Do I Need to Form an LLC to Sell Online?

Do I Need to Form an LLC to Sell Online?

Modern business has largely moved online in recent years, especially when it comes to commerce and retail sales. Today, you can buy nearly anything online, be it products or services. Online business offers convenient and versatile opportunities both to entrepreneurs and to customers. No wonder it’s getting up steam, and many huge companies focus on enhancing their online presence.

Meanwhile, such advanced commercial online platforms as Amazon and eBay give raises to multiple online entrepreneurs every day. And the main question new online businessmen ask themselves is whether they need an LLC company to sell online. LLCs have a lot to offer to commercial online projects.

Besides, LLC formation services make it a breeze to open a limited liability company ( here lawyer D.Kondratiev tells how to register your new business). So, whether you need one or not mostly depends on your business scenario and future business plans. Let’s give this issue a closer look and figure out when you should form an LLC for online sales and what values it will bring to your business.      

When You Should Consider LLC Formation

Similar to any other type of business, online business puts no strict requirements on business incorporation. In other words, the establishment of a corporation or an LLC is not a must for selling online. You are the one to choose the business structure for your online company, and you can stay with a sole proprietorship or a partnership.

Many home-based and online businesses usually falling within the low- to mid-profit category operate as sole proprietorships on the US market. However, before you deny LLC formation in favor of the sole proprietorship, ask yourself several questions and answer them honestly:

  • Do you want to run your online business with several partners?
  • Do you have ambitious business goals and growth plans?
  • Do you want to put your personal assets at risk?
  • What company image do you want to create for your customers? 
  • Do you want to be constantly liable for all business-related issues and problems? 

Noteworthy, business incorporation will help you handle all those issues in the best possible way, beneficial both for you and for your business. By creating a legal entity, you will not only show your serious attitude but also make your business independent and legitimate while still being in full control of it. A limited liability company is hands down the most popular choice for online businesses, especially those engaged in sales. 

Advantages of LLC Formation for Your Commercial Business

A limited liability company is a relatively new business structure that has become widely used since 1997. It appeared as an answer to a fast-changing business environment and targeted to make business incorporation a more attractive affair for smaller entrepreneurs.

The best thing about this business form is that being a sort of hybrid of a corporation and sole proprietorship, an LLC is a cinch to establish and quite easy to operate while allowing your business to benefit from corporate protections. And those benefits cover both offline and online businesses:

Protection against risks and liabilities: Beyond business incorporation, you are associated with your business. Not only do you give your company your name but also you are liable for all financial problems and business-related issues. It might be ok when those risks are minimal.

However, those risks grow pro-rata to the growth of your company profit and the scope of activity. This is where you need to separate from your business and let it function as an independent legal entity. The limited liability of the LLC company will protect you and your personal assets from business lawsuits. To further enhance the protective shield, you can use liability insurance for your business;

Flexible taxes to maximize profit: Launching an online sales business, you expect it to develop and count on a steady profit that will consistently grow, which is a normal thing. In this concern, LLC companies come up with flexible taxation options that will let you keep up with your business growth in a maximum beneficial way.

Thus, initially taxed as pass-through entities transferring business income to personal tax returns of the company owners, LLC formation also allows you to select an S-Corp status for taxation purposes. While pass-through taxation is great for startups and smaller businesses with lower profits, an S-Corp tax status will help you optimize the tax burden on a growing yearly income;

High business credibility: LLC companies not only look more credible and reliable in the eyes of state authorities and financial institutions but also evoke more trust and confidence in customers. Building a solid company image is crucial for building up a consistent customer portfolio and engaging new clients.

And customer loyalty along with positive customer feedback are the aspects greatly contributing to your company’s market image and reputation. This is where business formation will work for you too since a legally formed business entity with an LLC identifier standing next to the company name looks more serious and trustworthy; 

Higher potential for fast-paced growth: With limited liability protection, an adaptable tax system, and high credit of trust, an LLC structure creates a sort of springboard for smoother and more confident company growth, ensuring better business perspectives with lower personal risks.  

Incorporation Services: Form an LLC With Ease

With no legal requirements to incorporate a company for doing business online, you can start as a sole proprietorship and switch to an LLC any time you deem necessary. Though simplicity is the name of the game for both business structures, many entrepreneurs are not that eager to open an LLC even when they obviously have to.

In most cases, the reason is that they think LLC incorporation is expensive. On top of that, they are not sure they can handle the transformation process on their own. In fact, they don’t need to. There is a whole range of LLC formation services that will do all the job for you and file your LLC, with no effort from your side.

In the meantime, it’s also important to learn how to run and maintain a new business structure and LLC incorporation companies will come to help here as well. The best LLC services such as LegalZoom, Rocketlawyer, ZenBusiness, Mycompanyworks, and others provide a whole range of professional services and business consultations in company maintenance.

So, as soon as you feel the need to form an LLC to bring your business to yet another level and improve risk management, fear not and let incorporation services handle the formalities for you.  

About Author

Dmitriy Kondratiev

Dmitriy Kondratiev, chief Editor of, associate in Axon Partners. Experienced lawyer (Intellectual Property, Patenting, Contract law, Labor Law, International Private Law). Worked with IT-companies Webxloo (Delaware), Autoxloo (Florida), SCC (Delaware).