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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 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.
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.
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.
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.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There are 7 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.
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