LLCs in the United States are one of the most popular business structures for digital business owners, and especially in e-commerce or Dropshipping.
This is due to the numerous advantages that an LLC offers to this type of business: limit the personal liability of the partners, sell anywhere in the world, access a bank account in the USA, present a professional image and be easily managed, and more.
In this article, we will tell you in detail about these benefits, what taxes you would pay having an LLC and how to quickly open and launch it your online business. Let's get started!
What is an LLC?
First of all, you should know that an LLC or limited liability company is an American business structure that:
- limits the personal liability of its owners,
- offers tax transparency (no taxes are paid as a company, but each member pays taxes in their country of residence).
In addition, they are really simple to manage, costs and bureaucracy are low. Finally, LLCs can be one-person or many members, and can be opened by residents or non-residents of the United States.
The advantages of an LLC for your e-commerce
LLCs make life easier for those entrepreneurs who want to get fully involved in the field of electronic commerce. Let's look at these points in detail!
Your personal responsibility is protected
When selling products or services, it may happen that a dissatisfied customer or supplier decides to file a claim through legal lawsuits. In this unfortunate scenario, thanks to the corporate veil that protects the personal responsibility of the members, only the company's assets would be at stake and not that of its members.You can easily sell anywhere in the world
Opening an LLC in the United States will allow you to sell products through Amazon, eBay, Alibaba or Walmart, and probably any other marketplace in the world.
You can also use payment processors such as Stripe, PayPal, Payoneer, Shopify, and transfer your income directly to your business bank account, a point we will see below.
You can access a bank account in the USA
On the other hand, opening an LLC in the USA will allow you to open business accounts dedicated to your business. Attention, doing this and not mixing it with your personal transactions is essential to maintain your corporate veil.
Having a company bank account in the USA will allow you to receive and issue international payments in the currency of your choice, without any type of difficulty.
In this way, transactions will not only be cheaper, faster and easier, but they will also be more profitable because you will not have to fight with currency conversions which can often be unfavorable.
Provides a professional image
In the field of electronic commerce, online reputation is essential. Clients and suppliers will not take you seriously if you do not offer a professional image.
By owning an LLC in the USA, you will have a legal and legal structure that inspires confidence. In this way, you increase the chances of hooking new clients, negotiating with better suppliers and even getting new and powerful partners.
The LLC can be anonymous and not reveal your name publicly
At the same time, in some states of the country (Delaware, Nevada, New Mexico and Wyoming), you can register a limited liability company anonymously.
This way, you can enjoy e-commerce and dropshipping without revealing your name publicly, protecting your privacy and your personal life, separating it from the business environment.
Access to credits
Finally, if you are a seller on Amazon and have an LLC to do so, you can access solid credits through the Amazon Lending financing program.
Active for more than a decade, this service offered by the technology company serves to obtain loans of between USD 1,000 and USD 750,000, depending on the credit profile you have.
And in the case of Alibaba, Amazon's Chinese counterpart, You can finance purchases of up to USD 150,000 if you negotiate from a company registered in the United States using the Pay Later solution.
What taxes does an LLC pay for e-commerce?
When creating an LLC in the USA to get involved in e-commerce or dropshipping, you must be very clear what the tax treatment of these companies is like.
LLCs are pass-through entities
First of all, it is essential to understand that limited liability companies are pass-through entities, also known as “pass through” or “fiscally transparent” organizations.
This indicates that LLC taxes are transferred to the legal figure of its members, without the obligation to pay corporate taxes, unlike other structures such as C-Corp, which are subject to “double taxation” (both individual and corporate taxes).
Does your e-commerce business qualify as ETBUS?
“ETBUS” means “engaged in business within the United States.” In principle, your e-commerce should not be considered as ETBUS if:
- It does not offer physical services in US territory.
- It does not have a headquarters or store the products it sells in its own warehouse in the country.
If your company is not considered ETBUS, you would be exempt from paying taxes to the US government. It would only be enough to file the annual tax return with the IRS to keep the LLC in operation and pay the corresponding taxes in your country of residence.
If your e-commerce activity is qualified as ETBUS, you will have to pay taxes in the USA.
You can pay taxes as S-Corp or C-Corp
Still, although your LLC operates as a pass-through entity, the organization can also be taxed as an S-Corp or C-Corp.
- an S-Corp taxes salary and dividend distributions differently for members.
- A C-Corp pays corporate taxes (21% on its income) and then distributes dividends to shareholders, who must pay personal taxes on that amount. C-Corps suffer double taxation.
Changing the tax status of your LLC will not impact the legal situation, simply the way it is taxed. The business will remain a limited liability company.
How to open your LLC and launch your e-commerce business?
Opening your LLC to launch an e-commerce or dropshipping business is actually very simple, since the process consists of a few steps:
- Define the state of your LLC: you must choose the state in which you want to register your company according to your needs and objectives.
- Choose the name of your LLC: think about a marketing strategy and choose a suitable name to attract customers.
- Choose the registered agent: choose a registered agent, who will be responsible for receiving your official and tax documents on behalf of the company.
- Complete the form "Articles of Organization": submit the report that includes all the key information of the business to the state agency.
- Create your operating agreement: establishes in writing what the functioning and operations of the LLC will be among the members.
- Obtain an EIN: obtain your employer identification number from the IRS to access different benefits.
Get professional help to open your LLC
- Business experts in the USA
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Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, graduated in 2020 from the National University of Tucumán. Founder of Start Companies since 2023, he advises clients worldwide on forming LLCs in the United States and on proper tax filing. His expertise combines legal, tax, and practical knowledge, offering a comprehensive service that spans from company formation to bank account setup and sales platform integration.
