Ecommerce Corporate Business Structures
Business incorporation offers benefits when it comes to taxes, managing capital, and business planning. Find out which structure is right for you.
How to build efficient eCommerce teams
Success in eCommerce does NOT require you to do everything exactly as I do it. In fact, it will almost certainly NOT work if you do so. You must understand what makes my experience different from everyone else’s, and most importantly, you must find a system that works for you. All the best copywriters do, in fact, share certain common traits. They are not all “born with a silver spoon in their mouths.
Once you understand the basic concepts of project management, you will never be confused about what to do again. You will know what to do in every situation. You will be able to clearly see the path to success and be able to clearly define milestones along that path.
The seven different types of business structures for online stores were created based on wide experience of retail businesses. You must choose one of the three primary influencers of your business and then, make sure it's the one that most closely reflects your personality and strengths. This will maximize your ability to achieve success quickly.
This guide is part of the build an ecommerce brand track.
The biggest advantage of using an online store instead of a physical store is that it is possible to have complete control over your inventory. With a physical store, you are limited to what items you keep in stock at any given time.
Brick and Click – eCommerce website and a bricks and mortar store
When a customer places an order on the website, the customer receives an email with a link to a secure PDF document containing detailed, easy-to-understand information about the product, including shipping details and special offers.
Hybrid - Using a combination of both a website and an outside sales channel like Amazons, ebay's or their own brick and mortar stores C: Underground - Only using an outside sales channel like Amazons, ebay's or their own brick and mortar stores D:
A great niche piggyback partnership is one where the products are very similar, and the partners have a lot in common. They might share the same values, the same goals, the same dreams, and they often will have similar or complementary personalities. They both believe strongly in what they are selling, and they both have something to say about it. There are countless ways to use this secret weapon. Maybe you're an artist looking for an alternative means of selling your art. Maybe you have a hotel or restaurant you want to attract more customers. Maybe you're a musician looking for new ways to promote your music.
Multi-channel is much more complex and difficult to achieve and run than single-channel. That's why most marketers only achieve single-channel success. They're so focused on that one single goal that they neglect everything else needed to make a campaign work. Bravissimo (pronounced "Bravo Sissomomo"), Crew Clothing (pronounced "Crow Shoot"), Next)
If your eCommerce business is to be successful it needs to be one of these seven structures. It doesn’t matter if your current structure is perfect for your needs. No matter what structure your eCommerce business is in, this checklist will help you examine and improve it. This is the most comprehensive guide I’ve seen to creating an Amazon business from scratch. It covers everything from selecting a product idea, creating the website and getting found online, to managing your customer list, increasing your sales volume and much more.
Types of Businesses: Which Legal Structure Is Right for Your New Venture?
If you have the courage to start your own business, you will discover it to be both a challenging and rewarding experience. But once you've got all that set up, there are a few other important (but often tedious) things you should do to keep your business moving in the right direction. One of these is making sure you are keeping accurate and detailed records of everything your business does.
Of course not! Legit only comes from customers saying they’ve been satisfied with your work. Otherwise, you might as well not even have a website. Sadly, "something going wrong" is all too common these days. And, if your business attorney or CPA is not well versed in online issues... You Can End Up Financially Beached!
Incorporation is the bedrock on which your business is built. It’s also the least glamorous and most overlooked aspect of doing business in the United States. Incorporation means that your business will have its own unique identity separate from you personally. It provides protection for you and your business in case of lawsuit, protects your business from creditors, and makes it possible for you to raise investment capital. To make sure this message gets through, let's find out what this means, why you should do it, and how to get started.
If you are a sole proprietor, you are personally liable for any debts your business may incur. This is called “being personally liable” or “being personally responsible” for a debt.
There are three primary types of business structures: sole proprietorship, partnership and corporation. C: In addition, there are two more types of entities that are sometimes used in forming a business:
There are three main choices available to you when you are setting up a business. You can set up the business as an individual ("Sole Proprietor"), a partnership or a corporation.
