LLC or Sole Proprietor? Choosing the Right Business Structure for U.S. E-commerce
If you’re launching your online business in the United States — whether you’re a resident or a foreign entrepreneur — choosing the right business structure is one of the most important first steps.
This article explores two of the most common options:
Limited Liability Company (LLC) vs. Sole Proprietor — and how they apply to Amazon, Shopify, and other e-commerce platforms.
What Is a Sole Proprietor?
A sole proprietorship is the simplest form of business. You operate under your own name or a trade name, with no legal separation between you and the business.
Pros:
- Simple to start — no formal registration
- Lower upfront cost
- Minimal paperwork
Cons:
- No legal liability protection
- Can’t easily scale or bring on partners
- Limited options with platforms like Amazon
Common Mistake:
Many international sellers assume they can sell on Amazon with just a PayPal account and their passport. In reality, Amazon often requires a U.S. EIN (Employer Identification Number) and a registered business entity.
What Is an LLC?
A Limited Liability Company (LLC) is a formal U.S. business structure that separates your personal assets from your business operations.
Pros:
- Liability protection
- Ability to get an EIN & U.S. business bank account
- Accepted by major platforms (Amazon, Stripe, Shopify)
- Builds trust with buyers
Cons:
- Higher setup cost
- Annual reporting or state compliance
- Requires planning if you live outside the U.S.
📌 At Capa Group Inc, we help sellers form LLCs in states like Wyoming or Delaware — popular for e-commerce businesses due to tax friendliness and ease of registration.
Comparison Table
| Feature | Sole Proprietor | LLC |
|---|---|---|
| Legal liability protection | ❌ None | ✅ Yes |
| EIN & Tax Filing | Optional (if U.S.) | Required (if foreign-owned) |
| Amazon/Shopify acceptance | Often rejected or limited | ✅ Fully accepted |
| Bank account access | Difficult | ✅ Possible with EIN |
| Cost to start | $0–50 | $100–400 (state dependent) |
| Brand perception | Low | High |
Platform Compliance – Why LLC is Preferred
Amazon, Shopify, Etsy, and even Facebook Commerce increasingly expect sellers to have:
- A registered U.S. business name
- A U.S. EIN
- Verifiable business structure (LLC preferred)
These platforms are cracking down on anonymous or unverifiable sellers due to fraud risk, money laundering regulations, and consumer protection laws.
If you're serious about building a brand — go LLC.
International Sellers – What You Need
If you’re based outside the U.S. but want to operate a business targeting the U.S. market:
You will need:
- A U.S.-based LLC
- EIN (can be obtained remotely)
- U.S. mailing address (can be virtual)
- U.S. phone number (for platforms)
- A payment processor that accepts foreign owners (e.g. Wise, Mercury, Payoneer)
📌 Capa Group Inc specializes in LLC formation + EIN application and helps guide clients through the verification process on platforms like Amazon and Shopify.
Real Example:
A Vietnamese entrepreneur wanted to sell handmade wellness items via a U.S.-based Shopify store.
We helped them form a Wyoming LLC, obtain an EIN within 10 days, and configure a Stripe account.
Within 30 days, their website went live with product listings, brand story, and payment gateway integration — all compliant with U.S. rules.
Final Thoughts – Choose for the Long Game
If you:
- Want to build a brand
- Plan to sell across multiple platforms
- Intend to receive payments via U.S. systems
- Care about customer trust & legal protection
Then the LLC is not just the better option — it's the expected standard.
🏢 Need help forming a U.S. business structure for your e-commerce brand?
Let our team guide you through LLC registration, EIN setup, and platform compliance — with clarity and speed.
🔗 Start Your Business with Capa Group Inc