The LLC, for some sellers, may prove to be a trusted companion, offering not just protection, but also a degree of flexibility that makes it an attractive choice for many sellers.
Contrarily, the sole proprietorship is the solitary warrior. It's a path of simplicity, but with simplicity comes exposure. Your business and personal assets are intertwined, making you vulnerable in the face of adversity. It's a path I've traversed, and while it is an easier start for an online business, the lack of a protective shield made the journey all the more perilous.
So, as we delve deeper into these business structures, remember - each has its merits and demerits, its thrills and spills. And it's this journey, fraught with decisions and risks, that makes the world of business an adventure like no other. I invite you to join me, as we uncover the secrets of these business entities, and arm ourselves with the knowledge to make informed decisions in our entrepreneurial journey.
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