Why Ecommerce Businesses Should Consider Forming an LLC

In 2018, ecommerce sales accounted for 11.9 percent of all retail sales worldwide — and by 2021, ecommerce sales are expected to reach 17.5 percent of worldwide retail sales, according to Statista. Ecommerce is only continuing to grow, and the power of having an online presence is difficult to ignore.

As entrepreneurs develop or adapt their businesses with the demand for ecommerce in mind, uncharted territory will be crossed. Small business owners will have to develop a game plan for how to tackle the world of ecommerce and answer critical questions for their business.

If you're building a new ecommerce business, one of the most important questions you need to address when launching your online presence is whether you should consider forming a limited liability company (LLC).

Some business owners will form an LLC as their first step, while others will start an ecommerce business to sell products or services, and then form an LLC when they begin making money. So what’s the right answer here?

LLC Protection For Your Online Business

While it’s ultimately up to every small business owner to decide what’s best for their company, it's also important to understand the protection an LLC can provide your online business. An LLC is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation, giving the best of both worlds to business owners. This means that if you choose to form an LLC, your business will become its own legal entity that has separate debts and legal obligations from you as an individual.

If you don't plan on raising investment money for your business but want asset protection, flexible business management and simple taxes, then an LLC is likely the best choice for your business. An LLC can provide the same limited liability protection as a corporation, but without many of the regulatory complexities and legal formalities associated with them.

Altogether, this makes an LLC a great option for small business owners who are selling their goods and services online. Especially as online shopping for goods and services continues to increase, protecting your business from the known (and unknown) risks that may be associated with online retail is critical.

Some small business owners believe that forming an LLC will be time-consuming and costly — adding even more difficulty to an already stressful business launch. But the reality is that with an online incorporation and filing service like Incfile, you can easily and inexpensively form your LLC for as little as $49 + state fees. This is such a small cost relative to the huge protection you get when you form your LLC and know you have some security in case any unfortunate legal matters arise.

Outside of the legal protection and peace of mind you'll get when forming an LLC, your online customers will consider your business as more reputable than those that don't have a formal legal entity. In the world of ecommerce, this is a distinct advantage.

As a small online business owner who's dipping their toe into the murky and crowded ecommerce pool, you should definitely consider establishing an LLC to give yourself some legal security while building extra credibility with consumers. Not sure where to get started. Incfile is able to eliminate the burden of preparing and filing for an LLC and provide assistance throughout the process!

Have you been thinking of turning your small business into an LLC? Share your experience in the comments!