Some of the largest purely digital companies — Amazon, eBay, and Etsy — started as relatively modest organizations and have enjoyed exponential growth. Their presence has not deterred innovative thinkers from making a digital claim in the global economy.
Online sales have skyrocketed since the beginning of the health emergency and show no signs of slowing. Pakistan Telemarketing List According to ZipRecruiter, the average e-commerce business owner earns more than $127,00,0 with top-tier operators taking home more than $339,000.
People who want to tap into the steady revenue streams and benefits of owning and operating an e-commerce business need to officially form a company. If you want to join the e-commerce ownership ranks, these are reasons why creating a Limited Liability Company (LLC) may be in your best interest.
Why E-Commerce Start-Ups Choose LLCs
Known for protecting owners from civil litigation and business-related debts, all 50 states allow people to form LLCs. While each state has a slightly nuanced approach to acquiring an in-state business name, taxation, paperwork, and bureaucracy involved, limited liability companies remain a popular choice among e-commerce ventures. These are common official documents needed to file an LLC.
Articles of Organization
Operating Agreement
Employer Identification Number (EIN)
Annual Reports
States vary on which documents they require to recognize a legitimate business. Some ask only for an EIN and articles of organization, while others call for a variety. The common theme that runs through LLC formation is that states task owners and operators with less paperwork and a streamlined process compared to others. Entities needing even fewer hard copies or electronic filing typically do not provide adequate protection against civil lawsuits or creditors.
Benefits of Forming an LLC for e-Commerce Businesses
Although an LLC allows people to create a legal barrier to protect personal wealth and assets, the structure lets owners flow revenue through the e-commerce business onto their individual tax returns. This mechanism sidesteps state business taxes, giving owners an opportunity to keep more of their hard-earned money. These are other benefits commonly enjoyed by e-commerce LLCs.
Operational Flexibility: An LLC can be run by a single owner, its members, or managers. The business can be run remotely or at a brick-and-mortar facility. An LLC can sell products or services, and many e-commerce operations use the dropshipping model. In these cases, a savvy business professional enlists the support of supplies to fulfill orders. The e-commerce company takes a percentage for processing purchases and payments.
Streamlined Compliance: Secretaries of state ask little of LLC owners and operators. It’s common to file sales and use taxes, and sometimes an annual report. But, overall, the required official documents take little time. An LLC generally calls for less stringent record-keeping. That means go-getters can spend more time growing their business and their salaries.
Enhanced Privacy: If you wish to maintain your privacy, there are states that allow e-commerce business owners to keep your identity separate from the entity’s. By filing the LLC with a registered agent, states such as Delaware afford owners the right not to have their names disclosed.
Credibility and Trust: Forming an LLC demonstrates to vendors, clients, and others that you are not operating a loose side hustle. An official entity, filed with the state and possessing an EIN, indicates legitimacy. This status makes it easier for organizations and everyday people to trust products, services, warranties, and promises made by ownership.
Open Business Accounts: Separating business and personal accounts is essential to maintaining an LLC’s liability and financial protection. Should a customer or another company file a civil lawsuit against your LLC, lawyers may attempt to “pierce the corporate veil.” That means the business owners played fast and loose between personal and business endeavors. Establishing an LLC allows owners to secure separate and distinct business checking, savings, and credit card accounts.
There are wide-reaching types of e-commerce businesses that flourish under the LLC banner. Your start-up could carve out a niche in wholesale, B2B, retail, dropshipping, digital products and services, or subscriptions, among many others. The entity you select will have a substantial impact on long-term success and profitability.
