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Setting Up Your Amazon Business

A Comprehensive Guide of Amazon Sellers

Posted by Amanda Stein on 2023-07-05 | 3 minute read

In short,

An LLC is a superior option for an Amazon business because it protects your personal assets.

Setting Up Your Amazon Business

Amazon do not require US citizens to sell using an LLC. You can sell in various legal formations including selling as a sole proprietor. Having an LLC is not required to create a seller account.

Amazon sellers outside the US must have some sort of a legal entity (e.g. local variation of a limited company, have a tax ID etc.). We can not go into the different local business licenses so if you are selling outside the US make sure you consult with a professional advisor who will help you follow your contry's regulations.

Must I use an LLC to sell on Amazon?

First, let's understand what is an LLC. A limited liability company is a US business structure that offers the ownere protection from personal responsibility for debts or liabilities.

From an Amazon seller perspective a limited liability company is an ideal setup because it protects your personal assets. Such a business structure clearly separate between your business assets and your personal assets meaning you can approach this endeavour with greater confidence.

You can also hold various LLC vehicles and have a separate legal entity for your Amazon business. This flexibility and protection, make this vehicle an ideal solution for many sellers.

A sole proprietorship, on the other end, is owned and run by one person. As a result, no legal distinction exist between the owner and the business entity. This means that in this business structure the personal assets are not protected like they are in an LLC. While it is easier to start an an online business, and specifically an Amazon business, as a sole proprietorship, many sellers believe an LLC is a superior option.

Some of the the differences include tax benefits and sales tax considerations, different outlook on your business expenses, business license and the way the authorities collect sales tax. All of these will not be discussed in this article, but you should be aware of them and can read more about them in many legal outlets, as you can see here.

For the purpose of this article, what you need to know is that while you can operate your online business in any form you'd like, sole proprietorship or LLC, the protection of your personal assets under your LLC business license offer a huge advantage that shoulnd't be taken lightly.

If you choose to be a sole proprietor, you must take a close look at personal liability protection.

Should I sell as a sole proprietor or LLC on Amazon?

That's a quick NO. You can, and often should, use whatever name you want for your brand. You can conduct business under whatever brand best serve your needs.

Must my Amazon brand name be the same as my LLC name ?

As we mentioned, this is something you should consult about with your legal team, CPA or tax professional. We are just going to give you pointers of the questions you need to ask.

Understand if you need or how to get a LLC or business license, federal tax ID, if you need a separate business bank account, how to treat business expenses and how to collect sales tax .

Being an online business has some consequences from a sales tax perspective you must be aware of and your Amazon business, whether you are a sole properitor or a registered company will have to take it into account.

Bare in mind that all of the above is never too complicated. Once you are set with the basics, a federal tax ID, set up your business entity and have a registered business you can sell on Amazon.

All you need is someone to help you set it up and you are good to go

Frequently Asked Questions & Answers

  1. What is the first step to sell on Amazon?
  2. Answer: The first step to sell on Amazon is getting the basics set, which includes obtaining a federal tax ID and setting up your business entity.

  3. Is getting a federal tax ID complicated?
  4. Answer: No, it's never too complicated. It's part of the basic steps you need to take to start selling on Amazon.

  5. What is a federal tax ID?
  6. Answer: A federal tax ID, also known as an Employer Identification Number (EIN), is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses for tax purposes.

  7. What do you mean by setting up your business entity?
  8. Answer: Setting up your business entity means registering your business with the appropriate government agencies, which includes choosing the type of your business like LLC, Corporation, Partnership, etc.

  9. Is it necessary to have a registered business to sell on Amazon?
  10. Answer: Yes, it is necessary to have a registered business to sell on Amazon.

  11. Can I sell on Amazon without someone to help me set it up?
  12. Answer: Yes, you can sell on Amazon without help. However, having someone to guide you through the process can make it easier.

  13. Is it difficult to set up my store on Amazon?
  14. Answer: No, it's not too complicated. Once you have your federal tax ID and your business entity set up, you can start selling on Amazon.

  15. Can I sell on Amazon as an individual?
  16. Answer: Yes, Amazon does have an Individual Seller plan but the registration process still involves providing valid business information.

  17. What are some of the benefits of selling on Amazon?
  18. Answer: Selling on Amazon gives you access to a massive customer base, helpful seller tools, and can help increase your business visibility.

  19. What else do I need to sell on Amazon besides a Federal tax ID and business entity?
  20. Answer: You will also need to create an Amazon seller account, provide your bank account details, and have a product to sell.

  21. Is there a cost to sell on Amazon?
  22. Answer: Yes, Amazon charges a fee for its selling services. The amount varies depending on the selling plan you choose.

  23. Is an EIN the same as a federal tax ID?
  24. Answer: Yes, an EIN (Employer Identification Number) is also known as a federal tax ID.

  25. Can I start selling immediately after setting up my Amazon seller account?
  26. Answer: Yes, once your Amazon seller account is set up and your products are listed, you can start selling.

  27. How do I obtain a federal tax ID?
  28. Answer: You can apply for a federal tax ID or EIN through the IRS website.

  29. What type of products can I sell on Amazon?
  30. Answer: You can sell a wide range of products on Amazon, from books and electronics to clothing and household goods.

  31. Do I need to have inventory before I can sell on Amazon?
  32. Answer: Yes, you need to have stock of the items you wish to sell on Amazon.

  33. Can I sell on Amazon from outside the U.S.?
  34. Answer: Yes, Amazon allows international sellers but there may be additional requirements.

  35. How do I price my products on Amazon?
  36. Answer: You set your own prices on Amazon, but it's important to consider factors like competition, product costs, and Amazon fees.

  37. How does Amazon pay me?
  38. Answer: Amazon pays sellers through direct deposit into their bank account.

  39. Can I sell handmade products on Amazon?
  40. Answer: Yes, Amazon has a specific marketplace called Amazon Handmade for artisans to sell their handcrafted products.