← Back to Guides 📂 Directory

LLC Guide for Resellers

Should you form an LLC? Here's what you need to know about business structure, liability protection, and legitimizing your reselling business.

Business Structure Options

Structure	Liability	Taxes	Cost
Sole Proprietor	Personal liability	Schedule C on personal return	Free (maybe DBA fee)
Single-Member LLC	Limited liability	Schedule C (default) or S-Corp election	$50-500 state filing
S-Corporation	Limited liability	Separate return, salary + distributions	Higher, more complexity

Benefits of an LLC

Liability protection: Personal assets separated from business debts
Professionalism: Looks more legitimate to platforms, suppliers
Business bank account: Easier to get with LLC
Resale certificate: Required for tax-exempt wholesale buying in most states
Credit building: Build business credit separate from personal

When You DON'T Need an LLC

Just starting out: Test the waters first
Part-time hobby: Under $5k/year probably fine as sole prop
Low risk inventory: Selling clothing vs heavy machinery
Cost concern: State fees + annual reports add up

💡 General Rule: Consider an LLC when you're consistently profitable, doing $10k+/year, or selling higher-risk items where liability matters.

How to Form an LLC

Choose a name: Check availability in your state
File Articles of Organization: With your state's Secretary of State
Get an EIN: Free from IRS (irs.gov)
Create Operating Agreement: Even single-member LLCs should have one
Open business bank account: Keep business funds separate
Get resale certificate: For tax-exempt purchases (state-specific)

DIY vs Services

DIY: File directly with state, cheapest option ($50-200)
LegalZoom, ZenBusiness: $150-400+, they handle paperwork
Attorney: $500-1500, best for complex situations

Ongoing Requirements

Annual report: Most states require yearly filing ($25-500)
Registered agent: Someone to receive legal documents
Franchise tax: Some states charge annual tax (CA = $800 minimum)
Separate finances: Don't mix personal and business funds

⚠️ California Warning: CA charges $800/year minimum franchise tax regardless of income. Consider forming in your home state first.

Business Banking

Separate account: NEVER mix personal and business funds
Business debit card: Use for all business purchases
Options: Local credit unions often have free business accounts
Online banks: Mercury, Relay, Bluevine = no fees

Resale Certificate

A resale certificate lets you buy inventory without paying sales tax (you collect tax when you sell instead).

Apply through your state's Department of Revenue
Usually free or small fee
Present to suppliers for tax-exempt purchasing
Not all states require it—check yours