If you are beginning to explore the Amazon Marketplace, you may wonder whether you need an LLC to be a seller. Please continue reading to learn the benefits of establishing an LLC and why connecting with the AVASK Group is in your best interest.
What is the Difference Between an LLC and a Sole Proprietorship?
An LLC (Limited Liability Company) is a legal entity that protects owners from debt and other liabilities. Unlike a sole proprietorship, where the owner and business are legally inseparable, an LLC distinguishes the owners from the organization. Essentially, this means you won’t be personally liable for any lawsuits the company may face down the road. A sole proprietorship is an unincorporated business structure, where a single individual owns and operates the enterprise.
The primary difference between an LLC and a sole proprietorship is that LLCs can have multiple members, while a sole proprietorship only has one. In addition, when you are a sole proprietor, you can be held personally liable in the unfortunate event that your business gets sued or accrues any debts. If you have an LLC, credits are prohibited from going after your assets that aren’t owned by the LLC, such as your savings. Taxation is an important consideration. If you form a single-person LLC, you will be taxed identically to a sole proprietorship. However, you will have additional liability protection which ensures your assets are safeguarded.
When is the Right Time to Open an LLC for My Amazon Business?
While establishing a sole proprietorship is simple as you just have to start selling, it’s in your best interest to consider the benefits of forming an LLC. Even though you don’t need an LLC to sell on Amazon, the added protection of an LLC can be invaluable to your business as you face potential risks. As mentioned above, an LLC will separate your personal and business assets. For example, if a customer is injured by a defective product and takes legal action against you, only your business assets will be at risk. Your personal finances will be protected.
Furthermore, operating as an LLC will provide more freedom in structuring management. It can also boost your credibility, enabling your business to appear professional. This can increase customer trust and profits. If any of the following apply, you should consider taking your e-commerce venture seriously by forming an LLC:
- You are serious about growing your business
- Your sales have been steadily increasing
- You sell products that may cause injuries (such as sporting foods or wellness products)
- You want to separate yourself from the business
- There are multiple business partners
As you can see, there are numerous benefits to establishing an LLC to protect your business. At Ebiz Accounting, we are prepared to help you take your e-commerce business to the next level. Connect with our dedicated team today to learn more.