Launching your own eCommerce store is an exciting step, whether you’re drop shipping, selling handmade goods, or curating your own line of digital products. You have chosen your niche, created your site and perhaps even sold a few items. However, now the question that occurs to me the most arises, whether I should make an LLC.
The idea to get legalized may seem intimidating enough especially once you realize that you have been running your side hustle through the offices alone or you have been doing it casually under your personal name. But forming an LLC (Limited Liability Company) might be the smartest move you can make for the future of your business.
Why Can Your eCommerce Business Use More Than Just a Website?
The creative aspect of store building can be addictive and one might get lost in designing logos, posting on social, trying ads. However, under that energy, your business must have a structure that acts as a shield to your business legally and financially.
And the fact is that the bigger you get, the more risk you take. Ask yourself:
- What would happen in case a customer makes complaint?
- What happens when an unintentional violation happens in sales tax?
- What happens when you want to seek financing in the future?
There is no legal business entity and the liability is yours. It would imply that your personal assets can be jeopardized even in case of legal problems. That is where the LLC fits in.
What Is LLC?
An LLC or the Limited Liability Company is one of the most popular forms of business structure online sellers enter business with and there is a reason why. It is more flexible, easy to be established, and it provides limited liability. By starting an LLC your activities are looked upon as a distinct legal figure of your business and not as an individual. In case of any mishaps, your personal finances are not vulnerable to most of the business challenges.
Also, it is more professional in appearance. When doing business with other companies, filling out applications to payment processors, or promoting pitching to influencers, the presence of the acronym LLC in the name suggests that it can be taken seriously.
Key Benefits
What are the most common reasons why a large number of eCommerce business people decide to go the LLC way? Let us find out:
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Legal Protection
An LLC holds your personal investments safe when there is a lawsuit or in business debts. This in itself is worth it.
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Tax Flexibility
You have the freedom to report income as a sole proprietorship, a partnership or an S corporation when dealing with LLCs, which is quite convenient.
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Professionalism
When a business is registered, customers and partners tend to feel more secure making purchasing.
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Separate Finances
You will be able to open a business bank account, apply in a business credit card, and perfectly trace the money in/out of business-this will make taxation a breeze.
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Growth-Ready Structure
Have plans of adding later partners, investors, or employees? You will also require a credible business organization to do it well.
Set Up an LLC to eCommerce Business
Starting an LLC isn’t as difficult as it might seem. The process could be simply summarized as follows:
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Choose Your State
The majority of owners of small businesses operate LLC in the state where they reside. Nevertheless, such states as Delaware and Wyoming are also famous because of the business-friendly regulations.
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Choose A Unique Name of Business
Ensure that you do not have the same name taken at your state. It is possible to search online business database of your state.
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Assign a registered Agent
This is the agent or agency where legal documents are sent to on behalf of your LLC.
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Submit Articles of Organization
This forms your LLC official paperwork. It usually covers your name, address and management structure.
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Record an Operating Agreement
This will determine how your business will be operated though you can be the sole owner. States may or may not require it, nonetheless, it is always a good idea.
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Get an EIN (Employer Identification Number)
This is your federal tax identification number and it is necessary to have it in order to open a business bank account or employ people.
These are all the steps you need to perform and after these steps, your eCommerce store is now a real registered business.
Final Thoughts
There is opportunity and risk aplenty in the world of eCommerce. You’re not just protecting yourself, you’re laying the foundation for a professional, trustworthy, and scalable business.
Regardless of the number of items you have in the product range of your store whether it is five items or 5,000 items when you form an LLC you will have a legal and financial framework to give your store a measure of confidence.
It is time you take that step in case you have been procrastinating. It is time to turn your business into reality and make it the next level.
