Do You Need an LLC to Sell on Amazon

If you’re considering selling on Amazon — or have already started your e-commerce journey — you’ve probably wondered at some point whether forming an LLC is necessary for your business.

Amazon does not obligate sellers to form an LLC before they can start selling on their platform. However, due to the various different benefits this business entity structure can provide, it’s worth weighing up whether it makes sense for your situation.

In this Do You Need an LLC to Sell on Amazon guide, we’ll examine the key factors to evaluate when making this decision, as well as the other key considerations to think about when getting started.

Do Amazon Sellers Need an LLC

The short answer to this question is no — you don’t need an LLC to start selling on Amazon.

While Amazon will ask you for certain pieces of information regarding your “business” as you complete the seller registration process, they also give you the option to indicate that you’re not operating as one by choosing the selection reading “None, I am an individual”. 

In fact, the vast majority of Amazon sellers actually start out this way as a sole proprietorship, which simply means that they run their business as individuals without registering a separate legal entity.

This is largely due to this setup’s simplicity and lack of upfront costs, as well as the fact that it provides a great way to “dip your toes” into the world of selling on Amazon before deciding whether or not it’s right for you.

With that being said, while you won’t need an LLC in order to get started, it can offer significant benefits depending on your circumstances — including your business’s size, risk exposure, and long-term goals.

Is An LLC Right For Your Situation?

For the most part, the general advice regarding LLCs for Amazon sellers is that they’re typically unnecessary if you’re just starting out, or only plan to run a smaller-scale operation, since their benefits are often outweighed by the cost and inconvenience of setting one up.

However, if you’re more serious about this gig, will be selling higher-risk products, or have started to generate more significant revenue, you’ll likely want to consider forming an LLC to protect your growing business.

Outside of the standard LLC benefits applicable to business owners in any scenario, there are typically two key motivations for an Amazon seller to form an LLC, including:

• Greater protection against product liability risks
• Enhanced business credibility and supplier opportunities

In the sections below, we’ve explored these key motivations in more detail to help you determine whether or not it’s the right move for you as well.

Product Liability Protection

As an Amazon seller, you’re legally responsible for any harm your products might cause to customers.

Given this risk, many sellers choose to form an LLC in order to protect themselves from potential product liability claims, especially since they often deal with physical products that can’t be personally inspected to guarantee quality and safety for a number of reasons, including:

• When using Fulfillment by Amazon (FBA), products often ship straight from your supplier to Amazon’s warehouses, so you never get to see them yourself
• As your business grows, checking every single item becomes too time-consuming to be practical
• Products are often shipped directly from overseas manufacturers as this saves money and time compared to receiving and inspecting them yourself first
• When suppliers require you to order in bulk (i.e., 1000+ units at a time), it’s just not practical to check each item

If you were operating as a sole proprietorship and a customer filed a claim against you over a defective or dangerous product, your personal savings, home, and other assets could be at risk — whether or not you’re actually at fault. 

For this reason, LLCs are so attractive to Amazon sellers as they create a crucial barrier between your personal and business assets, limiting any product liability — or any other types of claims you might face — to your business assets alone. 

While they don’t provide full protection against all possible claims, an LLC structure does create a significant legal barrier, which can prove invaluable if your Amazon business faces product liability issues.

Business Credibility and Supplier Relationships

Many bigger Amazon sellers consider forming an LLC to help build credibility for their business and appear more professional — something which is particularly relevant when dealing with manufacturers and suppliers, as they often prefer working with formally established businesses rather than individuals.

While by no means a requirement, having an LLC will make the process of working with established brands and distributors significantly smoother as it will allow you to:

1. Establish business credit separate from your personal credit, making it easier to meet payment terms for larger orders
2. Open up a business bank account and set up trade references, which many distributors require as part of their vetting process

With that being said, while an LLC may be helpful for securing better supplier relationships and wholesale opportunities, if your only motivation for forming one is to appear more professional in the eyes of your customers, taking this step likely won’t be worth it.

Instead, you should consider looking into using a Doing Business As (DBA) name — which we’ve discussed in more detail in the “Other Key Considerations” section below.

Note: If you’re still stuck on the decision between remaining unincorporated or forming an LLC for your Amazon selling business, be sure to check out our Sole Proprietorship vs LLC article.

How to Form an LLC

If you’ve determined that setting up an LLC is the right choice for your Amazon business, there are two main ways you can go about doing this:

1. Use a professional LLC formation service to handle the process for you
2. Follow our step-by-step guides on how to form an LLC on your own

If you’d prefer to do this by yourself, select your state from the list below to find the specific formation requirements and filing instructions you’ll need to follow.

