Hey there! Are you starting an online store on Shopify? That’s awesome! You’re entering the e-commerce world with many cool things to explore and sell. But before you get into selling, there’s something really important you need to consider: making your shop an LLC, which is like giving your business its safety net.
Don’t worry; it’s not as complicated as it sounds, and you definitely don’t have to be a legal expert to figure it out. Making your business an LLC is smart because it protects you and makes your shop look professional.
If you need help figuring out how to start, think about using a service like Northwest Registered Agent to help you out. They’re fantastic at this and can make everything super easy. And hey, if you haven’t got your Shopify store up and running yet, now’s a great time to jump in and get started.
What’s an LLC Anyway?
An LLC stands for Limited Liability Company. Consider it a protective bubble around your stuff (like your savings, car, or gaming console) if your business faces any trouble, like debts or legal issues. It’s a way to tell the world, “Hey, my business and I are not the same person!”
Why Your Shopify Store Needs an LLC
Setting up an LLC for your Shopify store can be very beneficial for your business. It protects your personal assets and boosts your credibility. Customers feel safer shopping with you, and banks are more willing to lend you money. Plus, it makes handling taxes a bit easier, which is always a win.
5 Steps to Forming Your Shopify LLC
Choose A State
First, you must decide where you want your LLC to be created. You can set up your LLC in your home state or pick another state if it offers better benefits for your business. Remember, if you choose a state other than where you live, there might be extra paperwork or fees.
You can look at our other blog articles covering how to create an LLC in each state.
Choose a Unique Name
Your LLC needs a name. Each state has rules about what your name should include, like “Limited Liability Company” or “LLC.”
Make sure your name stands out and isn’t too similar to others, especially in your industry. You can do a quick, free name check online to see if your chosen name is available. Think about getting a website name that matches your business name. You can find good deals for your website domain names on Namecheap.
File Articles of Organization
You must submit to the state a form called the Articles of Organization. This step is important to make your business an LLC officially. Don’t skip this step, or your business isn’t legally an LLC yet. There will be a fee, each state has a different rate and different form to fill.
Here’s what you need to include in your Articles of Organization:
- LLC Name: Write the full legal name of your LLC. Don’t forget to add “LLC” or “Limited Liability Company” at the end.
- Mailing Address: If you get mail somewhere different from where your business is, put that address here.
- Registered Agent: This is who will get all the official papers for your LLC. Write down their full name or company name, address, and phone number. Make sure they agree in writing to be your Registered Agent.
- Management Structure: Tell if your LLC will be run by its members (you and any partners) or by the managers you pick. List their names and addresses. Remember, this info will be public, so you can use a PO box for addresses if you want.
- Purpose: Write a short description of what your business will do.
- LLC Organizer: This person or company fills out and sends in your LLC’s paperwork. They’re really important for setting up your LLC right.
- Formation Date: When will your LLC officially start? It can be right when you file this form or a date you choose (up to 90 days later).
- Signing: After you double-check everything, sign and date the form. Make sure your Registered Agent has agreed to their role.
Pick a Registered Agent
Your LLC needs a Registered Agent. This person or company will handle all your important paperwork. They must have an address in the state where you decide where your LLC would take place and be available during business hours. Remember that while someone in your LLC can be the Registered Agent, their address will be public. Alternatively, you can use a legal service specializing in this area, which will free you up to focus on growing your business instead of sweating over legal paperwork.
Check out our blog, ‘Is a Registered Agent Necessary? Your Guide to Finding an Affordable Option,’ for insights on how to find an affordable Registered Agent option.
Obtain an EIN
Your LLC needs its own ID number, known as an Employer Identification Number (EIN). It’s like the social security number for your business. This number will help you as an identification number when getting bank accounts and credit accounts, filing taxes, and hiring employees.
It’s free, and you can get it from the IRS website at https://www.irs.gov/businesses/small.
Elect LLC as an S Corp to Save on Taxes
If your LLC is making between $40,000 to $50,000, you can save some cash on taxes by choosing to be taxed as an S Corp. This way, you can avoid paying an extra 15.3% in self-employment taxes on the rest of the business’s income.
Why S-Corp Could Be Your Best Move
Choosing to be taxed as an S-Corporation can be a smart way to save on taxes without cutting into your profits. Here’s the breakdown:
- Pay Yourself a Salary: This bit is taxed like regular employment income.
- Profit Distributions: The money left after paying your salary isn’t hit with self-employment tax, which means more money in your pocket.
To do this, you’ll need to file Form 2553 with the IRS and consider if this model suits your financial goals.
Starting an LLC can be easy. Remember, you can take it step by step. If you need help, Northwest Registered Agent is there for you to set up your LLC from A-Z. This will save you a ton of time as an entrepreneur so that you can focus on other things that will move the needle forward in your business.
LLC Taxation for Shopify
The good news about an LLC is that it’s flexible with taxes. You can choose to be taxed as a sole proprietor, partnership, or corporation. This choice affects how much you pay and how you file your taxes, so it’s worth talking with a tax pro to see what’s best for your business.
However, when we talk about LLC taxation, especially for your Shopify store, there’s this thing called pass-through taxation. Basically, your store’s money gets added to your personal income, and you pay taxes on it just like any money you’d make from a job or mowing lawns.
But wait, there’s a bit more. In addition to the usual taxes, you also have to pay a self-employment tax, which is about 15.3%. This covers your Social Security and Medicare. Think of it as your contribution to your future self’s retirement and healthcare.