Incorporation Date C: Name of Corporation D: Year Corporation Was Incorporated E: Address of Corporation F: City of Corporation G:
There are several ways to take the next step with Shopify. Let me give you three to start with...
Why your business structure matters
A business structure is important. It affects your tax burden, your cash flow, how you get and use money, and a hundred other factors. Don’t put off studying up on this vital subject. If you don’t know what business structure is best for you, it may be too late once you start operating.
Incorporating your business will boost your profits in many ways, the two most important being…
It's a "must-read" for anyone who wants to improve his or her personal finances.
One less thing to worry about C: Autoship (you choose how often to receive the product, we’ll automatically ship it to you every month) D
No more double taxation C: More potential for capital gains D: Ability to hire and fire employees E: Reduced employee benefits costs F:
It’s much easier to get small business funding when your personal and professional biographies give a clear and accurate picture of who you are and what you have already accomplished.
Credit rating of a business will not reflect the creditworthiness of an owner, even if the owner has a perfect credit rating
Better to create retirement plans that are simple to create
There are many types of businesses in which different structures may be used to reduce personal liability, own the company completely, pay lower taxes, or to raise financing. This topic is very complex and outside the scope of this book. However, if you are interested, you should discuss this with an attorney and/or an accountant.
Types of business structures
No matter what kind of business you're in, certain types of business structures are better-suited for different types of companies. Therefore, it's important to understand the differences among the four most common forms of business entities... Sole Proprietorships, General Partnerships, Limited Liability Companies (LLCs) and Corporations. After selecting the business structure that's right for you and your company, you'll also need to decide whether you want to keep your current accountant or use an outside one. This is an important decision that should be made as soon as possible after your selection of a business structure. Why? Because it will affect how quickly (and how much) your taxes will be filed and processed.
An S-Corp is a corporation that has only one shareholder, usually a natural person like an individual or a trust. Shareholders elect one or more directors who oversee the operation of the company. The simplest business structure is the sole proprietorship. It's the most straightforward to set up and run, and it's also the most straightforward to do business with.
You can start an ecommerce business with very little money and a very low risk of liability using a sole proprietorship. This is especially true if you do most of the selling yourself. One of the best ways to get your ecommerce business going is to form an S corporation. It’s the fastest and easiest way to get your business going, and also allows you to take advantage of all the benefits (such as loss of income / social security / Medicare / and other tax benefits) of a partnership.
If you have a sole proprietorship you are not an employee, and therefore, not subject to the employment laws which apply to employees. This type of business is extremely common in the United States. In fact, it’s so common that there are entire websites and books dedicated to helping people start these types of businesses. Among small business owners, about 40% report having a non-employer business as their main source of income, while 60% use it as a supplementary source.
Advantages of sole proprietorship:
Higher taxes. A: Simplified tax code. B: Complicated tax code. A: Less government regulation. B: An S-Corp. is the most common type of corporation for small business owners. It offers many of the same benefits of a partnership (no double taxation) but it's also easy to administer and very flexible. Plus, it allows you to pay yourself a salary. The owner of the company isn’t obligated to pay taxes. Therefore, he doesn’t file a tax return for the company.
No one else will have control over your business but you. There is no risk for your partners or investors. All they have to do is send you the money and you make the decisions. It’s 100% on you. It’s easy to get confused because there are so many different kinds of businesses out there.
You can change the structure of this sentence in the future if you want to. There are several options for structuring a business, depending on your needs and goals. If you start out as a sole proprietorship, you’re not stuck with that company structure. You can change the type of business you have at any time, if you ever decide you want to do something else.
This is the amount of money you would have to pay if anything bad happened to you or to your business while you were traveling. In the United States, taxes must be filed by an individual or a corporation. Sole proprietorships are taxed as individuals, partnerships are taxed as individuals, and C corporations are taxed as corporations. If you have $1,000,000 in sales, that’s only 50 orders. Of course, if you’re using 1-800 numbers, that means you could conceivably take on 5,000 times $1,000,000 in liability. Your money and your investments are at stake.
