Do you have to have an LLC to sell online?
Legal structures are an integral part of doing business. These apply to a variety of business types. While true, certain types perform best with some types of business operations.
Here, I focus on whether I need an LLC to sell online. If you want to start an online business, you might be interested in the answers provided.
Do I Need an LLC to Sell Products & Services Online?
In this article, we’ve provided an overview of one of the most common legal structures: the limited liability company (LLC). We’ve also discussed its pros and cons and answered whether you need it to sell online.
In a nutshell, the content of this article provides comprehensive knowledge on the topic discussed.
What’s an LLC?
An LLC, a limited liability company, is a legal structure or entity commonly used in the United States to own, operate, and protect an enterprise.
This was introduced by action of legislation in the 1970s. It was later enacted at the state level, starting with the state of Wyoming.
Today, the LLC is a popular legal business entity adopted across all 50 U.S. states. While it offers a range of privileges related to taxation, credibility, and more, it has certain drawbacks or cons.
The LLC isn’t the only legal business entity you’ll find. Others include sole proprietorships, partnerships, and corporations. These are also popular.
While true, the focus is on LLCs and whether such can be used to sell online.
Pros & Cons of LLCs
We stated earlier that LLCs offer business owners a whole range of advantages.
While that is true, there are cons associated with this legal entity. The pros include greater taxation flexibility, asset protection, legal name & credibility, versatility, and flexibility in profit sharing.
On the flip side, LLCs have certain disadvantages that include formation costs and the likelihood of filing annual reports, including fees & taxes, which may sometimes be costly.
As an LLC owner or member, stocks aren’t issued as with corporations.
What Types of Businesses Are LLCs Suitable for?
Not all business types will thrive under this legal entity for various reasons.
However, tons of other businesses will do just well under LLCs. Examples include non-profits, holding companies, real estate investments, joint ventures, and service-based enterprises.
LLCs will also be perfect for online businesses, startups, creative businesses, family-owned businesses, independent contractors, etc. This brings us to the question; do I need an LLC to sell online?
The following section focuses on providing such answers. Read on for details.
Do I Need an LLC to Sell Online?
So you want to establish an online business but wonder if you need a legal entity like an LLC to sell. Well, this will depend on several factors.
However, we must start by saying you don’t necessarily need an LLC to sell online, as the same objective can be achieved using other legal entities like sole proprietorships and partnerships.
However, you’ll need to consider the benefits, suitability, or protection an LLC offers to see if it favors your online business. One of the highlights of an LLC is that it provides limited liability protection.
This is one advantage many online business owners won’t pass off.
More specifically, as an owner of a business that sells online, you may choose to go for an LLC due to its perceived benefits, like limited liability protection.
This is especially true if the products you sell online are prone to attract litigation in the future.
We’ve also stated that an LLC confers certain advantages on a business, like asset protection, versatility, and taxation options, amongst others.
So, if you find any of these interesting, you may want to consider applying for an LLC for your online business.
An LLC May be Perfect for an Online Business in Certain Respects
Still, on the question asked, it’s necessary to state that an LLC may be ideal for a business that sells online under certain circumstances.
These may include home much control you want over the business, taxes, complexity, liability, flexibility, capital investment, and licenses & permits. These are further discussed in the next section.
Tips on Choosing a Legal Structure for an Online Business
You must understand certain factors to find the perfect legal entity for your online business.
These have been earlier identified to include control, taxes, complexity, liability, flexibility, capital investment, and licenses & permits. Let’s discuss each as follows;
How much control do you want to have over your online selling business? Legal entities like sole proprietorships, partnerships, and LLCs will be ideal.
However, since we’re discussing LLCs, you must state that you’ll need an LLC for greater or primary control over your business.
As with sole proprietorships, all profits earned during the business for an LLC are considered personal income. So, it will be taxed at year’s end.
However, this structure (LLC) eliminates double taxation while ensuring you’re taxed as an individual and not a business.
If you’d want to avoid any complexities, especially reporting requirements with relevant state and federal government agencies, then an LLC won’t be ideal.
This might be a deal-breaker for many entrepreneurs interested in avoiding all complexities of doing business.
As highlighted earlier, LLCs provide liability protection while offering the privilege of being taxed as an individual and not a business.
This limits the degree of taxation. Minimal liability exposure means your assets are protected from litigations. This might be a reason to adopt an LLC for their business.
It’s essential to consider the destination or goal for your online selling business. An entity like an LLC supports the future growth of the company.
This should be one of the reasons to choose or go for it.
vi. Capital Investment
If you need funding for your online business, you may want to consider other legal entities like corporations. LLCs will present specific challenges when applying for loans.
With the discussions had so far, does one need an LLC to sell online? Not really. It’s best to weigh the pros and cons based on the factors listed.
This allows you to determine its (LLC) suitability for your operations.