Using a Delaware Company for an Amazon Seller (FBA) Business

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.

Before you start selling on Amazon via 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.

Do I Need an LLC to Sell on Amazon?

Beyond having the required information for selling on 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.

Choosing Delaware

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.

There are several benefits of a Delaware LLC for Amazon FBA. 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.

Alternatives to the LLC

The LLC is the easiest and most popular choice for Amazon sellers seeking basic asset protection for their business, but you do not need an LLC to sell on Amazon. 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.

Starting Your Amazon Business

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 LLC for Amazon FBA is in good standing before you begin to sell your products to customers. 

Verifying Your Address for Amazon FBA program

When you create your account with Amazon, they may ask you to verify your physical business address by sending them a copy of a bill for a utility bill, credit card, or other account that shows your business name and address.

Although Amazon will allow companies with international addresses to enroll and use their home address on their account, some of our clients have run into issues when it comes to payment and e-commerce platform integration. Some platforms have restrictions on which countries can use their service, and so clients seek to obtain a US address to use for their business with Amazon and any such third party platforms.

Form an LLC for Amazon with Harvard Business Services, Inc.

HBS does offer an additional Delaware Mail Forwarding Service to Delaware companies that HBS serves as the Registered Agent for as we specialize in receiving, scanning and emailing letter mail to our clients in a timely manner.  This will allow you to have the Amazon Verification code sent to our address and we will forward it on to you.  When a Delaware company signs up for the Delaware Mail Forwarding Service, it enables the company the ability to use the HBS address as the mailing address for the company but not the physical business address.  The principal place of business address is generally where the company actually physically operates even if based outside of Delaware and even the US.  It’s important to note that you are not permitted to list the HBS address as the service address for utilities or as your physical business address when creating accounts with Amazon or other services.