A “Partnership” is two or more businesses that have come together because they have something in common. They might have something very important in common such as an expertise or service that one of the businesses lacks. Each of these owners or partners contributes to the business in some way. For example, one may provide funding, another may bring expertise in marketing, and so on. All three of them own a percentage of the company. This gives them significant control over the direction of the company. It's a wonderful arrangement for all involved.
There are two types of partnerships: 1. One where both parties bring something to the table... and...
Limited partnership (LP). C: Limited liability company (LLC). D: Corporation. E: S-Corp. F: Partnership. In a general partnership, each partner owns a specific percentage of the business and those percentages have been recorded and agreed to by the partners.
Limited liability company (LLC). A limited partnership allows you to limit both your control and your liability to a specified partner or partners. This can be very useful if you don’t have the time or inclination to personally oversee every aspect of your business.
A partnership follows a "pass-through" taxation model. In other words, when you (as an individual) file your taxes, your profit / loss from the business is passed through to you as individual tax returns. This means the owners are taxed on their personal income rather than the business. This is an excellent point. It’s important to realize that in a partnership, each partner bears the responsibility for paying their own taxes. Therefore, it is vital to keep your personal and business finances separate and distinct.
Advantages of partnerships:
No matter how much money you make, there will always be more to come. And the amount of your net worth does not determine how much you will be able to earn in the future. There’s an old saw about “two heads are better than one”—and it definitely applies to a partnership. Share the burden. You don't have to do this alone. If you've got a competent and trustworthy partner, share the burden with them. In most cases, this will grant you access to much more capital than the standard $50,000 limit.
Easy to understand and easy to use. It’s relatively easy to set up an official partnership. As far as ongoing management is concerned, a sole proprietorship offers the least amount of hassle than any other form of business entity.
Disadvantages of partnerships:
There are numerous different types of conflicts that can occur between two people in a business partnership or marriage. These include competition, cooperation, jealousy, revenge, and so on. Most partnerships don’t have all parties agree 100% on everything. There will be decisions that one party (the leader) makes and then later the other party (the follower) may feel like their voice wasn’t heard or considered. A lot of companies "settle" rather than fight, but in the long run this can cause problems for the company, as owners and staff become emotionally drained from the constant conflict. It’s important to keep each other honest and make sure both of you are on the same page about what this agreement is all about.
Who would have guessed? Owners of C corporations assume far less personal risk than do partners in S corporations or sole proprietors. Therefore, if your S corporation has fewer than 25 shareholders, you should consider converting it to a C corporation. Business owners don’t pay any individual taxes. They report all their income on their personal tax returns, and then pay taxes at their individual rates. This means fewer deductions and lower tax bills for owners.
Corporations are legally separate entities from natural persons. This means they are not people and therefore are not personally liable for the actions of the business, except in extremely unusual circumstances. Instead, a corporation always assumes all the risk. The owners and managers of the corporation never have any risk at all. It's as if the owners and managers of the corporation had no skin in the game whatsoever. They literally get a free ride.
It is much easier to transfer a corporation from one owner to another compared to other forms of businesses. A corporation must be formed in every state where it does business. This means if you plan to do a lot of business in one particular state, you should consider forming your corporation there.
1. Corporations are different in every jurisdiction, but they basically have to pay three types of taxes: (
2. Federal Income Tax, (
3. State Income Tax, and (
4. Local Income Tax. Shareholders’ taxes are generally not included in the tax return filed by the corporation.
Whether corporations pay (lower) taxes or not, they sure don't pay any less than individuals. In fact, quite often, individuals have to pay more in taxes than corporations. This also varies by state, so it's a good idea to compare individual tax rates—sole proprietorships vs. corporations. It should be noted that compared to a corporation, a sole proprietorship will likely pay more in taxes. Limited Liability Companies So partners don’t have to pay corporate tax on their worldwide income. You may have to pay taxes on the money you make from the home sale, but if you are selling the house fast enough, the corporation may not have to pay taxes on the profits it made from selling your house.
