Strategic Growth: 6 Ways to Expand Your E-commerce Business Through LLC Formation

Strategic Growth: 6 Ways to Expand Your E-commerce Business Through LLC Formation

What are the key elements for a successful e-commerce business? Selecting the right product is key. And of course, you’ll need a website that delivers a positive UX, consistent performance, and online shopping security.

An element you may not think of, at least initially, is business structure. The legal classification you choose for your e-commerce business can actually have a significant impact on your ability to grow. And while there’s not necessarily one single answer here, most e-commerce businesses fare best with LLC status.

So what are the keys to using the LLC to expand your e-commerce business? 

LLCs Explained

First things first: What even is an LLC?

The LLC, or Limited Liability Company, is one of the most popular business structures in the country. It’s proven especially popular among digital entrepreneurs and e-commerce merchants, for reasons we’ll see in just a moment.

Basically, the LLC allows you to establish your company as its own unique entity, distinct from you. In other words, when you register your e-commerce company as an LLC, you can keep personal assets and liabilities in one pot, and business assets and liabilities in another.

This allows you to have some personal wealth protection: If someone brings a lawsuit against you, your personal or family assets are kept safe and secure. And that’s just one reason why LLCs are popular among digital entrepreneurs. Some other benefits include:

  • The ability to choose between pass-through or corporate taxation.
  • Plenty of flexibility with regard to how you manage the business day-to-day.
  • Relatively light regulatory burdens.
  • Minimal filing fees each year, especially compared with incorporation.

But how do you use the LLC structure to its full potential? Consider a few basic tips for e-commerce sellers.

Using an LLC to Grow Your E-Commerce Business

1) Take advantage of the added credibility.

Not just anyone can create an LLC. There’s a full legal process involved. The stipulations can change by state (so, the requirements to form an LLC in Texas differ from the requirements in Florida or New York), but regardless of where you are, registering as an LLC proves that you’re running a “real” business… not a side hustle or a hobby.

Use that to your advantage. Include language on your website denoting that your store is registered as an LLC, and maintains an active credential with your state government. This provides the kind of credibility that can make it easier for new shoppers to trust you.

2) Choose the most advantageous tax option.

Naturally, e-commerce sellers have no choice but to pay all relevant taxes. However, there may be some wiggle-room as to how they pay those taxes.

When you register as an LLC, you can determine whether you want to declare profits and losses on your personal tax return, or else pay at the corporate rate. You can make this decision with your accountant or a financial planner, and use any tax savings to invest in inventory, marketing assets, or other collateral that can help your business grow.

3) Embrace a flexible management structure.

Another way to leverage the benefits of the LLC is to choose the management structure most beneficial to your e-commerce empire.

Corporations have tight requirements about how the business can be run, but LLCs allow you to choose the arrangement best-suited to your needs. For example, you can opt to run all the behind-the-scenes stuff yourself, or you can enlist partners. For e-commerce companies, it’s important to note that you can also bring in third parties to help with management and logistics, including print on demand partners.

4) Seek investors or other outside funding.

To grow your e-commerce business, you’ll eventually need an infusion of capital. This is another arena where having an LLC format makes your life far easier.

Again, registering as an LLC provides your business with added credibility. It conveys your professionalism and your seriousness. As such, it’s easier to earn the favor of potential investors. And, LLCs can qualify for a broader range of business loans and lines of credit than Sole Proprietorships can.

The bottom line: By registering your e-commerce business as an LLC, you open up plenty of options to fund a website revamp, a huge order of inventory, or whatever else you need for your business to grow.

5) Confidently invest in yourself.

Another important point to make about the LLC designation: Not only does it allow you to court outside investors, but it also allows you to invest more heavily in yourself.

A lot of entrepreneurs are worried about putting too much money into their business, concerned that they could lose everything to a lawsuit or an aggressive creditor. But with an LLC, you can keep more money safe and secure for personal or family use, allowing you to feel confident that, even if your e-commerce business experiences a rough patch, you won’t be suddenly bankrupt.

6) Enjoy the administrative ease of the LLC.

One more thing that’s worth mentioning: There’s very little required of LLCs in terms of ongoing regulatory compliance. Basically, you just need to file documents to re-register each year, and keep the state in-the-know about your Registered Agent.

Compared with Corporations, LLCs have relatively lax obligations to the state. That frees a lot of extra time to focus on growing your business, improving your website, fine-tuning your UX, and strategically marketing your products.

Use the LLC Format to Fuel Business Growth

As you seek to grow your e-commerce business, one of the best tools in your toolbox is the LLC format. Follow these tips to register as an LLC, then use that designation to help your business grow.

Author Bio

Amanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing.

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