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Many entrepreneurs are familiar with the Amazon FBA program. With “Fulfillment By Amazon,” sellers can focus on their sales and marketing, while Amazon handles the shipping and logistics.
In order to use the Amazon FBA program, sellers must provide a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN) or an Employer Identification Number (EIN). As the SSN is only applicable to U.S. citizens, non-residents need an EIN or ITIN in order to proceed.
Beyond having the required information to sell through Amazon, sellers need to consider the business structure that best meets their needs. While the simplest solution is a Sole Proprietorship, which requires no formality, much has been written about the risks of this practice – most notably that it does not provide any legal separation from one’s personal assets. Instead, many opt for the simple but effective LLC.
Limited Liability Companies or LLCs create a legal business entity that separates business assets from personal assets while requiring very little in the way of paperwork and complicated tax filing, especially for single-member LLCs.
Let’s assume that you’re looking to sell through the Amazon FBA program, and you’ve decided that you want to form an LLC through which to operate your business. Now, you must decide in which state you will form your company.
The benefits of a Delaware LLC are well known. The liability protection is unparalleled and the formalities are kept to a minimum. Harvard Business Services, Inc. has been helping entrepreneurs form LLCs and corporations since 1981. Forming a Delaware LLC is an efficient, legal option for anyone in the world, with the exception of residents of restricted countries, as maintained by the U.S. Department of the Treasury.
We can also obtain EIN (Employer’s Identification Number) so your company is ready to do business on Amazon. Please note that if you do not have a U.S. address or Social Security Number, you will be required to provide a copy of the passport or government-issued ID for the person listed as the responsible party once you have submitted your order.
There are annual costs associated with owning a Delaware company, as there are with most states. In Delaware, LLCs must pay an annual $300 Franchise Tax, which is the sole requirement for the company’s Annual Report. The company must also maintain a Registered Agent in Delaware. Harvard offers this service for an industry-best $50 per year.
The LLC is the easiest and most popular choice for Amazon sellers seeking basic asset protection for their business, but there are other choices as well. S-Corporations, which must first form as a general corporation or LLC before filing for S-Corp status, are another popular option for small businesses. However, S-Corp shareholders must be U.S. citizens, so this option is not available to non-residents.
Non-residents are allowed to form C Corporations, but these can be more complicated and costly than LLCs and are generally not a popular choice for small businesses such as Amazon sellers.
As noted above, Sole Proprietorships are also capable of full compliance with U.S. business and tax regulations, but we do not recommend this approach due to the high risk it places on your business and personal assets. For example, if a customer decided to sue you for any reason and a judge ruled in the customer’s favor, both your business assets and your personal assets could be sought to satisfy the financial payment.
Once you have the proper taxpayer identification information, you are ready to enroll in the Amazon FBA program. Typically, the next step is to send your product inventory to Amazon. However, we recommend referring to Amazon’s instructions and most recent documentation, as these details may change over time.
Additionally, we recommend making sure your newly formed Delaware company is in good standing before you begin to sell your products to customers.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE'S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.
There are 2 comments left for Using a Delaware Company for an Amazon Seller (FBA) BusinessSaad said: Wednesday, August 28, 2019
Hello, I've just opened an LLC for Amazon selling purposes using your services. I could use some insight on any additional taxes apart from those mentioned in your article related to income generated from selling goods in Delaware or any other US state including sales taxes. Appreciate the help. Best Regards,HBS Staff replied: Wednesday, August 28, 2019
Saad, for any tax-related issues besides Delaware Franchise Tax, we recommend you speak an accountant or tax professional to determine what your specific tax obligations will be.Garth Cooley said: Thursday, August 22, 2019
Good day We are a small family business based in Cape Town - South Africa and are looking for a partner in the USA to sell our products on Amazon to the USA markets, are you able to assist us? If so could you please send me more information and your rates? If this is not your line and rather assist non-USA foreigners in setting up a Amazon business seller account in the USA could you then send me more info on this? Thank You Garth DreamHouse Solutions SA Pty LtdHBS Staff replied: Thursday, August 22, 2019
Garth, unfortunately we cannot assist with your Amazon business in the U.S. aside from helping you create an LLC if you would like to do that. We do not get involved with Amazon directly.