From Amazon Businesses To LLCs
LLC Or S Corp – Which Ones The Better Fit.
May 26, 2022
Moving States and LLCs
May 26, 2022
Amazon’s seller businesses have stellar revenue compared to Amazon itself! It was the incentive for Amazon to introduce benefits to its third-party sellers such as partnering with Amazon, or sale-tax initiatives, as an example. So whether you’re only starting your journey or are already part of the Amazon marketplace, the prominent question arising would be somewhere along the lines of ‘can I form an LLC if I am an Amazon seller?’ Well, referring to technicalities, you can start your shop under sole proprietor if you’re a citizen of the U.S. But LLCs come with their own advantages.
Amazon Seller LLCs and Tax Incentives
‘Pass-through Taxation’ is something LLCs offer to your business income which allows it to be taxed as personal income. It gives you a lower tax rate compared to the rate you would be given if your business was filed as a corporation. Alongside it, you also get to have the protections of liability offered by a LLC, and receive ‘qualified business income.’
If you’re already an Amazon seller or plan on becoming one, you’ll be paying both sales and income tax. A benefit on selling on Amazon is they collect the sales taxes through Amazon Seller Central for a certain fee. If you’re an internet-only business, you can set up your LLC anywhere in the U.S. However, if you have a ‘brick-and-mortar’ business in your state, you must register your LLC in that state.
Amazon Seller LLCs and Legal Protection
When you set up and LLC, you’re declaring your business as a separate entity from yourself. By doing so, you protect yourself from being held personally responsible for any damages, or debt etc. that affects your business. There are many people who are looking to scam people running online businesses. If you register for an LLC, it will be your first step towards protecting yourself in such cases.
Build Your Business On Amazon With An LLC
Establishing your LLC for your Amazon brand will help you build your brand. Many counterfeit business also have their faces set-up on Amazon under the guise of solid businesses. This hinders the ability of actual businesses to establish their credibility online, apart from customer reviews.
Having an established LLC along with your name will show your credibility and prove you are a legitimate business person who is selling off of Amazon. An LLC also additionally makes opening up a business bank account much easier and reduces hurdles down the road.
Business Entity Options From Amazon
Apart from setting up an LLC, there are a number of other options you can choose from for your business. Whichever option you choose depends on your business requirement in terms of what you sell, size of your business and your plans on growth for the future.
Sole Proprietor: establishing your business under sole proprietorship operates the business under the owner’s name and is also the default entity you register with on Amazon’s Seller Marketplace. Your taxes will be filed as sole proprietor and you won’t have any protection of your assets in this business type.
C Corporation: these entities are run and controlled by its shareholders. They come with complex tax structures which requires the taxes to be filed for company profits. It is also a lengthy process of registering a C Corp but may still be the right choice for Amazon sellers looking or investors etc.
S Corporation: these corporations have a limit of allowing only a 100 shareholders. With this business type, you ger liability protection as the company is separate from its owners. It is also, however, taxed under personal income and goes through tax deductions.
Incorporating Your Amazon Seller Business
Considering incorporating your Amazon business is a great idea mainly because o the liability protection options. Moreover, the tax incentives and simple registration options make LLCs an attractive choice. Many people don’t know that Amazon is also an LLC and it utilizes LLC structures to optimize the taxations!
If you’re ready to begin this step inn your business venture, BizInc offers great services and help in guiding you through the process but also making it easier for you by carrying out all the procedures for you!
