Last updated - November 28, 2023
You’ve managed to set up an eCommerce platform and started pricing the products to sell for your business. But, you soon find that staying as a sole proprietor won’t suit your needs.
One of the crucial steps to protecting your assets and formalizing your business structure is setting up a Limited Liability Company (LLC). Creating an LLC for your eCommerce business ensures legal protection and also opens doors for tax advantages and increased credibility.
In this guide, we’ll walk you through how to set up your eCommerce business as an LLC effectively. These insights will streamline the process, helping you navigate this essential step in launching or growing your eCommerce business. Plus, we’ll offer you some great tips.
7 Tips for Setting Up Your eCommerce Business as an LLC
Developing your home contractor business involves more than just acquiring technical skills. It needs strategic planning and execution. Discover effective ways to flourish with these tips.
Select the State Where You’ll Form Your LLC
The first step is to decide in which state you’ll form your company. Consider this choice carefully because it imparts significant implications for taxes and business regulations. There are a few states that are better than others. Delaware, for example, has more business-friendly laws.
However, if your operations are smaller and confined mainly in your home state, forming your LLC there could be more beneficial and straightforward. For instance, the process often involves less paperwork and fewer ongoing compliance requirements than in other states.
Search For a Name That Isn’t Taken
Selecting the right name for your business is crucial. It should be impactful, engaging, and memorable to attract potential customers. However, you need to check that your preferred name isn’t already in use by another company operating in your chosen state.
You can check if a business name is taken by looking at specific databases:
- United States Patent and Trademark Office (USPTO)
- ICANN Domain Name Registration Data Lookup
- Trademark Electronic Search System (TESS)
- Office of the Secretary of State (check the state where your business is located)
But even if a name isn’t copyrighted, you should still do a quick Google Search to check if another business is using it. If, for example, another established business with multiple followers is using a name you want, going ahead and using it anyway could cause brand confusion.
This can greatly increase your competition and make it harder to find social media profiles of domain names that don’t use that name. Don’t forget to add LLC at the end of your name.
In the end, it’s important to choose a unique name that aligns with your brand identity. A great business name will give you a sturdy foundation and be identifiable within your market segment.
Fill Out an LLC Operating Agreement
An LLC operating agreement is an essential document that outlines ownership rights, management structure, and ways to handle potential disagreements among members.
Rather than starting from scratch, you could opt for an LLC operating agreement template and tailor it according to your unique needs. This will help you outline who will manage the LLC, how the management team will be selected, how key decisions will be made, and more.
While this document is important, not all states require one. If you live in California, Delaware, Maine, Missouri, or New York, you can’t set up an LLC without an operating agreement.
But, even if your state doesn’t legally require such an agreement, having one will create clarity about the business rules that govern your company. Remember, a well-thought-out operating agreement can save you from future disputes and complications that could ruin your business.
Consider Using an Attorney as Your Registered Agent
In the process of setting up your eCommerce LLC, you’ll come across the term ‘registered agent.’ This role is crucial to your business operations. A registered agent is a person or a service designated to receive important legal and tax documents on behalf of your LLC.
Every state mandates that you have a registered agent who has a physical address in the state where your business is registered. They ensure that crucial paperwork doesn’t go missing and no important legal notices are overlooked. Their involvement can make managing your LLC much easier, but what can you do if you can’t personally find a registered agent?
Get an attorney to act as your registered agent. Engaging a lawyer can provide multiple advantages. The most significant benefit lies in their extensive knowledge of the law, which can help navigate any complex situations or legal predicaments that may arise.
Moreover, attorneys are well-versed in dealing with confidential documents and sensitive information, which ensures they’re handled appropriately. Keep in mind this may bring additional costs due to professional charges if we consider the broader financial picture.
Learn the Exact Documents You Need for Your LLC
We already covered an LLC operating agreement, but what other documents do you need?
Here are the documents you need to become an LLC:
- LLC Operating Agreement: To establish your business ground rules
- IRS Form SS-4: To get an Employer Identification Number (EIN)
- Name Reservation Application: To copyright a name not already taken
- Articles of Organization: To establish your LLC at the state level
- Initial and Annual Reports: To confirm basic information about your operations
- Tax Registration: To set you up as a business entity that pays specific taxes
- Business Licenses: To run specific businesses in certain states
Given the legal complexities tied up with starting an LLC, hiring a lawyer to assist in filling out the required paperwork can be beneficial. A lawyer’s input can ensure precision, prevent errors, and possibly save you from potential legal tangles down the line. They’ll help you understand the intricate details of specific forms and their implications for your eCommerce business.
Their expertise might be expensive, but consider it as an investment to protect your interests and secure the long-term performance of your LLC.
Get an EIN to Open a Business Account
Launching your eCommerce LLC also involves logistical aspects such as setting up a business bank account. To do this, you’ll need an Employer Identification Number, or EIN, from the IRS. It’s the SSN for your business, allowing the government to track your business’s transactions.
Obtaining an EIN is a simple online process, and it’s absolutely free. Once you have this number, you can open a bank account for your business. This approach separates personal finances from those of the company, ensuring clear financial records and smoother operation.
Not only that, but a separate account allows you to build business credit. This means you’ll be able to take out business loans that won’t affect your personal credit if you default.
Start Marketing Your Business as Soon as Possible
Once you’ve managed the logistical and legal aspects of setting up your LLC, turn your attention to marketing. Start promoting your eCommerce business as soon as possible. This is especially true if you’re becoming an LLC directly after you start your eCommerce business.
Use a combination of online strategies like social media marketing, SEO optimization for your website, and email newsletters. Reach out to existing networks and form new partnerships.
It’s recommended that you use a combination of digital marketing, project management, and document processing software to get your name out there. And if you’re short on time, using the top AI tools for marketing can allow you to conduct lead generation without a large team.
Remember, marketing isn’t just about selling products. It’s about creating a brand that resonates with customers. Your entrepreneurial journey begins with the first step forward into the market.
Establishing your eCommerce business as an LLC doesn’t have to be a difficult process. By following these insightful and strategic steps, you’re already on the path to success. Take the plunge today and start curating a business that echoes your passion and entrepreneurial spirit.
Remember, the most important step is the first one. Don’t wait another moment. Start shaping your future now with our essential tips and tricks. Your eCommerce empire awaits!