I'm about to launch my first ecommerce site (selling handmade leather goods). A friend keeps telling me I'm crazy not to form an LLC first. Is it really necessary before launch? I don't have a ton of money to throw at legal fees right now.
LLC
Would you form an LLC before launching an ecommerce website?
LLC before you sell anthing. Liability protection is the main reason. If someone chokes on a leather strap or whatever, you don't want them coming after your personal assets. Filing fees are usually a couple hundred bucks, not thousands.
What SkippingRocks said. Also, some payment processors (Stripe, PayPal) might ask for a business entity. Not always required, but it can make things smoother.
i launched my store as a sole prop for the first year. Nothing bad happened, but I was always a little nervous. Formed an LLC later. If I could go back, I'd just do it upfront. The peace of mind is worth it.
Depends on your state. Some states have annual fees that add up. Check what your state charges for formation and yearly maintenance. If it's like $50/year, no brainer.
You can also just get a business license and insurance as a sole prop. LLC isn't the only way to protect yourself. But yeah, LLC is cleaner
Thanks for the input. I should clarify—I'm in California, so the $800 annul franchise tax is a real gut punch. That's why I'm hesitant. Does that change anyone's advice?
California? Ouch. Yeah, that $800 minimum sucks. If you're not making much profit, it might be better to wait. But look Into a sole prop with a DBA and good insurance. That's a middle ground.
Or form in another state? Not always advisable, but people do it. Nevada or Wyoming. But then you might need to register as foreign entity in CA anyway. Probably not wortth the hassle.
I'm in CA too. The $800 is a killer. But if you're selling physical products, the liability is real. Maybe start as sole prop, get insurance, and only form LLC when revenue justifies the $800. That's what I did.
Not a lawyer, but I think if you're a sole prop and you get sued, they can go after your house. So insurance is a must either way. LLC just adds a layer.
Also, if you're handmade leather goods, maybe consider a hobbyist angle? If you're not making much money, the IRS might not even care. But once you have real revenue, LLC is a good idea.
Just don't mix personal and business funds if you do form an LLC. Commingling can pierce the veil. Keep it separate.
Appreciate all the perspectives. I think I'll start as a sole prop wiith insurance, and revisit LLC when I hit a certain revenue threshold. That $800 can go toward inventory for now.
Sounds like a plan. Just make sure your insurance covers product liability. Some homeowner policies don't cover business stuff.
Good call. And don't forget to track expenses carefully. You can deduct the LLC fees later if you do form one.