Dropshipping and LLC: A Winning Combination
- When should you open an LLC or other legal entity for an e-commerce business?
- Personal experience and opinion on the matter
- Importance of protecting oneself long-term
Why Start as a Sole Proprietor:
- Can run a business without a legal entity
- Everything tied to personal assets
- Not ideal for a legitimate company
- Many tax advantages to different legal structures
When to Consider an LLC:
- Wait until e-commerce business is making consistent sales
- E-commerce success is not always immediate
- LLC is the easiest legal entity to set up
- Cost and time involved in setting up an LLC
Advice for Starting:
- Go slow and make sure it's something that will work long-term
- Consult a business attorney or CPA for advice
- Resources available, including an 8-step checklist and Facebook ad program
- Importance of protecting oneself long-term
- Personal experience and opinion on when to open an LLC
- Resources available for those starting an e-commerce business
Do I Need an LLC for Drop Shipping? [Plus Other LLC FAQs]
In this article, we will be discussing common questions regarding business entities and LLCs with Chad Second from betterlegal.com. As both Anton and Chad are not lawyers, all information provided should be taken as public advice and additional legal advice should be sought when necessary.
What is an LLC?
- LLC stands for Limited Liability Company
- Similar to a corporation but easier to set up and maintain
- Provides liability protection and separate business accounts
Do I need an LLC?
- Depends on personal preference and risk tolerance
- If you want liability protection and a separate business account, an LLC is a good choice
LLC vs. S Corp
- LLC is simpler to set up and maintain
- S Corp provides tax benefits
- LLC can be taxed as an S Corp for tax benefits
Costs of forming and maintaining an LLC
- Costs vary by state and can include filing fees and ongoing taxes
- BetterLegal.com offers a $299 package deal plus state filing fees
- Ongoing costs depend on the state and can include state compliance fees
Setting up an LLC from abroad
- US citizens living abroad can set up an LLC with an existing bank account
- International individuals can set up an LLC but may have difficulty opening a business checking account
Multiple businesses under one LLC or separate LLCs?
- Depends on personal preference and risk tolerance
- Separate LLCs may be necessary for high-risk businesses to prevent liability from affecting other businesses
- One LLC may suffice for low-risk businesses with separate DBAs for different branding
LLCs provide liability protection and a separate business account, making them a good choice for those looking to start a business. The costs of forming and maintaining an LLC vary by state, but BetterLegal.com offers a $299 package deal plus state filing fees. When deciding between multiple businesses under one LLC or separate LLCs, personal risk tolerance and the complexity of the business should be taken into account.
How to Set Up an LLC for Dropshipping Business? | LLC for Shopify, Etsy & Amazon Dropshipping
Starting a limited liability company (LLC) can benefit Drop Shipping businesses by protecting personal assets, increasing tax options, and credibility. LLCs are simple and inexpensive ways to protect personal assets and save money on taxes. This article will discuss the LLC tax benefits and options for Drop Shipping businesses.
Benefits of LLC:
- Protect personal assets
- Increase tax options
- Increase credibility
- Gain consumer trust
- Benefit from small business loans, grants, and credit
LLC Tax Options:
- Pass-through entity taxation
- S Corporation taxation
- Reduced self-employment taxes
- Pre-tax contributions to 401k or health insurance premiums
Steps to Register LLC:
- Choose a state to register LLC
- Choose a name for LLC
- Appoint a registered agent
- Create LLC's operating agreement
- File articles of incorporation with the Secretary of State
- Obtain an EIN
Professional Formation Services:
- Inc file offers free package services for preparing and filing articles of organization
- Gold and Platinum packages offer more services, including filing reports and taxes for LLC
Importance of Separate Bank Account:
- Limited liability for LLC
- Prevents piercing the corporate veil
Starting an LLC for Drop Shipping businesses can protect personal assets, increase tax options, and credibility. LLCs offer tax benefits, including pass-through entity taxation and S Corporation taxation. Registering an LLC requires several steps, including choosing a state, choosing a name, appointing a registered agent, creating an operating agreement, filing articles of incorporation with the Secretary of State, and obtaining an EIN. Professional formation services, such as Inc file, offer various packages for LLC registration. Separating personal and business funds is crucial to prevent piercing the corporate veil.
How to setup a company in the USA for your dropshipping business [Great for NON-US citizens]
In this video, we will guide you on how to incorporate a company in the USA to run your e-commerce and dropshipping business properly. We understand that as a non-USA citizen, setting up a dropshipping business in the USA can be challenging. Therefore, we have created this video to help you make it happen.
Reasons to incorporate a company:
1. Receive payments from customers: To work with payment processors such as Stripe, PayPal, or Square, you need to have an incorporated company and be compliant with their terms and conditions.
2. Work with top suppliers: Wholesale and dropshipping suppliers that offer high-quality products require you to have a company and a sales license.
