What is an LLC?
This company type provides personal liability protection to business owners by separating the entity from the individual's ownership.
LLC stands for limited liability company.
Compared with a sole proprietorship, an LLC's structure and efficiency combine those of a corporation with the tax and liability benefits of a sole proprietorship.
What is The Difference Between Sole Proprietorships Vs. LLC?
For sole proprietorships versus LLCs, sole proprietorships have an advantage over other business structures in terms of tax filing – owners claim business taxes on their personal tax return, and income is only taxed once.
Having a sole proprietorship has the drawback that, since the business and its owner are technically the same entity, owners are 100% responsible for any liabilities or lawsuits incurred by the business.
Do I Need A Business License To Sell On Shopify?
Do you need an LLC for Shopify? No.
There is no requirement for having a business license to sell on Shopify.
However, there are certain circumstances where a license is essential.
For example, you might need one if the country/city/state or type of your business requires one.
Keep in mind that licenses are issued at the local, county, or state level.
Thus, even when Shopify does not require business licenses from its merchants, your country/city may.
Therefore we can say that Shopify stores can be run as sole proprietorships or LLCs. Although you might want to form an LLC or a corporation, it isn't required.
To set up all legal details of your Shopify store, you typically only need your social security number or tax identification number (TIN).
You can obtain more information about self-employment taxation by reading IRS guidance or contacting your local government agency.
How To Run Your Shopify Business As A Sole Proprietor?
It might be wise for you to register a business name or a DBA (doing business as) if you want to run your business as a sole proprietor.
You'll probably not run it under your own name, so choose a name for it.
Doing so is legal only if you obtain a DBA.
This isn't necessary if the name of the business combines your name with the service you offer, such as John Doe's Meats.
Important Note: In your state, is it mandatory for businesses to obtain a license? If yes, then you'll be required to obtain one before you can begin selling products or services.
How To Get A Business License?
As a part of the application process for a business license, you will need to obtain your EIN to streamline the process.
This will separate your business from you, the owner. A federal business license is necessary for certain industries, as well as any license required by local authorities.
In addition to your federal license, you will need to contact your state and municipality to find out what steps you should take for your state license.
For instance for WA State Licensing you can check their website.
If you are outside the U.S, you have to check your own country’s websites for licensing.
In general, each location has its own process and requirements. Usually you need to collect information about yourself and your business.
You will also have to pay any fees, fill out any forms, obtain permits, and submit it all to the appropriate individuals.
What is EIN?
You can distinguish your business identity and your personal identity by using your employer identification number (EIN).
A company's social security number (SSN) is a unique combination of digits that is used by the government to identify your LLC.
Who Needs A Business License?
There is no requirement that every business obtain a license.
A business license and permit are often required for regulated industries like food and beverage, CBD, health and wellness, or personal services.
Do I Need An EIN For Dropshipping on Shopify?
In the early stages of dropshipping, an Employer Identification Number (EIN) is not required, but it becomes necessary later for tax purposes.
EINs are needed for many tasks, including paying federal taxes online, preparing and submitting tax returns, and distributing payroll and tax documents.
Can I Start Dropshipping Without an LLC?
Business Licenses are necessary for dropshipping businesses, eventually. Most cities require business licenses yet this requirement may differ from state to state for dropshipping businesses.
Please review your local regulations to determine if you need an LLC for dropshipping on Shopify.
How Much Does It Cost To Have A Business License?
If you need a federal business license, you would need to pay fees depending on the type of business.
There are also state licenses and permit fees; they also vary depending on the state you are in. If you don’t have a federal business license you don’t need to pay fees to federal agencies.
For more information about the fees consult your state agencies.
Important Facts To Set Up A Legal Business On Shopify
- Registering a business and applying for an EIN is not required if you’re a small or medium-sized business.
- You can run your Shopify store as a sole proprietor and use your SSN (social security number) or SIN (social insurance number) for tax purposes.
- The federal government does not require business licenses for all types of businesses. Instead, it only requires them for businesses operating in certain industries. States that have their own set of requirements and steps to obtain a license.
Important Note: This guide is prepared mainly for the U.S Laws & restrictions. Each country & city has different rules and regulations. Please do your own research & take necessary steps based on your research.
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