Should I Register For Amazon Business

Gear up to try your luck at FBA just not certain whether you should starting time your selling journey every bit a sole proprietor or an LLC on Amazon?

Worry non; we are hither to guide you.

Organizing an LLC (Express Liability Company) is usually the all-time approach to sell on Amazon. Different a sole proprietorship, information technology offers express liability protection for your personal assets if something goes wrong in your business.

Plus, you lot can reduce your tax bills by applying for different deductions and saving money that yous can then reinvest into your Amazon store.

Of course, an LLC isn't perfect in every mode and has some drawbacks too. In fact, we recommend consulting your case with a local CPA for tailored advice. This post gives the best-informed recommendation based on our experience of selling on Amazon.

So, first things first:

Can you sell on Amazon as a sole proprietor?

Amazon allows you to sell on the market place, both as an private and a registered business.

That means you can list your product as a sole proprietor on Amazon without whatever bug.

Source: Unsplash

Sole proprietorship is a popular option among solopreneurs in the United States. It's the default business type whenever you outset something as a unmarried person.

That lemonade stand up at the corner of your street is an example of a sole proprietor business. Your freelancer friend working on Toptal is also a sole proprietor.

Sole proprietorships are like shooting fish in a barrel to set up and don't require any paperwork. Meanwhile, the profits you generate are treated as "laissez passer-through", meaning they are taxed just like regular income. Every bit such, you lot must pay both income and self-employment (FICA) tax equally a sole trader on your earnings on Amazon.

What is the sole proprietorship tax rate in the The states?

The federal tax charge per unit for sole proprietorships varies betwixt 10 and 37 percent, depending on how much you make on Amazon in a yr. Meanwhile, the FICA tax rate is set at 15.3% for sellers with an annual net sales ceiling of $142,800.

Is a sole proprietorship good for Amazon FBA?

Setting upwardly your Amazon FBA store as a sole proprietor has many advantages. Yous can commencement selling your production right away without registering your business with the state or federal government. You don't demand to get whatsoever license or permits either. The taxation filing process is also simple and easy and tin can exist handled DIY.

However, running your Amazon business as a sole trader comes with one significant hazard that deserves special attention.

In a sole proprietorship model, the company and the owner are considered the same entities. Their income, expenses, and liabilities are shared. In other words, your concern is non separate from you.

This isn't a state of affairs you want to be in, especially if yous're selling on Amazon. One bad business move tin can put your personal assets at take chances.

Sole proprietors aren't safety on Amazon

People sell different types of products on Amazon – from home essentials to automobile supplies to everything in between.

Some of these products carry safety or health risks. Example items include supplements, mobile chargers, kitchen knives, toys with loose parts, etc.

If your customer gets harmed using your production, they tin can potentially sue your business. Since you and your business concern are ane and the same, the liability would automatically transfer to you. Y'all can lose your home, car, and other personal avails along with the business that you've worked so hard to build all these years.

As a affair of fact, there are attorneys in the US who specialize in this very area of consumer protection law.

They work circular the clock to detect unprotected business organisation owners and their unhappy customers to bag a potential client.

Of form, you wouldn't want something like this to happen to you lot, would yous?

Therefore, the sole proprietorship model isn't recommended if you want to sell on Amazon. Information technology'south okay if you desire to test the market or flip a few retail items for quick wins. All the same, if you plan to build a brand and replace your full-time income, a sole proprietorship isn't the best way to sell on Amazon.

Here are some steps you can follow to set up an LLC.

What are the advantages of an LLC over a sole proprietorship?

Unlike a sole proprietorship, an LLC offers liability protection for your personal assets. Information technology gives your business its own separate legal identity.

Whatever y'all do in your business doesn't bear upon your personal assets. If someone always sues you for selling a defective product on Amazon, your business absorbs all the hit.

blue and white van parked near white building during daytime

Source: Unsplash

And then, there are some tax benefits that yous only go to enjoy if y'all are an LLC owner.

For case, you can write off your Amazon VA salary equally a business expense when filing your taxes if the amount paid is below a certain threshold. The nigh significant tax gains, all the same, come if yous tax your LLC as an Southward corp. This is where you can actually relieve on self-employment taxation past accepting income in function salary and part distributions. According to United states laws, South corp distributions aren't subjected to cocky-employment tax.

