Do I Need an LLC to Start an Online Store in the US?

No. You do not need an LLC to start an online store in the US. If you sell on your own without registering anything, the SBA says you are automatically treated as a sole proprietor, and you can open a store and accept card payments that way. Stripe, for example, lets a sole proprietor sign up with a Social Security Number instead of a business tax ID. An LLC is optional. What it mainly adds is a legal separation between business debts and your personal assets, which the SBA describes as protection “in most instances.” By default it does not lower your federal taxes, and in some states it costs real money every year.

This guide explains what changes when you form an LLC, what stays the same, what it costs in four large states, and a checklist for deciding when it is worth it. Official SBA, IRS, FinCEN and state pages were checked on October 24, 2026. This is general information, not legal or tax advice; your situation may differ, so confirm your decision with a lawyer or accountant licensed in your state.

What you are if you never register a business

The SBA’s business structure guide says you are “automatically considered to be a sole proprietorship” if you do business activities but do not register as any other kind of business. You do not file anything to become one.

Being a sole proprietor has two consequences worth knowing:

• No separate entity. The SBA says sole proprietorships “do not produce a separate business entity,” and you can be held personally liable for the debts and obligations of the business. A supplier you owe, or a customer who wins a claim against the store, can pursue your personal assets.
• Taxes run through your personal return. The SBA lists personal income tax and self-employment tax for sole proprietors. Store profit goes on your own Form 1040.

You can still use a store name. The SBA notes a sole proprietor can get a trade name, often called a DBA (“doing business as”), and suggests registering one even where it is not required. Rules and fees for DBAs are set by states and counties.

What an LLC changes, and what it does not

The IRS describes an LLC as “a business structure allowed by state statute.” You create one by filing with a state, and the state’s rules govern it. Here is how it compares with staying a sole proprietor for a one-person online store.

Question Sole proprietor Single-member LLC (default tax treatment)

Separate legal entity? No Yes, created under state law

Personal liability for business debts Unlimited (SBA) Owners generally not personally liable; SBA says “in most instances”

Federal income tax Schedule C on your Form 1040 Disregarded entity: still Schedule C on your Form 1040

Self-employment tax Yes, 15.3% on net earnings of $400 or more Yes, “in the same manner as a sole proprietorship” (IRS)

Can choose corporate tax treatment? No Yes, by election on IRS Form 8832

Separate EIN required? Not for income tax if you have no employees Only if it has employees or certain excise taxes; otherwise optional (IRS)

State filing and fees None to exist (DBA and local licences may apply) Formation fee plus recurring state fees or taxes in many states

Federal beneficial ownership (BOI) report Not applicable Not required for US companies (FinCEN)

Sources: SBA “Choose a business structure”; IRS pages on LLCs, single-member LLCs and self-employment tax; FinCEN BOI page. Checked October 24, 2026.

The liability shield has limits

The SBA’s own wording is careful: LLCs protect you from personal liability “in most instances.” It does not promise protection in every case. The shield is about debts and obligations that belong to the business. It is not a substitute for product safety, clear policies or insurance. If liability is your main reason for forming an LLC, ask a lawyer in your state what it does and does not cover for the products you sell, and price product liability insurance at the same time.

Federal taxes stay the same by default

This is where many new sellers are surprised. According to the IRS, a single-member LLC is treated as “an entity disregarded as separate from its owner” for income tax. Its activity goes on the owner’s return, on the same Schedule C a sole proprietor uses, and the owner pays self-employment tax “in the same manner as a sole proprietorship.” The IRS puts the self-employment tax rate at 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare, and it applies once net earnings from self-employment reach $400.

So forming an LLC on its own does not reduce your federal tax bill. A domestic LLC with two or more members is classified as a partnership by default. An LLC can elect to be taxed as a corporation using Form 8832, and the IRS notes an election cannot take effect more than 75 days before it is filed. Whether a corporate election saves money depends on your profit level and state, so that decision belongs with an accountant.

What an LLC costs in four large states

State fees are the clearest cost, and they vary a lot. The table below uses fees from each state’s official pages. It covers state filing fees and state-level annual charges only. It does not include registered agent services, lawyers, newspaper publication costs, local licences or sales tax permits.

Modelled three-year state fees by E-commerce Partners, from fees on official state pages checked October 24, 2026. Excludes registered agents, New York newspaper costs and professional fees.

State Formation fee Recurring state charge Modelled 3-year state fees Average per year

California $70 Articles of Organization $800 annual tax every year (FTB); $20 Statement of Information every two years $2,510 $836.67

Florida $125 ($100 filing fee + $25 registered agent fee) $138.75 annual report; $538.75 if received after May 1 $541.25 $180.42

Texas $300 certificate of formation No franchise tax due at or below $2,650,000 in revenue (2026 and 2027 reports); an information report is still required $300 $100.00

New York $200 Articles of Organization $50 Certificate of Publication (once) plus newspaper costs; $9 biennial statement $259 plus newspaper costs $86.33 plus newspaper costs

Hypothetical three-year model. Assumptions: California pays the $800 tax in years 1 to 3 and files the Statement of Information twice; Florida files three annual reports on time; Texas stays below the no-tax-due threshold; New York files one biennial statement. Totals calculated in Python and checked with a second method. Fees from California SOS and FTB, Florida Division of Corporations, Texas SOS and Comptroller, and New York Department of State, checked October 24, 2026.

