Any time you launch a new company, there are countless decisions to make. What will you name the company? What colors will you use for your logo and branding? Will you base the business out of your home, or do you need to find office space?
ECommerce companies also face their share of decisions, including important choices about what to sell, how to price, how to market, and beyond. And then there’s the decision about how to structure the business, legally.
For most eCommerce businesses, the best choice is the Limited Liability Company, or LLC. Foremost among the reasons for this is that the LLC is incredibly easy to form. In fact, you can typically start an LLC in as little as a day’s time, following just a few simple steps.
Taking the time to establish an LLC can yield a number of advantages for your eCommerce business. Some of the primary benefits include:
The bottom line: Structuring your eCommerce company as an LLC provides you with the flexibility, the security, and the peace of mind you need for long-term, scalable growth.
For eCommerce merchants eager to form an LLC, it’s important to note that the requirements can vary from state to state. Generally speaking, however, the trajectory looks like this:
You are technically allowed to start your eCommerce LLC in any state, and some entrepreneurs try to determine which state is most advantageous from a tax perspective. The long and short of it is that it’s always more advantageous to start your LLC in the state where you live and run your business. The only situation in which you should “shop around” for the best state is if you’re not a U.S. resident, and thus don’t have a home state to fall back on.
One of the first things you’ll need to do is to choose the legal name that you register with your state. There are a couple of stipulations here:
The next step in the process is to name someone to serve as your eCommerce LLC’s Registered Agent. This person is designated to receive business and tax documents on the company’s behalf.
Some states will allow you to serve as your own Registered Agent, but most don’t. Besides, it’s actually advantageous to have an external vendor who keeps up with your paperwork and documentation for you. You can easily Google LLC and Registered Agents in your state; for instance, if you’re in the Golden State, a quick search for the best LLC services in CA can be fruitful.
While it’s not legally necessary to create an Operating Agreement, doing so can be incredibly advantageous for the day-to-day efficiency of your eCommerce LLC.
An Operating Agreement is basically a blueprint for how your company is run. It might detail such information as:
This is strictly an internal document, and it’s not anything you need to file with the state. However, it can provide a lot of clarity about how you want your business to be run.
You do need to file Articles of Organization with your state. This is the legal document that officially establishes your LLC. Different states may require different pieces of information, but usually your Articles of Organization will entail:
When you file your Articles of Organization, you’ll also need to pay a nominal LLC filing fee. The cost varies by state, but usually falls somewhere between $50 and $200.
There are a couple of important banking steps to take.
By following these steps, you’ll be better able to benefit from the personal liability protections offered by the LLC structure.
Finally, keep in mind that you may need a license or a permit to conduct commercial activity in your state. Requirements can vary from state to state, so make sure you seek advice from a business coach, attorney, or simply the local Chamber of Commerce.
While LLCs are famously low on administrative obligations, there are a few things you’ll need to keep on your radar in order to maintain your LLC structure.
To lay the foundation for long-term eCommerce success, choosing the right legal structure is essential. Generally speaking, the LLC structure is optimal, offering the best possible balance of tax and managerial flexibility. Follow these steps to make sure your LLC is properly established, and with any questions, consult with a business coach or attorney.