Whether you need a Limited Liability Company (LLC) to sell products on Amazon depends on the type of business you run. For most sellers, Amazon does not require you to have an LLC.
In general, selling under a sole proprietorship may be enough starting out and doesn’t require you to have an LLC.
But if you wish to expand and add members to your business, you should consider applying for an LLC — for tax purposes, legal protection, and flexibility in ownership.
Keep reading to learn what you need to sell on Amazon, the benefits of having an LLC, and how to open an LLC for Amazon.
Do You Need a Business License to Sell on Amazon?
When starting a business on Amazon, one of the first things to consider is whether you need a business license.
Generally, you do not need a business license to sell on Amazon — products and services sold online don’t require government compliance to run a business on Amazon.
For example, if you run a small to medium-sized business as a private label or an arbitrage seller, these types of businesses receive less scrutiny when selling on Amazon.
But as you begin to scale your business and pursue larger projects such as wholesale operations, the legalities of business ventures begin to require federal approvals.
Also, depending on where you live and the nature of your business, you may be
required to obtain a business license before you can begin selling on Amazon.
It is always a good idea to check with your local government to determine the specific requirements for your area.
Additionally, Amazon also has its own set of guidelines and requirements for sellers, so be sure to review those before starting to sell on the platform.
Obtaining a business license is not always a mandatory step when selling on Amazon, but it is important to be aware of your area’s regulations and comply with them to avoid any legal issues down the road.
Benefits of Having an LLC for Selling on Amazon
You know you want to start a business on Amazon, but you may be unsure why you would want to apply for an LLC.
One of the most significant advantages of an LLC is that it protects your personal assets from potential legal problems that may arise from business activities.
In addition, an LLC can provide tax advantages because profits and losses can be passed through to LLC members, who are taxed only on their individual income tax returns. This can help reduce the overall tax burden on your business.
Below are the key benefits of having an LLC for selling on Amazon.
Limits Personal Liability
Under an LLC, your business is viewed as a separate legal entity — offering protection to your personal assets such as your car, home, and personal bank account. This is beneficial in the event the business incurs debt, faces a lawsuit or a member of the company commits any fraudulent activities.
Solidifies Your Business
The rules and regulations addressed in an LLC document bind a contractual agreement between the company members. This solidifies the business structure and creates flexibility in ownership and provides the necessary paperwork in the event the company is sold or passed on to a separate member within the LLC.
The legitimacy of an LLC adds value to its authority in the marketplace and is seen as a serious competitor — as opposed to a company that only holds a sole proprietorship. In addition, the financial infrastructure of an LLC is separated from personal assets, which further strengthens the legality of a company’s credibility.
Possible Tax Advantages
One of the appeals for small businesses operating under an LLC is the tax benefits. Members can benefit from the protection of legal obligations related to their personal assets. This allows them to separate their personal assets from the business, which protects them if the business is sued, goes under, or faces litigation.
The owner of an LLC has the option to register their business as a partnership, S corporation, sole proprietorship, or corporation. This provides money-saving benefits to the business that best suits its needs. The flexibility in tax deductions for businesses also makes it appealing to choose an LLC as a business structure.
How to Open an LLC for Amazon Sellers
Now that you know the benefits of having an LLC for selling on Amazon, let’s go over how to open an LLC for Amazon sellers.
Below you will find a list of the things you need to set up your LLC to sell on Amazon.
Decide on a Name
Every company needs a name that not only reflects the personality of the company but also establishes brand equity. When choosing a company name, make sure it is simple, concise, inviting, and appealing. It’s a good idea to brainstorm the possibilities and decide based on company values and how to portray them clearly and effectively.
Assign a Registered Agent
To open an LLC for Amazon, you will need a registered agent who will act as your official point of contact to manage your legal documents, communication from the state, and service of process. Having a registered agent is a mandatory requirement for opening any corporation or LLC. The registered agent acts as a mediator between you, the secretary of state, and the receiver of any services of process in the event of a lawsuit.
File Your Articles of Organization
Articles of organization are part of a formal legal document used to form an LLC with the state. It collects information such as the name of the company, address, member information, and the business purpose of the LLC. This document also creates a binding legal obligation to the members of the LLC.
Create Your Operating Agreement
An operating agreement is similar to an article of organization. It adds legitimacy to a business in the form of documentation should the company be sued. An operating agreement also establishes an LLC’s management structure, operating procedures, and liability statements.
Get Your EIN Number
An Employer Identification Number (EIN) is a registered document that identifies your business to the Internal Revenue Service (IRS) for tax purposes. An EIN also allows your LLC to open a business bank account, which legitimizes your business as a whole.
Register Your Business
If you’re ready to register your LLC as an Amazon seller, doola has all the tools to help ensure a smooth transaction and clear up any confusing terminology. With doola, you can register for an EIN, map out an operating agreement, and assign a registered agent for your company — all in one place at an affordable price.
You can find more details on how to get started in under 10 minutes here.
Become an Amazon Entrepreneur
Selling on Amazon can be an exciting business that offers many growth opportunities. But it can be quite confusing when it comes to forming an LLC if you want your business to thrive.
We want to save you the time and headaches of figuring out how to get your EIN, registered agent, or other necessary legal documents.
Everything you need to start your LLC is all right here.
doola will ensure a smooth ride when it comes to setting up your LLC—including all the support and tools available to you and guiding you forward to becoming an entrepreneur on Amazon.
Do I need an LLC to sell on Amazon as a non-U.S. citizen?
It is recommended to apply for an LLC as a non-U.S. citizen to protect personal assets, but it is not a requirement for an Amazon seller.
Why is an LLC important for selling on Amazon?
An LLC is important for selling on Amazon because it protects the personal assets of the owner from business liabilities, and it can provide tax benefits.
What is required to register as a seller with Amazon?
Several documents are required to register as a seller with Amazon, including a photo ID, phone number, bank account information, and a business email.