Sometimes small company shareholders get double-taxed. That means they get taxed on both their original investment plus any additional profits their shares might generate. However, the corporation will pay taxes on its profits and then the shareholders will pay taxes on their share of the profits in the form of personal income. This means the shareholders will pay a higher tax rate than the corporation.
Advantages of a corporation:
Lower price. C: More sales. D: Same or higher quality. E: Same or lower price. F:
1. A corporation is a legal entity separate from its shareholders. The primary benefits are (
2. protecting the shareholders’ personal assets and (
3. allowing the shareholders to limit their personal liability for the debts of the corporation.
As an attorney myself, I know this is true. If a customer sues a corporation and wins, the corporation will be forced to pay the legal fees. However, this does not mean that the retail corporation will lose the lawsuit. It's not right for a corporation to pass on its debts to shareholders, so if it doesn't have enough money to pay, the owners don’t have to make up the difference.
One of the most important steps you can take towards success is to raise money. One of the best ways to do this is through the stock market. An established company can go public again, allowing it to sell more shares to raise capital. Corporations are increasingly attracted to employees who have an interest in the company’s success, because such employees tend to be more loyal to the corporation and less likely to jump around from job to job looking for higher compensation.
Disadvantages of a corporation:
Easier said than done. This is typical of most successful writers. You must constantly "work" to improve your writing. It's part of the process. It’s true; it takes longer, it’s more expensive and it is more difficult to incorporate a corporation than to incorporate a sole proprietorship or a partnership. It’s not as complicated or as expensive as you might think. In fact, it only takes about 30 hours of your time (at $500 per hour) and a little over $10,000 to get you up and running.
As long as there are people in the world who have something to gain by hating you, there will be something they can bring against you, even if it’s just a lawsuit. If the corporation is a partnership, you could be personally liable for anything the other general partners decide to do with the company. If an attorney can prove a corporation’s records aren’t kept properly, and the corporation isn’t operating as a separate legal entity, then the attorney can reach into the corporation’s bank account, seize any assets he finds there, and force the corporation to pay those assets to the creditors.
Limited liability company (LLC)
A limited liability company, or LLC, is a hybrid business structure combining the liability protection of a corporation with the ease of a partnership. It’s an alternative business entity (ABE) which is designed for sole proprietors and small businesses that don’t need to raise money through the stock market.
Members, also known as owners, of limited liability companies (LLCs) pay taxes on company profits directly—the LLC itself doesn’t file taxes as a separate legal entity. Limited Liability Companies (LLCs) are designed for people who want to form a business but don’t want the hassle and risk of being personally liable for any debts or obligations incurred by the business. Under the new tax laws, there will be no more separation between business and personal taxes. This could have a tremendous impact on the amount of money you earn… and… it can also dramatically impact the amount of money you spend!
An “S” corporation is the most common type of business in the U.S., and it’s perfect for small, independent companies that want to keep as much of their profit as possible. Since the early 1980s, L.L.C.s (Limited Liability Companies) have seen an upswing in popularity, especially among business owners who prefer this type of entity to other business structures, like corporations and partnerships. This trend shows no signs of slowing down.
In many states, including California, an LLC can have an unlimited lifetime. An LLC can also have a different set of owners than the owners of its "parent" corporation. There are different rules in different jurisdictions as to when an LLC is dissolved when a member leaves. An LLC is the ultimate business structure for a solo entrepreneur who is just getting started. It provides many of the same benefits of a corporation (more on that in a moment) but is much more flexible and easy-to-manage.
Advantages of an LLC:
The authors do an excellent job explaining the concepts in simple, straightforward language... and make it easy to understand exactly what you need to do... and when. An S-Corp requires the least amount of paperwork and has the fewest profit-sharing requirements of any type of corporation or limited liability company (LLC). In fact, an S-Corp's only requirement for paying shareholders is that they must have a significant enough participation in the business in order for their tax returns to be accurate. It's a very simple and straightforward business structure that's appropriate for small/medium and early-stage businesses.
