If you are reading this article, then you have asked yourself the question almost every entrepreneur asks. Do I need an LLC? And if you wish to sell your products or services online, then you might also be wondering, “Do I need an online business license?”.
Well, the short answer is, No, since there’s no legal requirement that you register for an LLC before you can sell your stuff online. And because they are usually consumer goods and services, they don’t require Government approval. Also, the things you sell through most online sales platforms aren’t federally regulated.
However, there are other aspects of doing business that you need to consider. First, as an online business, you’re not only going to interact with those within your state. Your customer base may cover other states within the country and internationally. Secondly, once you start making a profit, the IRS will be interested in your business. So to avoid running into fines, tax penalties, and other problems, you’ll need an LLC.
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Now, let’s see what an LLC is, the reasons you might want to get one, and how you can register for one.
What is a Limited Liability Company (LLC)?
An LLC known as a Limited Liability Company is the registration for small business owners. An LLC license provides the liability protection of a corporation but without the complicated taxation process. A sole business owner, several partners, or businesses can register for an LLC. Generally, anyone who has good legal standing to live and work in the U.S. can form an LLC. Also, as an e-commerce business owner, you might want to register your business as an LLC for the following reasons:
Your online business has gotten off the ground, and you are making a profit from sales.
You want to separate your business from your personal assets and avoid risks.
Having an online business that comprises multiple partners or enterprises.
Yet, not every online business can operate as an LLC. For instance, if your business deals with the banking or insurance sector, registration as an online business LLC will be restricted. Other restrictions may also vary from state to state.
An LLC provides its owners with limited liability, which means that as LLC owner, you are not personally responsible for paying LLC business debts, especially those you have not personally guaranteed. The LLC limits the business’s liability to just the business, thereby protecting your personal assets from claims such as lawsuits against the business.
LLCs can insulate you from personal liability for injuries by your LLC’s business activities, for example, if an employee injures someone isolate you from liability. Yet, if you form an LLC, you remain responsible for your wrongdoing, such as fraud or hurting someone through your negligence.
What an LLC allows you to do
Under an LLC, you will not need to file a separate tax return for your business. Also, with an LLC, you avoid double taxation, which is a complication reserved for corporations. In double taxation, taxes are first paid based on the corporation’s net income, and then the individual is taxed again after the distribution of the revenue. An LLC does not pay any taxes itself. Instead, the profits and losses earned through the LLC business are passed to the owner’s tax returns.
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If you form an LLC to run an online business, it will qualify you for the 20% pass-through deduction. The deduction allows owners of pass-through business entities to deduct up to 20% of their businesses’ net income for income tax purposes. Therefore, if you earn a profit from your online business, a deduction comes to you. Plus, the LLC at the end, makes your online shop seem and sound more official.
Does forming an LLC cost you too much?
LLCs do not cost much. Usually, the cost of forming one differs from state to state but is at an average of $100. Though forming an LLC does not cost much. It can cost you a little more than a sole proprietorship or partnership would. These costs are in the form of extra state taxes such as a franchise tax, and annual renewal fees. Yet, some states also impose special income taxes on LLCs. So, consider your state before you decide if these extra fees are worth the advantages of an LLC.
Is registering an LLC simple
Registering for an LLC is easy and a simple way of managing your online business. The process is quite simple compared to forming a corporation.
Next, we’ll take a look at how you can register your business, get an LLC. But first, if you need some e-commerce marketing tips and how you can go about selling online on sites like Amazon, an excellent place to start is Smartminded. Once the profits start rolling in from your online sells, you need to register your business using these steps:
Choosing an LLC Name
As an individual who wants to register an LLC for an online business, you need to pick a name. The name should be different from your name since the LLC is separate from you as an individual. It also should be a name that no other LLC within your state is already using. You can conduct a name search online to check if your proposed name is already in existence.
Additionally, the name you pick must end with “LLC.” For example, a paper writing service like Online Writer Rating can use “Online Writers Rating LLC.”
