{"id":5189,"date":"2021-08-11T15:32:35","date_gmt":"2021-08-11T20:32:35","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/forming-an-llc-for-an-online-business.html"},"modified":"2026-06-02T10:24:00","modified_gmt":"2026-06-02T15:24:00","slug":"forming-an-llc-for-an-online-business","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/forming-an-llc-for-an-online-business.html","title":{"rendered":"Forming an LLC for an Online Business"},"content":{"rendered":"\n
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Forming an LLC for an Online Business<\/h1>\n\n
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\n By Catherine Hodder, Esq.<\/a> | Legally reviewed by Tim Kelly, J.D.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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An LLC is a legal entity that provides advantages for online businesses such as flexibility, liability protection, and unique tax benefits.<\/p>\n\n <\/div>\n\n\n\n

Your online business<\/span> may start as a hobby or a way to make extra income. Or maybe you want to sell to a larger customer base online. In either case, operating an online business<\/span> comes with risks and rewards. Before opening your online business<\/span>,\u00a0form a limited liability company<\/span><\/a>\u00a0(LLC formation<\/span>).<\/p>\n

Form your LLC with confidence.\u202fOur trusted partner LegalZoom has packages starting at $0 + filing fees.<\/a><\/b><\/i><\/p>\n

What Is An LLC?<\/h2>\n

An\u00a0LLC<\/a>\u00a0is a formal business structure<\/span> you register with your state. It\u2019s more flexible and offers tax benefits<\/span> to a small business<\/span> that a corporation does not.<\/p>\n

But should you form an LLC<\/a> for your online business<\/span>?<\/p>\n

First, consider the nature of your business and any potential risk of lawsuits. For example, could a customer sue you for negligence, fraud, or personal injury? Or is your business activity something that doesn\u2019t have inherent risk?<\/p>\n

For example, a blogger writing about beauty products doesn\u2019t have the same exposure to liability as someone manufacturing and selling beauty products.<\/p>\n

Second, consider your venture\u2019s growth potential. If your business becomes successful, you have more to lose. Additionally, an LLC<\/a> will help secure business loans and credit should you expand.<\/p>\n

Advantages of an LLC<\/h2>\n

If you have a home, car, investments, or other assets, forming an LLC<\/a> can protect them from seizure in a lawsuit.<\/p>\n

Liability Protection<\/span><\/h3>\n

As with any business, an online business<\/span> can subject you to liability. For example, suppose you make pottery, and someone claims your vase caused an injury. You could be liable for their personal injury claims. Any judgments against you can put your individual assets at risk\u2014unless you operate as an LLC.<\/p>\n

Many online <\/span>business<\/span> owners<\/span> form an LLC to shield them from personal liability. The LLC is a business entity<\/span> that keeps business expenses<\/span> and liability separate from the business owner<\/span>\u2019s personal assets<\/span>.<\/p>\n

Tax Benefits<\/span><\/h3>\n

If you operate an online business<\/span> as yourself, you\u2019re a sole proprietor. So, you report all income and losses on your personal income <\/span>tax<\/span> return<\/span>. The advantage is that you avoid “double taxation.”<\/p>\n

An LLC still allows\u00a0pass-through taxation<\/a>. This means you aren\u2019t taxed on your business profits and then taxed again on revenue received. So, an LLC is like a sole proprietorship<\/span> for tax purposes. It just has the benefit of liability protection<\/span>.<\/p>\n

No Need for Fictitious Name Filing<\/h3>\n

A\u00a0sole proprietor\u00a0<\/a>operates under their name. But suppose they want to brand their business with a company name. They file a\u00a0DBA or “doing business<\/span> as”<\/a>\u00a0to register that name.<\/p>\n

By forming an LLC, you register your business name<\/span> with the state. You don\u2019t then need to\u00a0file a fictitious name<\/a>.<\/p>\n

Privacy<\/h3>\n

Since your LLC operates under the LLC name<\/span>, you can keep your name out of it. High net-worth business owners<\/span> prefer to separate their personal financial life from their business. You often see holding companies formed as LLCs.<\/p>\n

Keep Business Accounting Separate<\/h3>\n

Your LLC is a separate entity<\/span>. You can open a bank account<\/span> for your business. You pay your bills and receive income from your online sales into this account.<\/p>\n

Keeping your transactions in the business <\/span>bank account<\/span> keeps your business finances<\/span> from co-mingling with your personal finances.<\/p>\n

Flexible Business Structure<\/span><\/h3>\n

There are different types of LLCs<\/span>. You can operate as a single-member LLC<\/span> similar to a partnership or a multi-member LLC, like a partnership. As your business grows, you might bring on partners. It\u2019s easy to do by adding members to your LLC.<\/p>\n

How To Set Up An LLC<\/h2>\n

Creating an LLC is not overly complicated for an entrepreneur. But first, check the LLC requirements with the secretary of state<\/span> in your home state or the state where you operate your business.<\/p>\n

Choose the Business Name<\/span> for Your Online LLC<\/h3>\n

There are many things to consider when choosing a business name<\/span> for your LLC. Check with your secretary of state<\/span> to see if the name is available. You can do this by searching online with your secretary of state<\/span> or department of corporations.<\/p>\n

Make sure the name doesn\u2019t\u00a0infringe on another brand name or business<\/a>. You can search for the name online at the\u00a0United States Patent and Trademark Office<\/a>. Before committing to your new business<\/span>\u2019s name, check the social media handles and web domains available.<\/p>\n

Designate a Registered Agent<\/span><\/h3>\n

A registered agent<\/span> is a person or business that serves as your business representative in that state. The registered agent<\/span>:<\/p>\n