When to Collect Sales Tax for Your LLC
The rule of thumb is you collect sales tax from customers in the same state your business has a “presence” in. If your LLC has what’s called a sales tax nexus in a state, or you sell stuff that the state considers taxable, you need to collect sales tax from your customers in that state.
The rules about what’s taxable and whether you need to collect tax can change from state to state, like how some states think candy is essential (no tax) and others don’t.
Before you start collecting, you also need to get a sales tax permit from the state. It’s their way of giving you the nod to collect tax on their behalf.
Shopify Tax Collection
Shopify’s role in this is as a tool, not a tax collector. They won’t handle your taxes for you, but they offer a service called Shopify Tax that can help automate collecting sales tax from your customers. This does cost extra, but it can save you a ton of time and help make sure you’re collecting the right amount of tax. It’s like having a calculator that knows all the tax rules, so you don’t have to.
However, even with Shopify’s help, talking to an accountant is super important. They’re like the guide on your tax journey, ensuring you take all the steps and fully comply with tax laws. Just because you have excellent tools and services doesn’t mean you can skip out on professional advice.
There you have it! You should know the details before setting up your LLC for your Shopify store. It’s not just about making it official; it’s about making smart choices for where to set up shop, picking a unique name, doing the paperwork, getting your business its ID, and even saving on taxes.
Understanding the New BOI Reporting in 2024 for Florida LLCs
What’s New and When Does It Start?
Starting January 1, 2024, all LLCs, including those in sunny Florida, need to comply with new federal reporting requirements. These are designed to enhance transparency and make sure everyone knows who’s running the show in businesses.
Important Dates and What They Mean for You
- Effective Date: Mark your calendars – these rules take effect from January 1, 2024.
- Reporting Deadline for Existing LLCs: If your LLC was established before 2024, you must submit your first report by January 1, 2025.
- New LLCs: For those of you starting an LLC in 2024, your first report is due within 90 days of forming your company.
- Domestic LLCs: If your business is based in the US, these rules apply to you.
- Foreign Entities: Foreign businesses registered in Florida are also included.
Are There Exceptions?
Yes, there are certain exceptions. Detailed info is in the Beneficial Ownership Information Reporting Regulations at 31 CFR § 1010.380(c)(2).
- What Do You Need to Report?
In a nutshell, you’ll need to report details about who owns and controls your LLC. Think of it as the who’s who of your business. For the nitty-gritty details, check out the compliance guide.
How to File Your Reports and Avoid Penalties
Filing Your BOI Report
- When to File: All reports must be filed electronically starting January 1, 2024. Remember, filing before this date isn’t allowed.
- Accuracy is Crucial: You must certify that the information in your report is accurate. Double-checking is your friend here!
The Consequences of Getting It Wrong
- False Information Penalties: Mistakes or misinformation can result in a fine of up to $10,000 or up to two years in prison.
- Focus on Education: The Financial Crimes Enforcement Network (FinCEN) is emphasizing helping businesses understand and comply with these rules.
- Have you got It Wrong? Fix It Fast: If you realize a mistake in your report, you have 90 days to correct it without facing penalties.
If you need more information or specific guidance, don’t hesitate to visit the FinCEN website for all the details.
Northwest Registered Agent
Northwest Registered Agent Pricing: What to Expect
Northwest Registered Agent keeps it simple when it comes to pricing. They have a clear, straightforward fee structure, which is a big plus. No hidden fees or surprises – that’s the kind of honesty we all appreciate, right?
Why is Their Pricing Affordable?
- Transparent Costs: They tell you exactly what you’re paying for so you can make informed decisions.
- Competitive Rates: Their prices align with what you’d expect for top-notch services, ensuring you get good value for your money.
- One-Stop Shop: Since they offer a whole suite of services, you can bundle things together, potentially saving time and money.
- Location: They’re headquartered in Spokane, Washington, but don’t worry – they have offices in all 50 states. So, wherever you are in the US, they’ve got local expertise ready for you.
- Experience Counts: These folks have been in the game for over 20 years. That’s a lot of experience under their belt, helping businesses like yours start and grow.
- LLC Formation: Dreaming of starting your own LLC? They can help make that happen.
- Registered Agent Service: This is the main event – they’ll be your reliable point of contact for all those important legal documents.
- Address Privacy: Keep your personal address off the public records. It’s all about your privacy.
- Lifetime Customer Support: Got questions? They’re there for you, not just today, but for the life of your business.
- Annual Report Reminders: Never miss a deadline with their handy reminders.
- Online Document Dashboard: All your important documents are organized in one easy-to-access place.
Additional Services (Because There’s Always More)
- EIN Number: They can help you get your business’s unique tax ID.
- Annual Report Service: Let them handle your annual reporting needs.
- Operating Agreements: Need help with the rules for running your LLC? They’ve got you covered.
- Virtual Office Service: Get a professional business address without the office.
- S-Corp Election: Thinking about S-Corp status? They can help with that.
- Mail Forwarding Service: Keep your mail organized and forwarded to where you need it.
- Foreign Qualification: Expanding your business to new states? They can assist.
- Legal Forms: Access a variety of legal forms easily.
- Legal Services (in Utah): If you’re in Utah, they’ve got specific legal services just for you.
- Incorporation Services: More than just LLCs, they can help incorporate your business, too.
So, if you’re looking to create an LLC, Northwest Registered Agent is like having a wise old friend in the industry. They ensure everything runs smoothly, keeping you focused on what you love – growing your business.