Are you a reseller, and are you considering forming an LLC for resale business, whether you resell on eBay, Amazon, or Shopify, whatever platform you may use.
In this guide, I will talk to you about whether or not you should form an LLC for resale business.
I am from Micahguru Formation, where we help entrepreneurs like you start their businesses without dealing with complicated legal forms. We help over 150+ entrepreneurs to start their businesses in the United States.
Should I Form an LLC for Resale Business in 2022?
- 1 What is an LLC?
- 2 Do I Need to Form an LLC for Resale Business?
- 3 Which is the Best State to Form an LLC for Resale Business?
- 4 How to Form an LLC for Resale Business
- 5 Conclusion
What is an LLC?
An LLC stands for Limited Liability Company refers to a business entity formed under state statute or the LLC Act. This business structure is characterized by flexibility and fewer formalities.
An LLC is an entity with the limited liability features of a corporation and the tax flexibility of a partnership. A limited liability company provides its owners with protection against personal liability for business debts, which means that if the company gets sued, only the company’s assets are at stake. The members of an LLC are not personally liable for its liabilities.
The main LLC cost to form an LLC is the state filing fee, ranging between $40 and $500.
There are generally two options to form an LLC for resale business:
- Form an LLC yourself.
- Hire a Professional LLC Service.
Do I Need to Form an LLC for Resale Business?
LLC’s are an incredibly beneficial type of business structure. They provide a layer of protection from personal assets and afford some tax benefits. It’s a great way to protect your assets from liabilities. LLC’s are also simple and inexpensive to form.
Benefits of Form an LLC for Resale Business
There are many benefits to form an LLC for resale business, some of which are as follows:
- Easy to form and manage
- Personal Liability Protection
- Tax advantages
Easy to form and manage
LLCs are generally easier to form than corporations, have less paperwork, and do not require as much maintenance – filing only one document (Certificate of Formation) is enough for legal purposes when starting the company.
The most common necessity for LLCs is to file their operating agreement, but this is just a recommendation, so there isn’t any penalty if it’s not filed until later.
Personal Liability Protection
LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event of a lawsuit or if your business defaults on a debt.
Businesses that resell goods will benefit from the liability protection offered by an LLC because of the risk of workplace injuries, property damage, and advertising damages to other businesses.
LLCs also offer protection for personal assets if you experience commercial bankruptcy or loan defaulting due to its limited liability protections.
Tax Advantages for a Resale Business
LLCs are taxed as a pass-through entity by default. This means that the business’s net income will be passed through to each owner and then individually subject to tax rates (based on their own rate). The company’s net income is also subjected to self-employment taxes.
Which is the Best State to Form an LLC for Resale Business?
An LLC can be used to protect your business assets and limit your liability. But where should you form an LLC? The decision largely depends on what type of business you operate.
The best state to form an LLC for resale business is Delaware. Delaware has a reputation for being a business-friendly state, and it has a simplified filing process to help you get your LLC quickly up and running.
Delaware offers some of the most competitive tax rates for resale businesses. If you form an LLC in Delaware, you’ll only be charged $0 in franchise taxes per year (unless you do more than $1 million in gross revenue).
On top of that, when it comes time to sell your business, there is no personal income tax in Delaware unless the profit exceeds $60,000 in any given year for an individual or $300,000 in any given year for a corporation.
How to Form an LLC for Resale Business
This complete guide will tell you how to form an LLC for resale business. For forming an LLC for resale business, you have to follow these steps:
Select Your State
To form an LLC for resale business, you must first decide the state where you want to form your LLC. For U.S. residents, the best state to form an LLC in the state where they live.
For Resale business, the best state to form an LLC is Delaware. The benefits of starting an LLC in Delaware, I have mentioned above.
Name Your LLC
The next step to form an LLC for resale business is to select the name of your LLC. The name of your LLC is essential in obtaining an EIN and opening a bank account in the U.S. for your business.
There are a few guidelines to follow when you are about to name your company:
- The company name must include the term-limited liability company or the abbreviations LLC / L.L.C.
- Specific terminologies like FBI, State Department, etc. they can mistake your LLC for the government agency. The use of such terms is forbidden.
- The use of restricted words like University, Lawyer, and Banks requires additional documents and an authorized person.
Appoint a Registered Agent
The next step to form an LLC for resale business is to appoint a Registered Agent.
A Registered Agent is a person or a company who receives all official mail and processing services on behalf of your business. To keep your business in good standing, you must maintain a registered agent, which we do for $99 per year.
They are required by law and must maintain a physical address and maintain regular opening hours. Since you do not live in the United States, these are requirements that you cannot meet.
Micahguru Formation is best for this task. For Registered Agent service, we charge $99 per year, which is comprehensively cheap and more valuable than others.
File Your Article of Organization
To form an LLC, it is necessary to file your Articles of Organization, also known as Certificate of Formation, with your Secretary of State, which costs vary from state to state.
The Certificate of Formation must include:
- Name of your LLC.
- Name and Address of the Registered Agent of your LLC.
- Signature of an Authorized Person.
Prepare Your Operating Agreement
An Operating Agreement is a document that sets out the rights and responsibilities of the members and managers of an LLC. It is not required in every state, but it is highly advised to have one.
Apply for Employer Identification Number
The next step is to apply for an Employer Identification
Number (EIN). It is also known as a Federal Tax Identification Number.
What are the Purposes of EIN?
- An EIN is necessary for your business tax purposes.
- It is also required to open a business bank account in the United States.
- It is also needed when you want to hire employees legally.
Applying for an EIN is quite simple and free of cost. You can quickly obtain this by visiting the IRS.gov website.
In this comprehensive guide, I told you Why LLC is the best business structure for resale business, the benefits of forming an LLC for resale business, Which is the best state to form an LLC for resale business, and How to form an LLC for resale business.
I hope that this guide helps you and your business achieve success. I aimed to make it as comprehensive as possible, but I’m sure more points can be included. If you have any questions, you can reach out to me at any time. I’ll be sure to help you out. I hope this guide is helpful.