Practice LLCs pay less taxes than sole proprietors?

The federal income tax charge per unit for both LLCs and sole proprietors is the same, with the lowest tax rate set at 10%.

This, of course, excludes the cocky-employment tax:

So, how exercise yous gear up an LLC for your FBA business?

Steps to organize an LLC

Organizing an LLC is quite like shooting fish in a barrel, and anyone can do it. Alternatively, you can hire a professional to help you lot in the procedure.

Here are the steps to setting up an LLC in the U.s.:

Select a land. Nigh LLC owners choose their habitation state for LLC formation. However, you can choose any land y'all want.
Next, name your LLC. Make sure the name you selection isn't already taken.
Nominate a registered agent in the land yous want to set up the LLC.
File manufactures of system (aka document of formation) with your land'south business organization partitioning.
Draft an LLC operating understanding and layout the ownership structure and other details.
Finally, get an EIN. Some single-member LLCs cull to skip this stride because you can fifty-fifty utilise your SSN to file taxes if you are the only fellow member of your express liability visitor. Nevertheless, we recommend that you lot get an EIN because you'll demand it later when you hire employees or expand your business farther.

Call back, LLCs are registered with the state and not the federal government. In fact, they don't take anything to exercise with the latter.

How much does it cost to ready up an LLC?

You lot can prepare an LLC for as low every bit $45 in the land of Arkansas. Other states' fees vary, with Massachusetts having the highest filing fee at $500. The boilerplate toll for setting up an LLC in the US, though, is $132. But, of course, if you hire a professional person service, like LegalZoom, it will cost yous more.

How long does information technology take to get an LLC?

Registering an LLC is a adequately quick procedure. You can get started inside seven working days. Nonetheless, EIN registration may take some time because of the current pandemic situation. You tin can wait to receive your EIN anywhere betwixt viii and ten weeks after submitting your application.

Does an LLC need its ain bank account?

Technically speaking, an LLC doesn't need to have its own bank business relationship. However, opening one helps you avoid legal risks down the road. You don't want to have the same account for your personal and business expenses, as that can driblet the corporate veil and expose your personal assets.

But what if someone has already started selling on Amazon as a sole proprietor and wants to change to LLC? Is information technology possible to do that?

Can I change from a sole proprietor to an LLC on Amazon?

You can change your Amazon business relationship business details from a sole proprietorship to an LLC from the settings menu.

Only click on Legal Entity and update the information.

Make sure the changes are saved, or Amazon tin can close down your account.

Delight notation, if y'all are a unmarried-member LLC, y'all don't need to alter your tax information in the Seller Central; Amazon will tax yous on your SSN. For more information, consult your CPA.

Planning Your Business Structure on Amazon in Accelerate is Important!

With any business, it's important to outline your strategy well in accelerate. You should have a clear roadmap of what you are going to do before y'all actually set the phase and roll out the ruby-red carpet. Planning your business structure for Amazon is a crucial stride to getting started with your selling journey.

When choosing between a sole proprietorship and an LLC, we recommend going for the latter equally it gives y'all liability protection for your personal assets.

You lot don't get this protection if yous sign upwardly equally a sole proprietor on Amazon. We hope y'all found this mail service helpful. Wishing you the best of luck, and see yous on the grinning A.

Nigh ZonGuru

ZonGuru is an all-in-ane Amazon toolkit that helps private label sellers with product research, niche evaluation, competition assay, listing optimization, inventory tracking, customer review conquering, and running day-to-day operations of their Amazon business organization. Our tools bring you the most accurate information from beyond x Amazon marketplaces, including the U.s.a., Canada, Mexico, UK, Italy, France, Spain, Australia, Germany, and Republic of india. We make selling on Amazon easier.

About the Writer

A marketer past merchandise, a author at center, and an Amazon evangelist around-the-clock, Hammad lives and breathes the globe of the smile A. He can oftentimes exist found discussing the ins and outs of the market place across the web. In the very rare instances when he is non decorated educating the audiences, he likes to sit down and accept a adept me-time watching the latest football action on his large-sized TV screen.