Are you trying to set up your Amazon business suture, but have no idea what options to choose from? Fortunately, there are some easy-to-set up and good options for Amazon sellers that provide tangible advantages. In this article, I’ll lay out some of the top options, including an LLC.
Third party sellers make up up to 60% of all Amazon sales, so regular business owners are the primary way the e-commerce giant makes money. If you want to be part of the movement and grow a legitimate business with Amazon, then read on to learn the different business structures available to you.
3 Amazon Business Structure Options To Consider
Now let’s look at 3 different business structures that are commonly used by Amazon sellers. These options are available for sellers worldwide who are selling in the United States or Amazon UK.
This is also known as a sole trader, and it summarizes people who own the business on their own. Sole proprietorships have a trading name, and these are used instead of a personal name to do business. This provides an added level of anonymity, if you don’t want to associate your personal name with the business.
Furthermore, many Amazon business owners might choose to go down the sole proprietorship route because it’s easy to set up, and there’s a lack of government regulations that make it difficult to run your business.
However, under a sole proprietorship, the business is still under your name and that means you are legally liable for what happens to the business. This is a disadvantage compared to limited liability companies, which we will cover in the next section. Also, you are directly liable for the taxes, but you should hire a tax accountant if you don’t know how to handle them.
Limited Liability Company
One of the more popular and useful options for sellers to create an Amazon business structure, is the limited liability company. Here are some of the advantages of creating a limited company for Amazon sellers:
- Improved Amazon image: you’ll find that your image on Amazon will improve if buyers notice that they are buying from an LLC. Hence, you may increase the number of sales, which makes the effort worthwhile.
- Reduce personal risk: an LLC creates a barrier between you and legal liabilities with your business. Therefore, you are not personally liable for any issues that customers might run into when using your products.
- Fast sign-up process: you can create a limited company in a short period of time, so the time commitment is small. Also, with services like Business Anywhere, the fast sign up process is simplified – great for beginners who would like help.
- Manage finances: when running your Amazon business with partners, you can do finance management within your LLC. This provides a sense of transparency for every member of the team.
- Cheap: creating an LLC will not put a big dent in your bank account. The low cost means there is not a lot of investment, yet you get a lot of upside as mentioned above.
A limited company is formed for a single owner or when there will be multiple shareholders. Also, the individual in the company will be liable for any legal problems with the company. The amount of liability for each individual varies based on the percentage of company shares that they own. Therefore, the limited company structure can somewhat reduce the financial liability of running an Amazon business.
However, if you’re going to choose to open a limited company, then think about the merits of an LLC. That is usually the better option for most Amazon sellers, and could be what your business needs to take things to the next level.
What’s the Best Option For Taxes?
From the three different Amazon seller business structures, the sole proprietorship is the worst option for taxes. That’s because you will need to pay taxes as part of your personal income and that leads to massive taxes. This can result in massive taxes of up to 45%, which can eat into the profitability of your Amazon business.
In comparison, Amazon LLCs have the best business structure from a tax perspective. That’s because you don’t have to pay personal taxes in relation to the business, which means double taxation is avoided. Also, you can open an LLC in any state, so someone in a state like Delaware which has no sales and state income tax.
Dealing with International Suppliers
You’ll find that Amazon businesses get more respect from suppliers when they have created their operations under an LLC. That’s because this step shows that you have gone through steps to create a professional operation with a good Amazon business structure.
In comparison, if you only have a sole proprietorship structure, then it makes suppliers feel like they are interacting with an amateur. This leads to lower-quality deals and more difficulty when negotiating the best terms and prices.
Therefore, you should take the time to create an LLC for your Amazon business can lead to better deals with suppliers. Once you have opened an LLC, don’t forget to make it known. You can do this in a sublet manner by adding LLC at the end of your company name.
To summarize, when looking for Amazon business structure options, there are three main options – sole proprietorship, limited company, and limited liability company (LLC). The latter has several advantages over the others, including better tax rates, improved financial management, and removal of personal liability.
With services like ours here at Business Anywhere, opening an Amazon LLC company is easy and will not take much of your time. Therefore, you have a lot of upside with few drawbacks for any Amazon business owner.