About to launch your eCommerce dream? Before you hit “buy” on that inventory or go live with your store, there’s one decision that can save your bacon down the line: choosing the right business structure.
Now, we know this doesn’t sound like the most exciting thing to focus on. But global eCommerce sales are projected to reach $6.86 trillion in 2025, and 28 million active online businesses worldwide. In that landscape, selecting the proper eCommerce business structure has never been more important for protecting your growing venture.
You could be planning to become an Amazon seller, launching your own online store, or scaling an existing business – either way, understanding the different business structures available can save you thousands of dollars and protect your personal assets.
Solo founders, side hustlers, Amazon sellers, anyone turning clicks into a business…whatever stage you’re at, this guide will walk you through everything you need to know about eCommerce business structures, helping you make an informed decision for your online business.
Why does my eCommerce business structure matter?
Your business structure affects everything from liability protection to tax obligations and scaling opportunities.
Over 55,000 independent Amazon sellers generated more than $1 million in sales in 2024, and many of these successful entrepreneurs attribute part of their success to choosing the right business structure early on.
The structure you choose will determine:
- How much liability protection you have
- Your tax obligations and potential savings
- Administrative requirements and ongoing costs
- Your ability to raise capital and scale
- Professional credibility with suppliers and customers
What are the main business structure options?
Sole proprietorship: The simplest starting point
A sole proprietorship is the default business structure when you start selling without forming a legal entity. It’s the simplest option because there’s no separation between you and your business.
Pros:
- No formal registration required
- Complete control over business decisions
- Pass-through taxation (no double taxation)
- Minimal paperwork and compliance requirements
- Low startup costs
Cons:
- No liability protection for personal assets
- Difficulty raising capital
- Limited business credibility
- Business dies with the owner
- Unlimited personal liability for business debts
Best for: Testing business ideas, very small operations, or temporary ventures where liability risks are minimal.
LLC for Amazon sellers and eCommerce: The popular choice
A limited liability company (LLC) has become the go-to choice for many eCommerce entrepreneurs. While Amazon doesn’t require sellers to have any specific business structure, an LLC can offer advantages like personal asset protection and tax flexibility.
Pros:
- Liability protection means your personal assets stay separate from business debts.
- Pass-through taxation helps you avoid double taxation while still benefiting from liability protection.
- Tax flexibility gives you the option to elect S-corp status and potentially reduce your tax bill.
- Professional credibility enhances how customers and suppliers perceive your business.
- Operational flexibility means you’ll deal with fewer compliance hoops than a corporation.
- Registered agent benefits include a professional business address and secure handling of legal documents.
Cons:
- Annual fees and ongoing costs
- Some paperwork and compliance requirements
- May require a business bank account
- Self-employment taxes on all profits (unless electing S-corp status)
Best for: Serious eCommerce entrepreneurs, Amazon FBA sellers, dropshippers, and businesses with growth potential.
S-corporation: Tax-efficient scaling
An S-corporation (S-corp) can be a separate entity or a tax election for your LLC. This structure becomes attractive as your business grows and generates substantial profits.
Pros:
- Pass-through taxation means you don’t pay corporate income tax.
- Self-employment tax savings let you pay tax only on your salary, not on distributions.
- Enhanced credibility gives your business a more professional look as it scales.
- Employee benefits can be offered to owner-employees as part of a formal structure.
- Growth potential makes it easier to attract investors or bring in new partners.
Cons:
- Strict requirements mean the owner must be paid a reasonable salary.
- Compliance overhead includes payroll duties, quarterly filings, and annual meetings.
- Administrative costs are higher due to added accounting and bookkeeping needs.
- Ownership restrictions limit you to 100 shareholders who must be U.S. citizens or residents.
Best for: Profitable eCommerce businesses generating $60,000+ annually, businesses with employees, or those planning rapid scaling.
How each business structure stacks up
| Feature | Sole Proprietorship | LLC | S-Corporation |
| Setup Cost | $0 | $50-$500+ | $100-$800+ |
| Annual Fees | None | $0-$800+ | $0-$800+ |
| Liability Protection | None | Full | Full |
| Tax Filing | Schedule C | Schedule C or separate | Separate return |
| Self-Employment Tax | On all profits | On all profits* | Only on salary |
| Administrative Burden | Minimal | Low | High |
| Professional Credibility | Low | High | Highest |
| Scaling Potential | Limited | Good | Excellent |
*Unless LLC elects S-corp taxation
Before you commit: questions every eCommerce seller should ask
Could I afford to be personally liable if something goes wrong?