Self-defense. An S-Corp protects your personal assets from lawsuits and creditors. That's why many successful entrepreneurs choose to form their businesses this way.
Disadvantages of an LLC:
Some businesses may not be eligible. If you don't have an S Corporation, you're limited to having only two shareholders. An S Corporation is much more flexible in this regard. You can have any number of shareholders as long as at least one of them is a "responsible" individual (like a trust fund baby or someone without a criminal record). If you run afoul of any of these restrictions, the process could take months and you might have to pay a $35,000 penalty fee. Plus, you'll have to start from square one. But what about foreign LLCs? Well, as far as I can tell, there are three special situations that can arise if you incorporate or set up shop in the U.S. with a foreign LLC:
When dealing with tax issues, it’s always best to consult with a tax expert or an accountant. In this issue, we will concentrate on state and federal income taxes.
1. The owner of an S corporation must file an information return (IRS Form
2. for that entity every year. However, this is only required for years in which the S corporation has gross receipts of more than $100,
3. Also, this is only required for years in which the S corporation had any shareholders. The shareholder has to be an individual, not a business or an LLC.
All members of an LLC have to pay payroll tax. It's included in the filing fee.
There are many different ways to form an LLC. This book explains them all in plain English, so even people who have no idea what an LLC is, can easily understand how to set one
How to choose your business structure
Every new business should consider the options carefully and make an intelligent choice. There isn’t an “easy answer” for every new business when it comes to deciding on a legal structure. If you are a web retailer who hasn’t yet incorporated or formed a corporation or limited liability company (LLC), you should seriously consider doing so as soon as possible. Your personal assets may no longer be protected and you could be subject to a judgment or execution against the company if you are not careful.
Ultimately, deciding which business structure is best for you and your company will be the safest decision you ever make. Hiring an attorney to guide you through the process is the very safest choice you'll ever make. In the meantime, here are a few things to think about.
Incorporation gives you certain legal benefits, such as protecting your personal assets from being attached by your creditors, and it can also make it easier to raise money for your business. Because of this, you will often see lower prices from big wholesalers than from the small guys. You'll also often see very large discounts from the distributors themselves! There are two basic types of business structures: sole proprietorship and general partnership. Each type offers different protection for owners, and each has its own advantages and disadvantages. A corporation (S-Corp), which is often referred to as a "C" corporation, offers the strongest owner protections. One of the best ideas I ever had was to form a partnership with another individual or entity. It's especially helpful when you are starting out because then both of you share the risks, benefits and responsibilities. You should consider the amount of personal liability you are willing to assume.
If you're in the direct marketing business, you need to read this book. It'll tell you how to get the right kind of licenses for your state, and it'll explain why these licenses are so important.
You'll probably reach a point in your business when you need funding for product development, store expansion, inventory investments, or other necessary expenses. And there's always more to it than that... A: There are many ways to find the perfect product for your customer’s needs. If you have an existing customer base, you may already have market research data on that customer group. There are multiple ways to raise capital for your ecommerce business. However, the success of your online store depends largely on your business structure and history. One of the biggest mistakes new ecommerce entrepreneurs make is not taking the time to learn all they can about the various options available to them. This book reveals the ins and outs of one option: setting up a LLC (Limited Liability Company).
Incorporation is an important step in starting a business. By incorporating as part of your business strategy, you build a positive credit and financial history for your business. People looking for financing, or who are evaluating your business for another reason, will find this section useful. It provides a lot of detailed info they didn’t have before, and gives them more data points to use in their decision-making. Having a strong credit history and a good personal or business reputation will increase your chances of getting financing and obtaining favorable interest rates.
Bringing on partners
Likewise, if you are going to have a business partner, you should choose a business structure that best supports your relationship. Sole proprietorships are generally not acceptable for this type of business because you will want some form of organization that allows for limited liability. You could also choose to go the S-Corp route, although this has several disadvantages. An LLC or a limited partnership (LP) would be best.
