Do you need an LLC to sell on Amazon

What does Amazon require to sell?

Amazon lets you register as an individual or as a business. Either way it verifies who you are and how you will be paid, typically asking for a government ID, a bank account for payouts, a card for fees, and contact details. It also runs a tax interview, which collects a US tax form: a Form W-9 from US persons, or a W-8 form from sellers who are not US persons. An individual can use a Social Security number or ITIN, and a business uses its EIN. Amazon's exact requirements change, so check Seller Central when you register.

Does an LLC change how Amazon income is taxed?

Not by default. A single-member LLC is disregarded for federal income tax, so your Amazon profit goes on Schedule C of your own return either way, and you pay self-employment tax on it. An LLC with two or more owners files a partnership return. The tax picture only changes if the LLC elects to be taxed as a corporation. See how LLCs are taxed.

Sales tax does not depend on the structure either. Amazon collects and remits sales tax on Amazon orders in every state with a sales tax. What can still matter is where your FBA stock is stored. See sales tax for Amazon FBA sellers.

What does an LLC protect an Amazon seller from?

Physical products carry risks that services do not: a product that injures someone, a supplier dispute, or unpaid storage or advertising charges. With an LLC, those claims and debts generally belong to the company rather than to you personally. That protection depends on keeping the LLC separate, with its own bank account and no personal spending through it. It is not a substitute for product liability insurance, which Amazon requires of sellers above certain sales levels.

When should an Amazon seller form an LLC?

• You sell products that could cause injury or harm, such as supplements, children's products, electrical goods or anything used on the body.
• Sales are growing and you are committing to inventory, suppliers and advertising spend.
• You have a partner. An LLC with an operating agreement sets out who owns what.
• You want to build a brand you might sell one day. Keeping the brand, account and trademarks in a company makes a sale much cleaner.
• You live outside the US and want a US company to hold the business. See also selling on Amazon US from outside the US. See how to open a US LLC from outside the US.

Testing a product with a few units is a reasonable time to sell as an individual and form the LLC once the business proves itself.

What if you start as an individual and form an LLC later?

You will need to update the legal entity, bank account and tax information on your seller account, and Amazon may ask you to verify the business again. Some changes can take time to process, so plan the switch for a quieter period rather than just before a peak season. Keep records of which sales belong to you personally and which to the LLC for the year of the change.

Where should the LLC be formed?

If you live in a US state, usually that state, because you will be running the business from there. See which state to form your LLC in. Forming elsewhere and then registering at home adds cost without a tax advantage.

What changes once you have an LLC?

• Get an EIN and open a business bank account in the LLC's name.
• Update your Amazon tax interview with the LLC's details.
• Keep the LLC's yearly state filing up to date.
• If you live outside the US, file Form 5472 each year for a single-member LLC.

For every tax filing an Amazon business has, see Amazon FBA taxes.

This guide is general information. It is not tax or legal advice for your situation.