This post is for information only. Requirements are updated frequently and you should make sure to do your own research and reach out to a professional legal and tax advisors, if needed. Businesses outside of the United States will have different steps and requirements. Show
What is an LLC?LLC stands for limited liability company and is a business type which separates the individual from the business entity. This separation offers personal liability protection to business owners. An LLC is a hybrid business type because it combines tax and structure flexibility of a sole proprietorship with the liability and asset protection of a corporation. When it comes to sole proprietorships vs. LLCs, sole proprietorships, have an advantage of simpler tax filing over other business structures—owners pass business taxes through as part of their personal tax return, and income is only taxed once. The downside of a sole prop is that since the business and its owner are legally considered the same entity, owners are 100% responsible for any debts or lawsuits incurred by the business, potentially putting personal assets at risk. Establishing an LLC creates a legal separation between business and owner similar to a corporation—offering business owners a layer of personal asset protection.
Why form an LLC?There are many benefits to forming an LLC. For starters, it’s a relatively simple and inexpensive process, making it a great first step to making your ecommerce venture “official.” This validation can impact you as an entrepreneur, as well as build trust in your “legit” brand in the eyes of potential customers. Legitimizing your business can also boost your ability to secure outside funding, such as loans or investors—and even business partners down the line. How to form an LLC1. Choose your nameNaming your LLC is important administratively and also in the eyes of your customers. Your business name is the first impression many get of your brand, and you want to make the right one. Photo courtesy of: UnsplashNaming your online store may take some time—the perfect name doesn’t come to everyone overnight. Sometimes it requires lots of brainstorming and even collaboration. There are also lots of free tools, like Shopify’s business name generator, that can get your creativity flowing. Once you’ve landed on a name, do a thorough check to ensure someone else hasn’t claimed it first. Many states have business directories where you can search. You’ll also want to look outside your state, especially if you plan to sell to a wide audience. Scan Google, social media, and available domain names to see what’s out there. 2. Get an EINYour employer identification number (EIN) separates your personal identity from your business identity. It acts like your business’s social security number (SSN), so to speak. In other words, it’s a unique numerical combination the government uses to identify your LLC. Photo courtesy of: UnsplashTo get an EIN, you need to go to the IRS website and fill out an application via online form. The process is free, but you’ll need your personal Taxpayer Identification Number. The process takes under 15 minutes and is completely online—and you’ll get your EIN immediately upon completion. 3. Register your businessPhoto courtesy of: UnsplashOnce you have your EIN and business name, it’s time to officially register everything. Registering your business is a fairly straightforward process, though there may be extra steps required for merchants operating in certain industries, like food and beverage or CBD. You may also need to get a business license, depending on your niche and location. 4. Open a bank accountIt’s easier to keep personal and business finances separate. Separating your finances also provides more protection to your personal assets. You’ll need your business information, including EIN, to open a business bank account. Photo courtesy of: UnsplashLearn more: Basics of Small Business Accounting: 12 Steps to Get Your Company on Track 5. Build and launch your websitePhoto courtesy of: UnsplashWhen you’re ready to share your new business with the world, you can launch and promote your online store. We’ve created a handy online store launch checklist to help you remember everything from marketing to inventory to fulfillment. Drive traffic to your site to make your first sale, and invest in small business loans to grow your business. See our state-specific LLC guides:
Moving forward with your LLCStarting an LLC unlocks financial and even mental benefits for your ecommerce business. Once you’ve incorporated your LLC, you can focus on the important parts of your business—and taking it where you want to go. Ready to create your business? Start your free 14-day trial of Shopify—no credit card required.LLC FAQsHow much do I need to start an LLC?You typically need anywhere from $50 to $150 to start an LLC. Each state charges different fees. Some niches and locations require additional licensing and permit fees. How do I make myself an LLC?You make yourself an LLC by filing your articles of incorporation with your local jurisdiction. You may also need to pay corresponding fees. Does having an LLC help with taxes?Having an LLC can help with taxes depending on your situation. In some cases, you can lower how much you owe in taxes. It’s always best to consult your licensed tax professional. Join 446,005 entrepreneurs who already have a head start.Get free online marketing tips and resources delivered directly to your inbox. No charge. Unsubscribe anytime. |