You don't need to form an LLC or any other company structure to sell online, but it would probably be good practice to incorporate anyway.
Ask anybody if you should form an LLC to sell online and you'll get the same answer. You don't NEED to, but is highly recommended that YOU DO.
Here's why you should form an LLC if you want to sell online:
- You don't have to mix your personal finances and your LLC business finances
- Creditors will be unable to touch your personal assets if the business gets sued or goes bankrupt
- Your business looks more professional
- There are tax advantages to having an LLC to sell products online
Let's look at what members of our community are saying when we asked them “Do you need an LLC if you want to sell online?”:
Nope you don’t “need” to form a business entity to sell online, but you “should.” Forming an LLC makes things easier and safer for a business owner. It’s easier to have an LLC because you can avoid commingling your personal funds with business funds; by forming an LLC, you’ll have the chance to open up a bank account for the LLC.
It’ll make things safer in the event that anything goes awry. By forming an LLC, and abiding by the necessary formalities for maintaining it, creditors will be unable to touch your personal assets if you’re ever sued or the business goes bankrupt.
Obviously no one opens up a business thinking that it’ll go belly up, but it’s better to be realistic than optimistic when it comes to legal protection.Raad
No, you don’t NEED an LLC. An LLC buys you some limited liability for acts that the company does that you personally are not liable for. It creates for many purposes, a separate legal “person” or entity. I say SOME liability because if you ARE the company, and the company does something and gets sued, likely they will sue YOU as an individual too, so the protection, in that case, might not be complete. But, if you have employees creating a separate legal entity to employ them might be beneficial.
Tax wise, there is no difference because the IRS will not recognize a one-person LLC. They just ignore it and consider you a sole proprietor anyway. So it’s not a way to get out of taxes.
The downside is that it’s a bit more difficult to create, manage, and administer an LLC. The biggest headache is filing reports with the state for the LLC like state income tax returns or franchise tax returns. And with an LLC the accounting is a bit more complex since YOU are an employee of your LLC.
One area an LLC or S-Corp can help is in dealing with large clients if you do that. Many companies won’t deal with an individual (for reasons we won’t go into now), but they wIll deal with an S-Corp or LLC taxed as an S-Corp.Steve Thomas
It’s a little difficult to answer without more information for context. However, it sounds like you are still in the planning stages and haven’t yet launched.
Is this going to be a full-time business venture or a side gig that won’t take all of your time? Are there others who are or will have an ownership interest? Are you looking to raise money?
All these questions have a bearing. However, the general answer is yes unless you are going to run it as a side hustle/hobby. If you are the sole owner and won’t be bringing anyone else in with an ownership interest then you could stay as a sole proprietor. That’s the simplest thing to do but it doesn’t provide you with any legal protections of any kind. You will be liable for everything.
The best answer is yes, form an LLC. It’s not difficult just requires more paperwork and costs more money. You get all the legal protections of a company/corporation but it’s far easier to manage.Chris Haug
I had 7 LLC's and now have just 1 LLC.
An individual can sell something online without having a corporation. For example, if someone wanted to sell their used children’s toys, they could sell them online, just as they could sell them to their neighbor or friend.
That being said, if one wants to sell a lot of things, such as going into business, then registering as an LLC or S-corp is generally the best way to go.Sue Murphy
So, as you can see, if you are even asking the question of whether you should form an LLC to sell online, the answer is probably yes.