Four things stand out:

1. California is in a different league. The FTB says every LLC doing business or organized in California must pay an $800 annual tax, due “even if you are not conducting business,” until you cancel the LLC. The first-year exemption only applied to tax years starting from 2021 through 2023. An LLC with more than $250,000 of California income also pays an extra LLC fee, starting at $900.
2. New York’s headline fee hides a publication step. The Department of State says a new LLC must publish its articles or a notice in two newspapers for six weeks, as designated by the county clerk, and file a Certificate of Publication ($50) within 120 days. Failing to do so can suspend the LLC’s authority to do business. Newspaper charges vary by county and are not in our total.
3. Florida punishes late reports. The annual report costs $138.75, but Sunbiz lists $538.75 for a report received after May 1, and reports must be in by the third Friday in September to avoid administrative dissolution.
4. Texas is cheap for small stores. Beyond the $300 formation fee, an LLC under the Comptroller’s no-tax-due threshold owes no franchise tax, though it still files a Public Information Report or Ownership Information Report each year.

What about forming in Delaware or another “cheap” state?

Online sellers often read that they should form an LLC in a state they do not live in. Be careful. The SBA notes that a business registered in one state and qualified to operate in another typically pays taxes and annual report fees in both. Delaware, for example, charges LLCs a $400 annual tax due by June 1, with a $200 penalty plus 1.5% monthly interest if it is late. If you live and run the store in California, a Delaware LLC can mean paying Delaware’s tax on top of California’s, not instead of it. Ask a professional before forming outside your home state.

Do Shopify, Amazon or payment processors require an LLC?

Not as a rule. Stripe’s support page explains that a sole proprietor can sign up without an EIN and use a Social Security Number instead. Amazon offers selling plans to individuals; our comparison of Amazon’s Individual and Professional selling plans covers the fee side. Shopify says you might be required to verify personal and business information to use Shopify Payments in the US. Expect every platform to verify your identity whichever structure you choose.

If you do form an LLC, set the platform accounts up in the LLC’s name, with its EIN if it has one, and pay into a bank account in the LLC’s name. The IRS notes an LLC may get an EIN to open a bank account even when it does not need one for federal tax. Mixing store money with personal money makes bookkeeping harder and blurs the line between you and the business that an LLC is meant to draw.

A checklist: when an LLC is worth considering

There is no single revenue figure at which an LLC becomes “required.” Use these questions to decide whether it is worth the cost now or later.

Points toward forming an LLC sooner:

• You sell products that could injure someone or damage property, such as items for children, cosmetics, supplements, electrical goods or anything people eat or apply to their skin.
• You are signing contracts with obligations, such as a warehouse lease, a minimum-order manufacturing deal or a loan for inventory.
• You have two or more owners. An LLC with an operating agreement gives you a framework for who owns what.
• You have significant personal assets, such as home equity or savings, that you want separated from business risk.
• Your state’s yearly cost is low relative to your expected profit, as in Texas or New York in our model.

Points toward waiting:

• You are still testing whether anyone will buy, with low inventory and no contracts.
• You live in a state where the annual charge is high. In California, $800 a year is a large share of a test store’s profit.
• Your main reason is taxes. By default, a single-member LLC pays the same federal income and self-employment tax as a sole proprietor.
• You sell low-risk goods and can carry suitable insurance in the meantime.

A practical test: compare the average yearly state cost in your state with your realistic first-year profit. If a test store expects to make $3,000 in profit, the California average of $836.67 a year in our model is roughly 28% of it, while Texas at $100 a year is about 3%. That does not settle the liability question, but it shows when timing matters. If you are still working out your numbers, our guide to markup vs margin and pricing helps you estimate profit per order.

How forming an LLC usually works

The exact steps are set by your state, so use your Secretary of State’s site as the primary guide. In general:

1. Pick the state. For most small online sellers, this is the state where you live and run the business, to avoid paying in two states.
2. Check the name. Search your state’s business registry to see that the name is available.
3. Name a registered agent if your state asks for one. This is the person or company that receives official papers for the LLC. Florida, for example, lists a required $25 registered agent fee at filing.
4. File the formation document. California calls it Articles of Organization; Texas calls it a certificate of formation. Pay the filing fee.
5. Complete follow-up filings. Examples are California’s Statement of Information and New York’s publication requirement.
6. Get an EIN if you need or want one. It is required if the LLC has employees, and useful for opening a business bank account.
7. Move the store into the LLC’s name. Update your platform accounts, payment processor, bank account and any state tax registrations.
8. Put the recurring dates in your calendar. California’s $800 tax for the first year is due by the 15th day of the 4th month after registration; Delaware’s tax is due June 1; Florida’s report has a May 1 late-fee date; Texas reports are due May 15.

