selling?
- Answer: Using just a LLC, not really. You would a S-Corp (or a LLC taxed as an S-Corp) to take advantage of tax savings.
- Q5: How long does it take to set up an LLC for my Amazon business?
- Answer: Most states you can have a LLC set up in a couple of days.
- Q6: Can I use my existing LLC for a different Amazon store or business?
- Answer: You can use any current LLC to sell on Amazon.
- Q7: Are there ongoing costs associated with maintaining an LLC for Amazon selling?
- Answer: Each state is different, so you will need to look at your state.
- Q8: Can I convert my existing sole proprietorship to an LLC for Amazon selling?
- Answer: Yes.
- Q9: What legal considerations should I be aware of when forming an LLC for Amazon?
- Answer: Liability, liability liability.
- Q10: How can I choose the right business structure for my Amazon business?
- Answer: Speak to a laywer like KKOS Lawyers or a qualified tax professional.
VII. Do You Need an LLC to Sell on Amazon?
- Its hard to give a straight answer to do you need an llc to sell on Amazon. No, you don’t have to but we’d recommend one.
- You should really take the time and speak to a professional about this before jumping in. A proper foundation is the key to success long term.
- Check out our free video on entity registration for more information.
VIII. Additional Resources
- IRS – Internal Revenue Service great source for more information regarding business structures
- SBA – Small Business Administration can help with different small business questions.
- Tax Advantages for the different business structures.