Select Your State

• Alabama LLC
• Alaska LLC
• Arizona LLC
• Arkansas LLC
• California LLC
• Colorado LLC
• Connecticut LLC
• Delaware LLC
• Florida LLC
• Georgia LLC
• Hawaii LLC
• Idaho LLC
• Illinois LLC
• Indiana LLC
• Iowa LLC
• Kansas LLC
• Kentucky LLC
• Louisiana LLC
• Maine LLC
• Maryland LLC
• Massachusetts LLC
• Michigan LLC
• Minnesota LLC
• Mississippi LLC
• Missouri LLC
• Montana LLC
• Nebraska LLC
• Nevada LLC
• New Hampshire LLC
• New Jersey LLC
• New Mexico LLC
• New York LLC
• North Carolina LLC
• North Dakota LLC
• Ohio LLC
• Oklahoma LLC
• Oregon LLC
• Pennsylvania LLC
• Rhode Island LLC
• South Carolina LLC
• South Dakota LLC
• Tennessee LLC
• Texas LLC
• Utah LLC
• Vermont LLC
• Virginia LLC
• Washington LLC
• Washington D.C. LLC
• West Virginia LLC
• Wisconsin LLC
• Wyoming LLC

Note: For the vast majority of new business owners, the best state to form an LLC will be the one where you live and plan to conduct your business.

Other Key Considerations

Whether or not you should establish an LLC for your Amazon selling business isn’t the only consideration you’ll need to weigh up when starting out; we’ve broken down the others in more depth below.

Do I Need a Business License to Sell on Amazon

While Amazon itself doesn’t require you to hold a business license when you create your seller account, this doesn’t automatically mean to say that you can start selling without one.

In fact, whether or not you’ll need a business license before you can start selling on Amazon is dictated almost entirely by your location and the business model you plan to adopt.

For example, as a private label seller or someone doing retail arbitrage, you typically won’t need a specific business license just to sell on Amazon.

However, if you’re planning to source products directly from brands and distributors to resell on Amazon as a wholesale seller, you’ll likely need one, as most legitimate suppliers will require this documentation before allowing you to open a wholesale account with them.

Similarly, it’s not uncommon for state and local governments to impose a requirement for online businesses to obtain licenses before they begin selling — so be sure to check the regulations in your jurisdiction proactively. 

Do I Need to Collect Sales Tax 

Generally speaking, you won’t need to collect sales tax as long as you’ll be selling exclusively on Amazon and/or other qualifying online marketplaces. 

This is because Amazon operates under a marketplace facilitator system, where it automatically collects and remits sales tax on behalf of sellers where required in all states that impose sales taxes — which is the case regardless of whether you’re running a print-demand, dropshipping, or self-manufacturing model. 

Even though Amazon will handle your sales taxes for you, you may still be expected to obtain a Seller’s Permit and file a tax return in your home state, as well as any others in which you’ve established a sales tax “nexus” — though it’s worth noting that this is highly state-dependant.

Be aware that, even if you’re required to submit these returns, you won’t owe any sales taxes when doing so as they’re purely for reporting purposes.

Note: If you’ll be selling your products and/or services outside of Amazon, it may be a good idea to obtain a reseller’s permit in order to avoid paying sales tax (depending on your state).

Do I Need Business Insurance 

While there’s no requirement to be insured before you start selling, certain insurance requirements will apply to all Amazon sellers once they begin to reach certain thresholds.

In particular, once your monthly gross sales exceed $10,000, you’ll have 30 days to obtain adequate commercial liability insurance according to Section 9 of Amazon Services Business Solutions Agreement.

The type of insurance can be commercial general, umbrella, or excess liability coverage, as long as it protects against liabilities related to your business operations, including product-related incidents and bodily injury claims.

In order to qualify for the purposes of these requirements, your insurance policy must:

• Include a minimum coverage of $1 million per occurrence and in aggregate
• Have a maximum deductible of $10,000
• Provide coverage for all products listed in your Amazon store
• Name “Amazon.com Services LLC and its affiliates and assignees” as additional insureds
• Be provided by an insurer with specific financial ratings
• Give Amazon 30 days’ notice of any policy changes

If this requirement applies to you, we recommend searching for a policy using the Amazon Insurance Accelerator, as it provides a network of pre-vetted insurance providers. 

That being said, you’re under no requirements to choose from here, as any policies from other insurance providers that meet the requirements listed above will suffice.

Do I Need to Register a Business Name

Since Amazon doesn’t require sellers to set up an LLC in order to be able to use its platform, you also won’t be required to register a business name to start selling.

With that being said, if you’re operating your selling business as a sole proprietorship, you may be interested in registering what’s known as a “Doing Business As” name (DBA name) if you want to give yourself a more marketable business identity for the Amazon store.

This is because, by default, sole proprietors will operate under their personal legal name, but with a DBA, you’d be able to officially conduct all business activities under a more brand-friendly name of your choosing.

Keep in mind that registering a business name doesn’t provide the same legal protections as forming an LLC — it simply gives you the legal right to operate under that name. If you decide to form an LLC later on, you’ll also need to register a new legal name for it as well as re-register the DBA for your LLC.

It’s also important to note that you can’t just take any name you want as a DBA — you’ll first need to check it’s actually available through your state’s business registry before filing the appropriate paperwork and paying the relevant fee.

Note: Since the filing fees for DBAs and LLCs are generally quite similar in a lot of states, opting to form an LLC will likely make more sense for you given the extra liability protection it provides.

Do You Need an LLC to Sell on Amazon FAQs