3. Legal compliance: To pay taxes in the most efficient way and build a 100% sustainable and scalable business, you need to register as a company in the USA.
Steps to incorporate a company in the USA:
Step 1: Choose the right legal entity: LLC (Limited Liability Company) is the preferred choice as it's easy to set up, flexible, has no corporate taxes or limitations on the people involved, and can be run by its members.
Step 2: Select your state: Since your dropshipping business won't have a physical location anywhere in the USA, you have the freedom to open an LLC in any state.
Step 3: Name your LLC: Your company's name must be unique, represent your business, and describe what you do.
Step 4: Appoint a registered agent: You need to have a registered agent to receive important documents from the state such as tax forms or other government correspondence.
Step 5: File your LLC with the state: Often called articles of organization, its purpose is to have the state formally recognize your company.
Step 6: Create an LLC operating agreement: It's always a smart move to have a legally binding document that defines key operational aspects of your LLC.
Step 7: Get an EIN number: It's required to have one if your LLC has multiple partners or employees.
Using a third-party company:
If you are a non-USA citizen and find the process complicated, many third-party companies can do this for you, making it easy to set up a USA business from the comfort of your home.
The final cost depends on all the services and add-ons that the plan you choose might include, such as mail forwarding. It can cost between $200 and $1,000, depending on the USA state you register and what additional options you may choose.
Incorporating a company in the USA before launching your dropshipping business is crucial to make it legal and compliant. We have provided you with the steps to follow and recommended some top third-party companies to make the process easier for you. If you have any questions or suggestions for our next videos, leave us a comment below. Happy dropshipping!
Do You Need An LLC For Your Dropshipping Store? (Explained in 3 Minutes) | Shopify 2022
Should You File an LLC for Your Drop Shipping Store?
In this article, we will answer one of the most common drop shipping questions that can completely change the finances and structure of your business. That question is: Should you file an LLC for your drop shipping store?
Three Point Checklist:
1. You Make Enough to Pay Taxes:
- If you make over 200 orders or $100,000 in revenue, you have to pay taxes.
- Shopify, PayPal, and other institutions will send you a 1099 that you need to file on your tax return.
- You must file for a sales tax permit with your local government.
- Filing an LLC makes filing your taxes much easier.
- Consult with a licensed attorney or CPA for legal advice.
2. You Need Access to Business Credit Cards and Business Lines of Credit:
- Business credit lines require a registered LLC and an EIN.
- Once set up, they are easy to acquire and build credit long term.
- Monthly limit increases based on payment history and credit age.
- Cash back credit cards available with crazy cash back incentives.
- Reinvest cash back in your business or throw in stocks.
3. You Hold Inventory:
- Holding inventory is a business investment that gets written off on your taxes.
- Filing an LLC makes doing your taxes much easier and makes the structure better.
- Limited liability aspect helps in case of a lawsuit and protects personal assets from business assets.
In summary, filing an LLC for your drop shipping store can provide many benefits such as making tax filing easier, accessing business credit cards and lines of credit, and protecting personal assets from business assets in case of a lawsuit. Consult with a licensed attorney or CPA for legal advice and consider the benefits for your business.
When To Start An LLC (Shopify Dropshipping)
Overview of the Legal and Tax Aspects of Running a Business
- Apologize for delay in accountant video
- Will be sharing personal experience and opinions on legal and tax aspects
- Started freelancing without legal barrier
- Met a lawyer at a business event and began networking
- Contacted him later for advice on legal aspect of business
- Only need to worry about legal aspect once making consistent money
- Created LLC (limited liability corporation) to protect business assets
- Avoided sole proprietorship due to being a minor
- LLC can be used for all business ventures
- Filing for LLC is simple and cheap through state websites
- Do not use Legal Zoom
- Did not have to pay taxes until making a consistent amount of money
- Only pay taxes through LLC
- Does not charge sales tax or sales tax on products
- Dropshipping is like being a middleman, not a manufacturer
- Charging and paying sales tax can get confusing
- Will eventually make a video with accountant for more detailed information
- Don't worry about legal and tax aspects until making consistent money
- Make sure to have a parent or grandparent help with Paypal and Shopify accounts if under 18
- Personal experience and opinions shared, not legal advice
Do You Need an LLC to Dropship
In a recent video, the speaker discussed the benefits of using Facebook Shops over Facebook Marketplace, including the ability to input a business EIN instead of just a social security number. This led to questions about setting up a business and whether it is necessary for beginners.
- Putting a business EIN in Facebook Shops can lead to lower income taxes and more profit.
- However, beginners do not need to set up a business or worry about complex tax nuances.
- Instead, focus on building momentum and mastering the craft of dropshipping.
- Once making consistent money, then consider optimizing and keeping more profit.
Setting up a business is not necessary for beginners in dropshipping, and focusing on building momentum and mastering the craft is more important. Once consistent income is achieved, then optimizing and keeping more profit can be considered.
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