This July, Amazon revealed in its Small Business Impact Report that more than one million small and medium-sized businesses based out of the United States are selling through Amazon. The report also disclosed that half the items purchased through the website come from—you guessed it—small and medium-sized businesses.
As more individuals migrate over to the platform to become Amazon Sellers, they might be under the impression that all they have to do is set up a storefront and start selling and shipping their products. Amazon will take care of the rest of your business, right? Not quite. Here’s a little insight into what entrepreneurs need to know before they sign up to become an Amazon Seller.
Decide which type of seller you want to be.
For sellers new to the platform, they may be classified into one of two categories: Fulfillment by Amazon or Fulfillment by Merchant sellers.
Which does which, exactly? If you decide to become a Fulfillment by Amazon (FBA) seller, you get to enjoy some hands-on assistance from Amazon as an added incentive with your affordable pay as you go plan. You, the seller, need only to primarily focus on selling your products. Amazon will pick, pack, and ship your orders out to customers on your behalf.
They also take care of other details that tend to derail small business owners. Inventory scattered all over the place? You can store and keep your products accounted for at their fulfillment centers. Don’t have time to handle returns and customer service inquiries? They’ve got that covered with their trusted customer service and returns team. Struggling to build up your customer base? They’ve got the tools necessary to help you reach more customers and scale your business.
Fulfillment by Merchant sellers, on the other hand, sell their products through the website—and handle every other detail that comes after the sale. This includes packing, shipping, customer service, returns, marketing, and growing your business.
Should I incorporate my business as an Amazon Seller?
As business continues to steadily increase and word of mouth gets out about your online presence, you might wonder if it’s necessary to incorporate and if so, which entity is best for your business.
I’m not a legal professional, so I can’t advise you on what steps to take next but I have noticed that many Amazon Sellers incorporate as limited liability companies (LLCs). Forming an LLC as an Amazon Seller provides all the same benefits it would for a small business owner with a brick and mortar storefront. You are able to keep your professional and personal assets separated and limit personal liability. This becomes particularly critical in a marketplace like Amazon, where a customer may try to sue you for being injured by your product. Incorporated businesses also enjoy additional perks like saving money on taxes, choosing your tax structure (which can be either a C Corporation or S Corporation), and establishing credibility with customers.
What comes next?
How do you know which type of seller to become and entity to incorporate as, should you choose to incorporate? The best step to take next is to meet with a legal professional for guidance. Based on your particular circumstance, they will be able to help you make decisions that are the right fit for you and your business, answer any questions you may have, and leave you feeling confident about your next moves as an Amazon Seller.