For the wider launch costs, such as plan fees, apps and a domain, see our breakdown of how to start a Shopify store and what it really costs.

What you should check next

1. Look up your own state’s LLC formation fee and annual charges on the Secretary of State and state tax agency sites.
2. Estimate your first-year profit and compare it with your state’s yearly LLC cost.
3. List the risks your products carry and get a product liability insurance quote.
4. Check whether your city or county requires a business license or DBA registration, whichever structure you use.
5. If you have a partner, or expect profit high enough that tax planning matters, book time with an accountant before forming anything.
6. If you sell without holding stock, read our guide to selling online without keeping inventory, since your model changes how much risk you carry.

Frequently asked questions

Can I open a Shopify store without an LLC?

Yes. Nothing in the business structure rules requires an LLC to run an online store. You will be asked to verify personal and business details when you set up payments, and as a sole proprietor you can use your own name and tax number.

Do I need an EIN if I am a sole proprietor or single-member LLC?

The IRS says a single-member LLC needs an EIN if it has employees or owes certain excise taxes. Without those, it generally uses the owner’s name and taxpayer number for federal tax, though you may still want an EIN for a business bank account or because your state asks for one.

Does an LLC have to file a beneficial ownership report with FinCEN?

Not if it is a US company. FinCEN says US companies are exempt from beneficial ownership reporting, and a final rule making that exemption permanent took effect on August 14, 2026.

Can I switch from sole proprietor to LLC later?

Yes. Many sellers start as sole proprietors and form an LLC once the store proves itself. When you do, move contracts, platform accounts, payment processing and bank accounts into the LLC’s name so the business actually operates through it.

The takeaway

You can start selling online as a sole proprietor today, with no LLC. Form one when the liability protection is worth the yearly cost in your state: sooner if you sell riskier products, sign contracts or have partners, later if you are still testing demand in a high-fee state like California. Do not form one expecting lower federal taxes by default, and confirm the final decision with a lawyer or accountant in your state.

Sources

• U.S. Small Business Administration, “Choose a business structure” (sole proprietorships, LLCs, comparison table, operating in more than one state; updated August 28, 2026). sba.gov
• IRS, “Limited liability company (LLC)” (default classification, Form 8832, 75-day rule; reviewed October 10, 2026). irs.gov
• IRS, “Single member limited liability companies” (Schedule C reporting, self-employment tax, EIN rules; reviewed July 27, 2026). irs.gov
• IRS, “Self-employment tax (Social Security and Medicare taxes)” (15.3% rate, $400 threshold; reviewed June 27, 2026). irs.gov
• FinCEN, “Beneficial Ownership Information” (US companies exempt; final rule effective August 14, 2026). fincen.gov
• California Franchise Tax Board, “Limited liability company” ($800 annual tax, due dates, first-year exemption years, LLC fee tiers; updated March 5, 2026). ftb.ca.gov
• California Secretary of State, LLC forms and fees ($70 Articles of Organization, $20 Statement of Information) and business entities FAQs (Statement of Information every two years). sos.ca.gov and sos.ca.gov
• Texas Secretary of State, “Form 205 instructions” ($300 certificate of formation fee). sos.texas.gov
• Texas Comptroller, “Franchise Tax” ($2,650,000 no-tax-due threshold for 2026 and 2027 reports, May 15 due date, information reports). comptroller.texas.gov
• Florida Division of Corporations, “LLC Fees” and “File Annual Report” ($100 filing fee, $25 registered agent fee, $138.75 annual report, $538.75 after May 1, September dissolution deadline). dos.fl.gov and dos.fl.gov
• New York Department of State, “Forming a Limited Liability Company in New York” ($200 filing fee, publication requirement, $50 Certificate of Publication) and “Biennial Statements” ($9). dos.ny.gov and dos.ny.gov
• Delaware Division of Corporations, “LLC/LP/GP Franchise Tax Instructions” ($400 annual tax, June 1 due date, late penalty). corp.delaware.gov
• Shopify Help Center, “Shopify Payments for the United States” (personal and business information verification). help.shopify.com
• Stripe Support, “Signing up for Stripe as a sole proprietor without employer ID number.” support.stripe.com

Last reviewed: October 24, 2026. State fees, tax rules and the FinCEN exemption match the official pages listed above as checked on that date; fees change, so confirm them with your state before filing.

How this article was made: researched and drafted with AI assistance, with every factual claim checked against the sources above. The three-year state fee totals and the $3,000 profit comparison are hypothetical models based on the stated assumptions, not quotes for any specific business.

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