So you are conducting your own business on Amazon FBA by selling your products. Your business must have spiked up and now you are thinking of starting an LLC.
But you are confused whether it’s important for your business or not?
Not to worry, all your queries will be answered in this guide.
If you want to read the detailed guide on formation of LLC step by step, you can click here.
So, What is an LLC?
First of all, you need to understand what an LLC is. LLC stands for Limited Liability Company. An LLC provides protection of your personal assets from your business’s debts and lawsuits. It is very beneficial for new business owners and has provided them with a lot of benefits.
It is not compulsory for you to create an LLC but then you will be depriving your business from a lot of benefits.
There are many other business structures but LLC will be the best choice for your business as it is much cheaper and is quite easily formed.
You can also read our full comprehensive guide about LLC.
Why an LLC for Amazon FBA Important?
The first reason why an LLC is beneficial for your Amazon business is its personal liability protection.
This limited liability protection is what you need for your Amazon business so that no one can harm your personal assets even if your business is in huge debt.
Another great advantage is that you get tax flexibility. You do not get these advantages in sole proprietorships or corporations.
By default your LLC structure is like a sole proprietorship where your profits and losses are not filed with your business but are taxed through your personal assets.
Sole proprietorship does not provide limited liability protection which is the reason why LLC is better than corporations and sole proprietorships.
Another benefit of forming an LLC is that you increase your business’s credibility.
Customers are more attracted to well known or established companies. Having an LLC showcases your seriousness about your business and your business looks more professional in the eyes of customers.
You also get legal rights of your business’s name which means that no other business entity can have the same name in your state.
Most Amazon sellers choose to start an LLC because it is easily formed and is less expensive than other business structures. You free yourself from all the paperwork and you only have to pay one filing fee.
How to form an LLC for your Amazon Business?
Now you know why LLC is significant for your Amazon business seller account. Let’s move forward to the process of forming an LLC.
First of all remember that every state has its own laws in forming an LLC so you need to check your state’s laws.
I’ll be listing down some major steps to start your LLC, you can also read our comprehensive guide on LLC.
- Select your state
- Pick a name for your LLC
- Hire an LLC Registered Agent
- Create an LLC Operating Agreement
- File your Article of Organization
- Get an EIN
#1: Select your State
Choose in which state you want to start your LLC. Every state has its own laws and it is wise to start your LLC where you live and will carry out your business.
#2: Pick a name for your LLC
You need to choose your LLC name carefully. Your business name should be attractive to your customers as it will be the first thing any customer will look up to.
Check if your name is available. After picking your name you also need to check its availability in your state and if your name is not available then you need to pick another. You can check your name’s availability at many different websites.
After checking your name’s availability, you need to secure it as well. It usually takes two months to start your LLC and you do not want anyone else grabbing your name in that period.
#3: Hire an LLC registered agent
Every state demands you to have a registered agent. Your agent will deal with all your legal matters so you do not miss out anything. He will be a vital factor to your company’s success.
You can also look up to your town’s top registered agent service provider if hiring an agent seems complicated to you.
#4: Create an LLC operating agreement
An operating agreement will highlight your business’s standard and rules. If your business includes more than one member than creating an operating agreement is vital.
It showcases the responsibilities, rights, voting power of every member. It also tells how your business’s revenue will be distributed among members which avoid any conflict regarding money.
Many states do not demand you to create an operating agreement but by creating an agreement you can avoid any future conflicts between your company’s members.
#5: File your Article Of Organization
Article of Organization or Certificate of Formation is a simple document which give you access to officially enter LLC.
This document must be filed with proper consultation and must be filed correctly.
Many other online platforms like Legalzoom offer methods to solve this process quickly.
#6: Get an EIN
EIN stands for Employer Identification Number. It is like a social security number required by your LLC for many purposes like opening a bank account, filing company taxes etc.
This number allows the IRS to identify and tax businesses.
You can get an EIN for free if you will directly apply to the IRS.
LLC Service Providers:
Now you know how to form your own LLC but if this process seems complicated to you then you can always hire some top LLC service providers.
There are a lot of LLC service providers but I’ll be listing down top two LegalZoom alternatives.
If you want to know about all the best service providers then you can read our detailed review.
If you are looking for the complete package then ZenBusiness is the best choice.
They have got everything; at just $49 their starter pack includes LLC formation, free registered agent for one year, operating agreement template and much more.
They have 4500+ reviews and mostly all of them are positive.
It also offers a pro-package that has a worry-free guarantee feature. This feature provides good care to the customer’s annual report filing.
You can also read our full review on ZenBusiness.
If you are looking for a more experienced company then Northwest is a definite choice. They have been providing LLC services form 1998 and has established themselves as the best LLC service provider
Northwest has got the best customer support as their team is filled with highly professional staff. They also provide LLC registered agents free for one year.
One major downside of Northwest would be its pricing. Northwest is quite expensive as compared to others and mainly that is because of its experience in providing LLC service.
You can also read the full review of Northwest for complete guidance.
In this guide you learned about LLC and how it can play an important role in your Amazon business although there are many other business structures but they do not provide the same features and are quite expensive.
If you are starting your Amazon business then you must form an LLC and if you are running your business without an LLC then you must create one.
All these mentioned LLC service providers are the best in the market right now but you can always read our full guide on LLC services.