This decision will affect your choice of corporate structure. If you’re hiring employees or have plans to, this will influence your selection of the corporate structure you choose. However, it may be possible for you to start a “bare bones” operation without employees by using one or more of the following options: This is the only tax break you'll ever get on your profits that is 100% legal. There's no downside to this whatsoever - it'll give you a huge advantage over your competitors, especially over the long term.
Incorporating your business
Incorporating your business is an administrative process which requires a few steps. You should definitely consider doing everything yourself, using expert guidance, or outsourcing the entire process. Hire an expert if you need help. There are plenty of experts who will work for you at a very affordable rate. Browse through Shopify Experts to find qualified experts and sales tax experts who can help you. Disclaimer: The content of this website is for informational purposes only.
The first step you need to take to incorporate your business is to get a filing number from the SBA. At a glance, you’ll need to take the following steps to officially incorporate your business:
Decide where you’ll incorporate your business
Incorporation is always straightforward for some business owners. It’s not as simple for other business owners. Even if you operate and sell locally, it makes sense to use the legal structure that is most favorable to your needs and goals. There are many reasons for (and against) choosing to do an AMS ("Always Market Smart") rather than an EMS ("Every Market Smart") strategy. One of the main reasons for choosing AMS is that it makes more sense when you are first getting started because it is easier to focus only on one or two large markets.
There’s no such thing as one size fits all when it comes to business structuring. Every business is different, and every state has different requirements for each type of business. This book will help you get your state license as fast as humanly possible. It's the only book that I know of that teaches you how to do it by providing you with an “action plan” that is almost ready to roll out.
Choose your business name
This is the most important decision you'll make as an entrepreneur. When you think about it, your name is the "brand" of your business. Your name will likely be the way people identify you, and therefore determines how well you do financially. Sometimes it pays to be really clear about what you are talking about. In this case, referring to General Electric as “GE” is actually a bit of a misnomer because the company's full corporate name is… General Electric.
Feeling stuck on your name? Use this guide to choose a business name that will get your creative juices flowing! If your idea isn’t unique, search your state’s database to make sure no one else has already claimed it. If someone has, don’t worry. Simply refile and start the process over again. It’s amazing what will happen as a result.
Apply for your Employer Identification Number
It's a 9-digit number that identifies your business. There are two main reasons you should know your EIN. First, if you have employees, you should make sure each of them has their own EIN. It’s a 15-digit number that is used by various parts of the U.S. government. It has several uses: One of which is to identify your individual tax return. This is how the IRS (Internal Revenue Service) identifies your business. You need to get your "tax identity card" to do business as an individual or an S-Corp in the United States.
All you have to do to get your 9-digit EIN is to complete this form on the IRS website. You’ll get your EIN immediately, and in addition, we’ll also apply for your SSN for you.
File your paperwork and/or articles of incorporation
Once you have your EIN and a chosen name, you can begin the process of making it all official by filing the paperwork with your state. You’ll also need to attach articles of incorporation if you are forming a corporation. This is important paperwork which you must file with the secretary of state in your state. This is called “amending” your articles of organization or, for short, “organization amendment paperwork.” It's very important for a number of reasons, not the least of which is that it will put your business on the official record as an ongoing enterprise instead of a one-time event. These three documents officially make your business official.
Business structure FAQs
What are the 4 types of business structures?
There are four basic business structures for an LLC or an S-Corp. To keep things simple, I've only listed the name of the most common ones. There are many other variations possible. These are just the most common ones.
LLC C: Partnership D: Corporation E: S-Corp F: Ltd. Partnership G: LLP H:
C0010010011001 C: 01010101110100 D: 10110110111110 E:
A limited liability company (LLC)
Which type of ecommerce business is best?
In the past, people have said that online stores are the only way to go. But that’s not necessarily true, as retail businesses can be a great option as well. For example, popular retailers like Target and Walmart have been able to profit from their physical stores.
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