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File Your LLC’s Articles of Organization
You will also need to file organization articles with your state or filling office when creating an LLC. States often use the term “articles of organization,” but a few others refer to it as a certificate of formation. The organization’s articles usually contain the LLC name, address, and names of its members. Once your details have been filled on the form, you can file it alongside the filing fee, if any.
You file articles of organization with the appropriate state office. But if your LLC has other members, you also need to create an LLC operating agreement. An operating agreement is essential if there are more than one owners for the LLC. The contract lists the rights, responsibilities, voting power, and percentage of profit and loss of each LLC owner.
Again it varies from state to state where you are to file your articles of organization. For most states, you file your LLC with your state’s Secretary of State. For places like Massachusetts, Virginia, and Pennsylvania, filing is at the Commonwealth’s Secretary since they don’t have a Secretary of State. There are links on the Small Business Administration website where you can get information on filing.
Register a DBA Name
LLCs often operate under their business names. But if you wish to run your company using a name different from its business name, then you’ll have to register a DBA (“doing business as”) name. For example, if my online business has its LLC name as Red Plate LLC, its DBA can be RedPlate.com. Again not every state requires the registration of a DBA name. So you’ll have to check your state requirements on the process to follow if you plan to use a DBA name.
Get a Sale Tax ID
Depending on your state, your e-commerce business must collect sales tax from every state you do business. For example, if writing a service review, Best Writers Online is registered in Texas and provides services to a client in California, they’ll need to collect sales tax and report it to Texas.
Get a Federal Tax ID
Another LLC for online business registration is that you need to apply for an EIN with the IRS. The Employer Identification Number (EIN) is an LLC social security number. It is required if your company has a bank account and staff. Application for an EIN is free on the IRS website. You can likewise apply for your EIN via fax or mail.
Select a Registered Agent
Your LLC is required to have a designated registered agent. Companies often select one of their members to act as a registered agent. Your agent must be a resident of the state where the LLC is created. It can likewise be a corporation authorized to carry our business in the state. The agent’s job is to receive Government correspondence, service of process notices, compliance-related documents, and other legal papers on behalf of the LLC.
Filing an LLC for your side business as a full-time employee
Starting a business while holding down your day job is a great way to test out the waters and earn some side income. The day job becomes a fantastic way of helping your business grow in its early days. However, if you want to file for an LLC for that side business while holding on to your job, it is good to ensure it will not lead to negative consequences.
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It would be best to go back to your job contract to determine your employer’s policy on employees with a side business. For instance, it is a norm that any invention developed by an employee with company resources or while on the job belongs to the employer. So you have to ensure that your side business has no use of such invention.
Conflict of interest occurs when you start a business that puts you in competition with your employer, and many job contracts prohibit employees from such. Your employee may also get worried about your commitment to the company when you start a side business. This worry is valid if you may be using company resources and time to work on your business.
However, these challenges do not affect your ability to file for an LLC for your side business as state laws on LLC formation do not consider your employment status when submitting an application request. So, if your employment contract does not stop you from filing for an LLC for your side business, you can go ahead to do so. However, remember to do it at your own time, and not to the detriment of your job. Clearly separate your side business’s time and resources from your other job.
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How do I get more customers for my LLC business?
After forming an LLC for your online business, you should either continue attracting customers the way you have always done if it has been working, or look for ways to improve. Online advertisements, promotions, and launching a public relations campaign can increase your brand’s awareness and attract new customers. However, most times, what stops one from these active plans is resources. In the absence of unlimited resources, below are ways to generate new sales leads for your online business.
Understand who your existing customers are
Listen to their needs
Find out what value proposition you are offering to the customers
Use the information to form a target audience
Use search engine optimization (SEO), advertising, and affiliate marketing to drive new business to your website
Conclusion
And that’s it! Hopefully, I’ve been able to provide some useful information to your question, “do I need an LLC for my online business?” Although there are no legal requirements that you need an LLC to sell online, however, if you have plans of making a profit, then registration becomes a must. It doesn’t matter if you operate your online store from home or office space.
