If you’re an ecommerce business owner, you must have heard about LLCs, and you might be confused about whether you need one for your Shopify store. Well, you’re in the right place–in this article, we’ll discuss in detail what an LLC is and whether you need one for Shopify.
What Is an LLC?
An LLC is a limited liability company. It’s a business structure that can provide personal liability protection to its owners, and LLCs are popular among small business owners because they offer flexibility and tax benefits.
When it comes to taxes, make sure you’re using the best accounting software for Shopify you can find, so you can keep all your tax-related information straight.
If you’re wondering how an LLC is formed, it’s quite simple. You just need to file the necessary paperwork with your state government and pay the required filing fee. Once your LLC is formed, you’ll be able to open a bank account, obtain licenses and permits, and start doing business.
Do You Need an LLC For Shopify?
The short answer is: no. You don’t need an LLC to start a Shopify store; however, there are two major benefits of having an LLC that you should consider. The first is personal liability protection and the other is tax reduction–if you’re the sole owner of your business, an LLC can provide personal liability protection. This means that if your business is sued, your personal assets will be protected against seizure, which is especially important if your business is generating a lot of revenue or you’re selling high-risk items like food products.
Another benefit of having an LLC is that it can help you save on taxes. LLCs are taxed as pass-through entities, which means that the business’s income is passed through to the owners and taxed at their personal tax rate. This can be beneficial if you’re in a high tax bracket. Collecting taxes on Shopify and remitting them to your state tax authority can also be a bit tricky for beginners, so check out our post on Shopify Tax Reporting for more information.
Another important benefit of forming an LLC is that it gives your business credibility. When customers see that your business is an LLC, they’ll know that you’re a legitimate business, which can help you attract more customers and build trust with them–something that is crucial in the world of online business.
Is an LLC the Same as a Business License?
Many people believe an LLC is the same as a business license, but this is a misconception. A business license is obtained from your city or county and it allows you to operate your business within their jurisdiction.
An LLC, on the other hand, is a state-level legal entity. It’s formed by filing the necessary paperwork with the state government, and once your LLC is formed, you’ll be able to do business in any state that recognizes LLCs–so, if you’re planning on expanding your business to multiple states, an LLC is the way to go. For instance, you can consider starting an LLC in California, Delaware, or Nevada, or any state or country that does not fall under the list of OFAC-restricted countries.
Just like an LLC, you don’t need a business license to run a Shopify store. However, there are certain exceptions that you should keep in mind. These include selling tobacco, food or alcoholic products, and running a dropshipping business. In these cases, you may need to obtain a license or permit (depending on your location).
As you can see, you don’t need an LLC to run a Shopify store. However, there are certain benefits of having one that you should consider, including personal liability protection, tax reduction, and business credibility. If you’re thinking about starting an LLC, we recommend that you speak with a business attorney to learn more about the process and what’s required in your state.
Wondering whether you need an EIN for Shopify? Check out our recent post.