Becoming a seller on Amazon has some major benefits. For starters, it’s a platform with practically zero barriers to entry. It’s accessible to nearly everyone with internet and inventory to sell. It gives you the power to create cash flow from the comfort of home. And one of the best parts? Amazon is a trusted and known name, making it easier to reach customers fast. Each month, more than 197 million people around the world get everything from everyday products to niche devices from Amazon.

Here’s the thing though: Once you launch your Amazon seller account, upload your products, and start bringing in your first sales, what happens next? That’s where things start to get a little murky for a lot of sellers. How do you protect the business you worked so hard to build? Should you be worried about any legal problems? How will you manage your finances? And how will you handle all of these things come tax season? It all just seems too easy.

That leads a lot of new sellers to an even bigger question: What kind of requirements do you need to meet to truly see long-term success as an Amazon seller?

The answer? There aren’t as many as you think. But there are still a lot of things you should do to protect your business and your personal assets as your Amazon business takes off.

Do I Need to Form an LLC to Continue Selling on Amazon?

Forming an LLC for your Amazon business isn’t required—but it’s definitely recommended.

LLCs can be the best type of business entity for a small business owner like an Amazon Seller. They’re simple and inexpensive to set up, easy to run, and often the top business entity type chosen by solo entrepreneurs and small businesses. Why? Because LLCs take the main advantages of larger businesses and corporations but strip away many of the expensive rules, regulations, and legal compliance needed with other types of business structures.

What Are The Advantages Of Setting Up An LLC As An Amazon Seller?

It’ll boost trust and credibility

Adding an LLC to your business introduces a layer of trust for customers, as they’re more likely to buy from an established company. It also tells potential customers that you’re serious about the products you’re selling—so much so that you took the time to form an official business entity.

It’ll help you protect your assets

If your business is a sole proprietorship or a partnership, you and your business are legally the same “person.” That means your business debts are also your personal debts. And if, for whatever reason, your business is accused of negligence, your personal assets might be at risk.

Forming an LLC makes your business a “separate legal entity.” That means your business’ assets and your personal assets are distinct from each other. Any liabilities your Amazon seller business has (debts and obligations, for example) belong to it alone, and they won’t affect your personal assets (like your car, home or personal bank accounts).

It’ll give you more options come tax season

As an LLC as opposed to a sole proprietor, you are likely able to take advantage of some tax breaks not available to unincorporated entities. By keeping your personal and professional books separated with an LLC, it also decreases the likelihood that the IRS may want to challenge some of the business deductions claimed and paid for by your LLC.

The LLC also offers some advantages of a corporation or sometimes referred to as a C-Corp. The Internal Revenue Service automatically classifies LLCs as either partnerships or sole proprietorships, depending on whether they have one owner or more than one owner. This means that LLCs can always take advantage of “pass-through” taxation and won’t have to pay any corporate taxes. Instead, your business’ income and expenses pass through your personal tax returns, and you’ll pay personal income tax on any profits. This is generally known as avoiding the “double tax” problem associated with corporations.

The best corporate and tax structure depends on your particular situation so you may want to consult with a professional to determine what’s right for you. Conventional wisdom, however, says that LLCs give you the most flexibility for a small business.

It gives you management flexibility

An LLC can opt to be managed by its members, which allows all owners to share in the business’ day-to-day decision-making, or by managers, who can be either members or outsiders. This is especially helpful if you’re not totally experienced in running a business and want to hire people who are.

How Do You Set Up An LLC?

Choose a business name

First, you’ll want to conduct a business entity name search in your state to make sure the one you’ve chosen is good to go. You’ll also want to make sure your business name complies with state regulations in regard to LLC names. Generally, this means that “LLC” or “limited liability company” must appear in your formal business name registered with the state.

Choose a registered agent

Almost every state requires its LLCs to name a registered agent (also sometimes called a statutory agent). A registered agent is a person who agrees to receive lawsuits, subpoenas and other official documents on behalf of the LLC.

Fill out and file the Articles of Incorporation

This document helps outline the basics of your LLC. The information requested will be simple and basic, such as your LLC’s name, address, registered agent, years in operation, and sometimes the purpose of forming your LLC. You can easily start the filing process online so you can get your LLC up and running in no time.

What Other Requirements Do Amazon Sellers Need To Be Mindful Of?

Do you need a business license?

You don’t need a business license to sell products online, including Amazon. This is because most products that are being sold on Amazon are not Federally regulated. In general, most products sold online are consumer products that don’t require the government’s approval—so you don’t have to worry.

Do you need a seller’s permit to sell on Amazon?

You just might need one. Most states require anyone selling products to consumers to have a seller’s permit because this is the procedure used by states to collect sales taxes from sellers and retailers. Because Amazon may technically be the retailer responsible for sales tax collection—and the sales tax landscape is evolving in light of recent Supreme Court decisions— you may want to consult with a professional as to whether you need one or not.

To be on the safe side, it is better to have one. Not having a seller’s permit not only makes you liable for the taxes you failed to collect but for penalties and interest, too. Speaking of taxes, check out this article from BigCommerce to learn more about Amazon’s sales tax requirements.

It’s easy to feel overwhelmed by all of the things you have to do to get started.  But the truth is, taking care of a few basics on the front end will help to protect your business in the long run. If you still have questions about Amazon’s requirements for sellers, they have a handy website that outlines everything you need to know to get started.