Do You Need an LLC to Sell on Amazon?

By Sarah Harris

“Need” is a strong word. An LLC for Amazon sales is beneficial, as we’ll show here, but there are plenty of sellers who get away without one. 

Do you need an LLC to sell on Amazon effectively? If you plan on selling long-term or as a main source of income, you will find that an Amazon sales LLC is worth having. Most high-level sellers have an Amazon sales LLC. Let’s explore whether you should, too.

What Is an LLC?

LLC stands for limited liability company. It’s a business structure designed to protect owners from liability such as debt or legal problems. Profits and losses get reported on members’ individual tax returns, which means that LLCs don’t directly pay taxes on profits. 

Current LLC owners can choose to be taxed as a sole proprietor, an S-corporation or a C-corporation, with each offering different benefits and downsides.

Benefits of Having an LLC

An Amazon sales LLC will protect you legally as you sell. The main reason people form LLCs is to reduce personal risk and appear to be more professional. Credibility matters when generating sales, and an LLC for Amazon can afford you exactly that.

Formalize Your Business

Do you need an LLC to sell on Amazon legitimately? Somewhat. Having a business name and identity certainly offers a level of prestige not available otherwise.

Protection

If someone comes to collect business debts or tries to sue your business, remember that an LLC means you won’t be targeted personally. Instead, the business entity will absorb the liability.

Tax Flexibility

With an LLC you can pass your taxes through to individual returns. This capability is why LLCs are called “pass-through entities.” It’s a significant advantage to be taxed individually rather than be tied to the company’s profits and losses. Perhaps most beneficially, LLCs don’t pay federal income tax.

How Selling on Amazon Works

If you sell on Amazon, you need to choose a selling plan. With an individual plan, every item you sell pays 99 cents to Amazon. The Professional Plan is $40 per month. Whichever you choose, Amazon will take a referral fee from each sale.

Do I Need a Business License to Sell on Amazon?

Probably not. You would need a business license to sell products that are federally regulated, and most products on Amazon aren’t. 

Do I Need an EIN to Sell on Amazon?

You will need a tax identification number to sell on Amazon. This number can be either an employer identification number (EIN) or your Social Security number. Which you choose to use will be important as you start making profits and need to report them for tax purposes.

How Do I Register a Company to Sell Products on Amazon?

Starting an LLC varies slightly by state, but the general way it happens is as follows:

1. Choose your LLC name
2. Reserve the name with your state
3. Choose your registered agent (sometimes referred to as a statutory agent)
4. Prepare the LLC operating agreement (which establishes how the LLC is run)
5. File the appropriate organizational paperwork with your state
6. Get a certificate from your state
7. Register to operate in other states

If you want to get a business license, you need to register with the appropriate federal agency for your given industry. From there, you will need to explore the state, county and city licenses and permits needed for the area where you plan to operate. 

This work would probably be overkill for selling on Amazon; an LLC should be all that you need.

How Much Does it Cost to Create an LLC to Sell Products on Amazon?

Starting an LLC comes with different costs depending on which state you operate in, but on average, the initial filing fees are anywhere from $80 to a little over $100. You’ll need to pay an additional ongoing fee every one or two years to keep your LLC active. 

Do You Need an LLC for Dropshipping on Amazon?

Yes. Your LLC will protect you from the extra risk that comes with dropshipping. Because dropshipping allows sellers to sell items that aren’t in stock, the seller is getting their inventory from a third party or manufacturer on an as-needed basis. 

This setup lessens the amount of oversight and direct hands-on experience the seller has with their inventory.

What to Know About Selling Products on Amazon

If you’re going to treat selling items on Amazon like a business, your products will need to seem legitimate to your customers.

Label Customization

You need to have an obvious corporate identity for customers to latch onto. Having your own labels put on products you’re reselling gives your business legitimacy. Print Bind Ship can make new labels that represent your brand.

Packaging

If you use Amazon FBA (Fulfillment By Amazon), the company will receive, store, pack and ship your orders, but it will do so with the minimum presentation. If you want more personalization and a wow factor, Print Bind Ship excels at creating unboxing experiences.

Consider Order Management

Also, having Amazon receive your orders will get expensive fast. Trusting an order-fulfillment business like Print Bind Ship with incoming orders gets you bulk rates and personal service that Amazon can’t offer.

Inventory Management

Finding, sorting, packaging and shipping your inventory takes organization. You’ll need to know how many of which items you have so you can stay on top of restocking. Print Bind Ship uses the latest warehouse-management techniques and software, so you always know what you have and where it is.

Shipping Logistics

Keeping track of all of your inbound and outbound goods can be a nightmare if you don’t have good organization and tracking software. Your entire supply chain needs eyes on it, from raw materials to packaging to customer deliveries. Using Print Bind Ship takes this burden off of you.

Product Returns

Products break, customers get the wrong item, and they may just decide they don’t want what you’re selling anymore. With Print Bind Ship, returns are simple and easy to manage. 

Because Amazon has an easy return policy, you might be getting a lot of items back. Let us handle them, so you don’t have to. We get the item back to our warehouse, inspect it for damage, restock it if we can and dispose of it if we can’t.

LLC or Not, Print Bind Ship Makes Selling Easy

So do you need an LLC to sell on Amazon? It depends. It’s beneficial to have extra credibility, and it protects you from potential problems down the road. Do you need an LLC to sell on Amazon more, or is it better to have an order fulfillment partner to ensure your sales are handled properly? 

With Print Bind Ship, you get print-on-demand and inventory warehousing to ensure your customers get everything they order as quickly as possible. Contact Print Bind Ship and transform your Amazon selling today!