• August 2019
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Do I need to have my business incorporated before getting a drop shipping account?

The technical and short answer to this question, at least within the US, is no. You can start and sell from your dropshipping business right now. However, even though you are able to sell without incorporation, it’s not recommended to keep that status for long.

 

If you are serious about this venture and want to move forward, incorporating is that step. Early on, the vast majority of drop shipping businesses are run as a sole proprietorships simply because it requires no filings. However, there are other types of businesses that may make sense, depending on your circumstances. Each have some positive and negative features.

 

Sole-Proprietor: This is the simplest business structure to implement but also offers no personal liability protection. So if your business is sued, your personal assets may be in jeopardy. Filing requirements are minimal, and you simply report your business’s earnings on your personal taxes. No other state or federal business filings are required.

 

Limited Liability Company (LLC): An LLC offers increased protection of your personal assets by establishing your business as a separate legal entity. While the liability protection isn’t foolproof, it does offer more protection than a sole proprietorship. You may need to comply with additional filing requirements and will need to pay both incorporation and ongoing fees.

C Corporation: Most major corporations are set up as C corporations which, when done properly, offer the most liability protection. They are likely to be more expensive to incorporate and are subject to double taxation, as income doesn’t pass directly to the shareholders.  

There is a lot to consider before choosing to incorporate – from the structure to the legal requirements. Here are the key things to consider when incorporating.

Since everyone’s situation is different, it’s recommended to discuss this with an attorney.