"Which Business Structure is Best for Me?" Sole Proprietorship vs LLC vs S Corp
In this module, you will be learning all about how to set up your business (before setting up the website and choosing your niche).
If you decided that this is the path you want to take in life, you need to set up a business structure. It's got to be in the United States to pursue this business model. With that said, there are a few different business structures, and there for a few different types of people.
It really depends on how much money you make and how many assets you have. Suppose you don't make a whole lot of money right now, and you don't have any assets. In that case, a sole proprietorship is the best business model or the best business type to start with. It is because there is very little upfront investment needed to make a sole proprietorship. It's practically free, depending on the state that you're in.
The only downside to it is that you're completely open to any kind of litigation, solve your business, take on debts, and then those debts go unpaid. They can actually go after you and your assets, like if you own a house or something like that. So if you do own assets, like a house, stock investments, bunch of cash, go for an LLC or an S corp.
A sole proprietorship is the best way to start. It's how I started and operated for years, and it is fine. You're really doing a dropshipping business, an eCommerce business, using dropship, and you're not going to have any upfront debts. You're going to be taking suppliers on. They're going to manage the product inventory for you. All you're going to have to do is monthly payout expenses for things like the Shopify hosting tools that you'll need to use.
A sole provider is probably the best way to start for most people out there. If you have a house, a brokerage account with lots of money in it and investments, other assets, you should definitely consider an LLC.
Limited Liability Company (LLC)
I do have an LLC now because I do have assets. You need to understand that you can set up an LLC in any state in the USA and go to that particular state. Type into Google, the best state to set up an LLC.
I can recommend that if you choose LLC, choose a state with no income tax and no franchise tax. For instance, California is one of the worst states to start an LLC because there's a high payment just to start it up. There's a high franchise tax that's a yearly tax you have to pay, and there are lots of other taxes depending on the jurisdiction you're in, even on a city level. But some of the best states are Wyoming, South Dakota, Texas, Florida, and Nevada.
Understand that to have your business legally taxed in that state; you also have to be physically located in a state. It's not just about having your business there, but it's also about you being there as well. This is the biggest difference being an LLC and a sole proprietor and an LLC that taxes as an S corp.
The IRS is still going to look at you as a sole proprietor if you're a single member, LLC, and are not taxed like an S corp. Understand that they are going to be taxing you according to the state you live in, not the state your business is in. Yes, you only be taxed once, but you'll still be taxed on income tax if you live in California and your business in Nevada, for instance. What I suggest doing is to go to the state you want to start your business. Go there for the minimum amount of time required for you to get a driver's license to actually set up residency. We just learned that the best place to do this is in South Dakota. You just need to go there for a one-night hotel stay, and then you can get a residency out there, a driver's license. You're officially a South Dakota resident, and then you can set up your business out there, and there's no state income tax.
If you make quite a bit of money right now and this is going to be a separate business for you, I do recommend setting up an S Corp or an LLC taxed as an S Corp.
That route is really important to understand because you'll be setting yourself up as an employee of your business to pay yourself. You'll be paying payroll taxes, taxes to the government as a W-4, but you don't need to pay all your money out that way. You can make a reasonable income from your business, and whatever that business is. You could retain 10 to 30 thousand a year or something like that, then you can take the remaining amount of money as dividends, and it's taxed much less.
Keep all this stuff in mind as tips. None of this is actual advice. I really want to make sure that you understand. Go to a lawyer or an accountant to get actual advice on the stuff. These are the things that I've run into that I understand as far as setting up a business. You must understand it, too. Make sure that you make the right decision. Go and speak to a lawyer, an accountant.
The last step here is that when you go to set up your business, understand that there are services out there like virtual mailboxes. Virtual mailboxes are like a PO box or UPS account address, but they have a website where you can look at the mail that you get every day, and they can receive packages for you and all that cool stuff. That's the best way to run a business while traveling the world.
I hope you enjoy this video. Go out and make sure you make the right decision for setting up your sole provider, LLC, or S corp. There are other models like a regular C Corporation, but I don't recommend doing that. It's not for small businesses. In fact, the S corp stands for Small Business Corp.
See you at our other podcast episodes. Comment, like, and share. Visit ecommerceparadise.com for more tips and information about dropshipping.
Step-By-Step Training for High-Ticket Drop Shipping
Here are the next steps you'll need to take to start your high-ticket dropshipping business:
Resources for Starting A High-Ticket Drop Shipping eCommerce Store
These are the resources I've created to help you start your own high-ticket dropshipping eCommerce store:
Recommended Resources for eCommerce Entrepreneurs and Digital Nomads
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eCommerce Paradise was created by Trevor Fenner of Seattle, Washington in 2015 to help you, the entrepreneur, to start and scale your own eCommerce business selling high-ticket products online with the drop shipping fulfillment method so you can make more profit per sale, have a sustainable and evergreen online business, get started with very little upfront investment, and live a location independent lifestyle. Trevor owns multiple 7-figure High-Ticket Drop Shipping eCommerce stores and is a digital nomad, traveling the world while working remotely with the help of his team of over 10 virtual assistants from around the world. Trevor is currently located in Bali, Indonesia. Trevor is also a passionate skateboarder, surfer, scuba diver, photographer, environmentalist, outdoorsman, fitness and tattoo enthusiast.
AFFILIATE DISCLOSURE: Some of the links on this page may be affiliate referral links. I will get a commission from the vendor when you make a purchase after clicking them at no added cost to you. As a result, many of them also provide you with a special discount just for using my link. You can go directly to their support if you have any issues with their software or product.