With product liability, shipping issues, and customer disputes being common in eCommerce, liability protection should be a top priority. When you are a sole proprietor, you are personally liable if your business gets sued or accrues any debts. An LLC or corporation protects your personal assets like your home, car, and savings accounts.
How will this structure affect how I’m taxed?
Most small eCommerce businesses benefit from pass-through taxation, where business profits are taxed only once on your personal return. Both LLCs and S-corps offer this advantage, avoiding the double taxation that C-corporations face.
Who’s handling my legal documents, and does it matter?
When you form an LLC or corporation, you’ll need a registered agent – someone to receive legal documents on behalf of your business. This service typically costs $100-$300 annually but provides a professional business address and ensures you never miss important legal notices.
Do I really need a separate bank account for my business?
Regardless of your structure, maintaining a separate business bank account is crucial for financial organization and tax preparation. It’s legally required for LLCs and corporations, and strongly recommended even for sole proprietorships.
Thinking of selling on Amazon? Here’s what else you need to know
More than 60% of sales in the Amazon store are from independent sellers—most of which are small and medium-sized businesses. If you’re planning to sell on Amazon, consider these additional factors:
Will Amazon FBA trigger tax obligations in multiple states?
Amazon FBA stores your inventory in multiple states, which can create sales tax obligations across different jurisdictions. Having a proper business structure helps manage these complexities and provides credibility when applying for sales tax permits.
Does having an LLC make me look more legit on Amazon?
While you can start selling on Amazon as an individual, having an LLC enhances your credibility with Amazon, suppliers, and customers. Being an LLC adds to your credibility and builds your reputation so buyers know when they shop your store, they’re buying from a legitimate business.
What structure will support me as I grow past six figures?
Independent sellers in the US averaged more than $290,000 in annual sales in the Amazon store in 2024. As your Amazon business grows, having the right structure becomes essential for tax efficiency and asset protection.
Not sure which structure fits your business? Let’s break it down
Start with sole proprietorship if:
- You’re testing a business idea with minimal investment
- Your monthly sales are under $1,000
- You have minimal liability exposure
- You want to keep things simple initially
Move to an LLC when:
- You’re serious about growing your business
- Monthly sales exceed $2,000-$3,000
- You have inventory or significant business assets
- You want professional credibility
- Liability protection becomes important
Consider S-Corp election when:
- Annual profits exceed $60,000
- You want to minimize self-employment taxes
- You’re ready for additional administrative requirements
- You have or plan to hire employees
Do I need professional help with my business?
This guide gives you the groundwork, but every business is different. A little expert input now can save you a lot of stress, tax, and legal risk later.
- A business attorney can help you protect your personal assets and ensure you’re compliant
- A CPA or tax pro can spot tax savings and help you structure things properly from day one
- A formation service can take the admin off your plate and keep you on track year-round
Think of it as an investment. What you spend upfront is often far less than what you risk losing without the right support.
What to do next
Take your business from idea to action with these steps.
- Assess your current situation: Revenue, liability exposure, and growth plans
- Research your state requirements: Formation costs, annual fees, and compliance obligations
- Consult professionals: Get personalized advice for your specific situation
- File the necessary paperwork: Register your chosen structure with your state
- Obtain an EIN: Get a federal tax ID number for your business
- Open a business bank account: Separate your business and personal finances
- Implement proper record-keeping: Track income, expenses, and important documents
Can I change my business structure later?
Absolutely! And many sellers do.
Starting small doesn’t mean staying small. Most eCommerce sellers evolve over time:
- Start as a sole proprietor while validating your idea
- Switch to an LLC as your sales and risk grow
- Elect S-Corp status or even become a C-Corp if you plan to scale big
Choose the structure that fits where you are now, but make sure it won’t hold you back later.
Ready to scale your operations? Check out our Business Growth Archives for proven strategies, and learn Why SMEs Should Use Amazon Business to maximize your growth potential.
Start building your business on solid ground today
Whether you’re planning to explore proven Amazon Business Models or ready to dive into the details of Amazon Seller Fees 2025, having the right business structure is your first step toward success.
Once your foundation’s in place, the next challenge is growth without chaos. And that means keeping your margins healthy and your pricing sharp, without spending hours a day tweaking numbers.
Repricer helps eCommerce sellers stay competitive without constant manual tweaks. With AI-powered automation and real-time competitor tracking, you can focus on growing your business while your pricing takes care of itself.
See smart repricing in action. Book a demo today.
