A new entrepreneur reaches out to us each week seeking advice to start their business. Amazon business licenses are the most common question we receive.
In this post, we’ll examine marketplaces such as Amazon and its competitors. Starting an online business requires a thorough understanding of how everything should be done.
You should also find this to be an exciting time for you!
You have taken more action than most people by going out there and taking action.
It’s not necessary for people to complicate things so much. In an effort to figure out the multitude of Federal, State, and Local licenses that exist, one can get lost and run around in circles.
Here are the important points. The difference between an online business and a side hustle or hobby is the amount of money you’re making.
When you are not making money, you do not have a business. From the taxman’s point of view, you do not exist. Put your efforts into making sales first.
Do You Need An LLC To Sell On Amazon? 2023
Can I sell online without a license?
To answer this question, let’s examine the top online marketplaces:
No, in a nutshell. Selling products online, including at Amazon, does not require a business license.
Amazon doesn’t regulate most of its products because most of them aren’t federally regulated. Consumer products are generally sold online and don’t need government approval.
You do not need to register a business or have a license to sell on the following marketplaces.
- Amazon
- Shopify
- Etsy
- eBay
- Craigslist
Any of these sites allow you to sell and buy without forming a business or having a license.
As soon as you start making money, you need to make sure that all of your income is reported at tax time.
Do You Need an LLC to Sell on Amazon?
No, in a nutshell. Amazon does not require you to form an LLC. As a sole proprietor, you can begin selling immediately.
What is a Sole Proprietorship?
An unincorporated business with one owner is referred to as a sole proprietorship. It’s simply a matter of starting a business. As soon as you sell a product or service, you become a sole proprietor.
Online businesses are best run as sole proprietorships. A sole proprietorship does not have a legal separation between the owner and the business, so any liabilities such as debts or lawsuits fall on the owner personally.
What is an LLC?
LLCs (Limited Liability Companies) are specific to the U.S., designed to protect owners from debt and other liabilities. LLCs (Limited Liability Companies) are specific to the U.S., designed to protect owners from debt and other liabilities.
It means that you won’t be liable for your business’s debts or lawsuits – the LLC will be. A sole proprietorship can only have one member, while an LLC has multiple members.
So, what is the difference?
A key difference between an LLC and a corporation is that an LLC provides you with much greater protection. LLCs are legal entities separate from their owners.
LLCs are used to run businesses – they have a bank account, they owe money, they borrow money, they sue, and they are sued. Real estate can also be purchased and sold through LLCs.
Whenever your business is sued or accrues debts, you are personally liable. When you have an LLC, your business’s creditors cannot get their hands on money or assets that you own personally, such as your home and savings.
A seller’s insurance policy can provide protection against that, but creating an LLC separates the business from you.
LLCs for single-person operations are taxed the same as sole proprietorships – you just have more protection.
It is fast and easy to form a sole proprietorship because all you have to do is start selling, but eventually, you must think about protecting your business and yourself with an LLC.
How to Register Your Online Business
Once you’re making profits, you need to take the following steps:
- Choosing a Business Structure
- DBA “Doing Business As” registration
- Register for a Sales Tax ID
- Obtain a Federal Tax ID
Choosing a Business Structure
How to Choose the Right can start your entire online business without forming a business structure. You want to be protected in case something goes wrong.
The likelihood of something going wrong and being sued is low, but it can happen. Therefore, it’s best to take precautions.
Starting a business as a sole proprietorship is the norm for many small businesses. Individuals in the United States are sole proprietors.
When you file your taxes, you will have to report any income you receive from selling t-shirts as your income. In the U.S., nothing else needs to be done.
LLCs can be formed by owners of online businesses. As soon as you hire employees, you should do that as well. Separating your business expenses from your living expenses is a good idea.
A CPA or attorney can help you determine whether a proprietorship or LLC is right for you. They are both good options for starting an online business.
Register a DBA
It is also important to register as a DBA if you are doing business under someone else’s name. The owner of a sole proprietorship who sells widgets under the brand “widgets for less” needs to file a “doing business as” name in order to sell those widgets. It varies from state to state. For more information, contact the local government.
Get a Sale Tax ID
Online sellers must collect sales tax from every state they do business in, regardless of which state they are located in. It is a legal requirement to collect sales tax when selling t-shirts to someone in Texas if you live in California.
Get a Federal Tax ID
Federal Tax IDs (EINs) are required for opening a business bank account. Having a business bank account isn’t necessary for sole proprietorships; however, you may separate your funds between two accounts.
According to the IRS, sole proprietors without employees and unrelated to excise or pension plans don’t need EINs (but can get one). As a sole proprietor, the taxpayer identification number is the taxpayer’s social security number (instead of a tax ID number).”
In the case of an LLC, however, you need an EIN from the IRS. There is no charge for this.
FAQs | Do You Need An LLC To Sell On Amazon?
🙆♀️ Are Amazon sellers required to have a permit?
The answer is no. It is so simple to sell on Amazon because you are operating an online business, not selling anything regulated by the government.
🙋 Can you sell on Amazon if you are not a registered business?
Selling on Amazon does not require you to be a registered business. You are not required to register an Amazon business; however, it may be necessary to register a business with your local government.
🧏♂️ Are you required to have a business license to sell online?
Online sellers don't need a business license as long as what they're selling isn't federally regulated.
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Conclusion | Do You Need An LLC To Sell On Amazon? 2023–
I hope this post has answered any questions you might have about starting an online business. It’s easy to feel overwhelmed when starting out and think there is more to do. You need to make money for your business to succeed. Until you have income, don’t bother formally registering. Just do something.