Manvendra Chaudhary, with over 5 years of professional experience as CEO of Unique News and Megalent Marketing, shares insights on life, business, and health for your success.
Gerber and Perrigo Face New Lawsuit Over ‘Store-Brand’ Infant Formula Pricing; All Pending Toxic Baby Food Cases Consolidated into New Class Action MDL
Infant formula makers Gerber and Perrigo have been hit with a class-action lawsuit, which accuses the companies of artificially creating a shortage and jacking up prices for “store-brand” formula sold at Walmart, Walgreens, and other retailers.
The lawsuit was filed on Monday in federal court in Alexandria, Virginia. It accuses Perrigo of violating antitrust laws by collaborating with Gerber to prevent competitors from entering the market for store-brand formula.
Perrigo, one of the nation’s largest suppliers of store-brand formula, sells its products under retail labels at prices lower than similar branded products. However, the lawsuit alleges that Gerber, by granting Perrigo the first right of refusal to Gerber’s excess formula supply, which could have been sold to other competitors, is engaging in practices that stifle competition.
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The lawsuit claims that through this arrangement, Gerber agreed to keep its excess formula out of the store-brand market, thereby gaining a share of Perrigo’s profits. The lawsuit was filed by four residents of California, Illinois, Michigan, and Pennsylvania, who will represent millions of customers who have purchased store-brand baby formula. The lawsuit does not name formula retailers as defendants. It asks the court to intervene and end the anticompetitive deals between Perrigo and Gerber and seeks more than $5 million in monetary damages.
This lawsuit is similar to another case filed in Brooklyn federal court by a potential store-brand competitor, P&L Development. Gerber and Perrigo requested the dismissal of that case, which was denied by the judge in February. The companies involved in the lawsuit claimed they compete fairly with other infant formula manufacturers, including those of store-brand formulas. The lawsuit also cited the squeezing out of P&L Development from the store-brand market, which has led to higher prices.
Gerber is also facing numerous lawsuits accusing its brands of baby food of containing dangerously high levels of toxic heavy metals, such as lead, arsenic, and mercury. These heavy metals are extremely toxic, even for adults, and can have catastrophic consequences on developing children, leading to health complications and neurological damage. Conditions such as ADHD and autism may be linked to consuming these toxic baby foods.
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On April 11, 2024, all the lawsuits pertaining to toxic baby foods, which had been filed at different times in various courts, were consolidated into a new class action MDL in the Northern District of California and assigned to Judge Jacqueline Scott Corley. Besides Gerber, other baby food manufacturers like Beech-Nut and Campbell Soup Co. have also been named as defendants.
The legal wrangling between the crypto sector and the SEC, or the Securities and Exchange Commission, is getting uglier, with ConsenSys, a major protagonist of the Ethereum Blockchain, filing a lawsuit against the regulatory body in a Texas federal court. This legal action seeks an intervention to ward off a looming SEC lawsuit against the company regarding features of its popular MetaMask wallet. The lawsuit also seeks the court’s help in deciding once and for all the vexed question of whether Ethereum’s digital token, Ether, is not a security. The legal uncertainty hangs heavily on the crypto sector and puts a question mark on its very existence.
In an exhaustive 34-page legal filing, ConsenSys states that the SEC’s endeavor to exert control over Ethereum is both illegal and a threat to blockchain technology.
The complaint states,
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“The SEC’s unlawful seizure of authority over ETH would spell disaster for the Ethereum network, and for ConsenSys. Every holder of ETH, including ConsenSys, would fear violating the securities laws if he or she were to transfer ETH on the network. This would bring the use of the Ethereum blockchain in the United States to a halt, crippling one of the internet’s greatest innovations.”
The lawsuit also alleges that SEC Chairman Gary Gensler has embarked on an aggressive enforcement policy directed at the big players in the crypto sector like Coinbase and Uniswap. The lawsuit particularly points out a campaign that involved a deluge of subpoenas asking firms and developers for documents related to their dealings with the nonprofit Ethereum Foundation, which supports the blockchain’s development.
The crypto sector is up in arms against Gensler’s tactics and has contended that the SEC has never provided clear rules meant for the distinct features of blockchain technology. However, Gensler negates this argument, saying that the existing securities laws are clear and sufficient, and that the crypto industry refuses to comply with them.
Gensler’s actions are full of contradictions since, in the past, the SEC had maintained that blockchain’s tokens, like Bitcoin, are not securities and hence beyond its purview. A senior official in 2018 had stated that Ethereum has reached a state where it is adequately decentralized, and further, the agency also gave the green signal for the launch of Ethereum futures trading—an implicit acknowledgement that Ether is a commodity. However, at present, Gensler is using a recent feature of Ethereum, known as staking, as grounds for the recent legal campaign.
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The lawsuit was filed after the SEC issued a Wells Notice, which is akin to a formal letter warning that the agency intends to sue a firm and could lead to a settlement later. The SEC charged ConsenSys that MetaMask was operating as an unlicensed broker-dealer. MetaMask offered users a means to stake Ethereum on their behalf. Staking was a feature introduced in September 2022 on the Blockchain as a replacement for the energy-intensive mining process. The process involves a system of validators who pledge collateral to become trusted validators.
The SEC objects to the process of staking, which has changed Ethereum from a commodity into a security. ConsenSys founder Joe Lubin has called this account of the SEC “preposterous”.
Lubin said,
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“The act of staking is really just posting a security bond so you can get paid to contribute labor and resources to help operate the Ethereum protocol. Now they’re trying to turn that into some sort of investment contract.”
Lubin also stated that the SEC’s actions will lead to a halt in the growth of the crypto sector and blockchain technology as a whole. Lubin feels that the SEC seeks to block pending applications by companies to launch spot ETFs for Ethereum, following the huge popularity of Bitcoin ETFs. The SEC is in fact trying to regulate a technology on its merits and it will only stifle innovation.
Caterina Fake is a renowned American entrepreneur and co-founder of several groundbreaking ventures, including Flickr and Hunch. Born on June 13, 1969, in Pittsburgh, Pennsylvania, Fake has been a driving force in reshaping the digital landscape through her innovative ideas and entrepreneurial acumen.
From her early days in Pittsburgh to her rise in Silicon Valley, Caterina Fake’s career has been marked by a relentless pursuit of excellence. Co-founding platforms like Flickr and Hunch, she has revolutionized how we connect and share information online. Her visionary leadership and creative brilliance have cemented her status as a trailblazer in the tech industry.
Caterina Fake Net Worth
As of 2024, according to TheRichest, Caterina Fake’s net worth stands at an impressive $25 million. Her entrepreneurial ventures, including Flickr and Hunch, have contributed significantly to her financial success. With a keen eye for emerging trends and a knack for innovation, Fake continues to inspire aspiring entrepreneurs around the world.
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Caterina Fake Age
Currently 54 years old, Caterina Fake was born on June 13, 1969. Despite her age, she remains a dynamic force in the business world, constantly pushing the boundaries of what’s possible in technology and entrepreneurship.
Caterina Fake Family: Husband and Children
Caterina Fake was previously married to Stewart Butterfield, with whom she co-founded Flickr. They tied the knot in 2001 but announced their split in 2007. They share one child, Mint Butterfield, who has recently been reported missing. Caterina Fake is currently in a relationship with Jaiku co-founder Jyri Engeström.
Caterina Fake Height and Weight
While specific details about Caterina Fake’s height and weight are not readily available, her stature in the tech industry is undeniable. Standing tall as a visionary leader and innovator, Fake’s impact transcends physical measurements, leaving an enduring legacy in the digital sphere.
