How to Form an E-Commerce LLC

Forming the LLC Is the Same Process as Any Business

An e-commerce business forms its LLC the same way any other business does: file Articles of Organization with your state, pay the state's filing fee, which ranges from $35 in Montana to $500 in Massachusetts, and name a registered agent with a physical street address in that state. Selling exclusively online doesn't change this process or exempt you from any of it; the state doesn't ask whether your business has a physical storefront.

Register for a Seller's Permit Before Your First Sale

If you sell taxable goods, most states require a seller's permit or sales tax registration before you make your first sale, not after. This is typically handled through your state's department of revenue and is separate from your LLC filing with the Secretary of State. Apply for this permit as part of your setup checklist, not as an afterthought once sales start coming in.

Economic Nexus Can Create Sales Tax Obligations in Other States

Before 2018, a state generally couldn't require an out-of-state seller to collect its sales tax without a physical presence there. The Supreme Court's decision in South Dakota v. Wayfair changed that, letting states set an economic nexus threshold, commonly a dollar amount of sales delivered into that state in a year, above which an out-of-state seller must register and collect that state's sales tax even with no physical presence there. Thresholds and rules vary by state, so once your online sales into a particular state grow, check that state's department of revenue for its specific threshold rather than assuming your home state's rule applies everywhere you ship.

Marketplace Sales Work Differently Than Your Own Website

Many states require an online marketplace that facilitates third-party sales to collect and remit sales tax on behalf of sellers using that marketplace, under what's usually called a marketplace facilitator law. If you sell only through a marketplace with this kind of arrangement in a given state, that marketplace may already be collecting the tax for you there; if you also sell through your own website, you're generally responsible for that channel's sales tax yourself. Don't assume marketplace collection covers every channel you sell through.

Follow the FTC's Rule on Shipping Times

The FTC's Mail, Internet, or Telephone Order Merchandise Rule applies to any seller taking orders online, by mail, or by phone. Per the rule, a seller must have a reasonable basis to expect it can ship within the timeframe it advertises; if no timeframe is stated, the default is 30 days. If a shipment can't go out on time, the seller must either get the buyer's consent to the delay or refund the payment for the order. This applies regardless of your LLC's size, so build it into your fulfillment process from the start.

Get an EIN and a Business Bank Account

An EIN from the IRS is free and is what most banks require to open a business account, along with what most payment processors ask for when setting up a merchant account for an LLC. Keep the business's payment processing, bank account, and expenses entirely separate from your personal accounts from the first sale onward.

Don't Skip Local Licensing Just Because You're Online

Many cities and counties require a local business license or home occupation permit for any business operated from a residence, including an online-only one with no customer-facing storefront. Check your city or county's requirements in addition to your state-level filings, since "I don't have a storefront" doesn't automatically exempt a home-based e-commerce business from local licensing.

Decide How You'll Handle Returns and Refunds

Several states have their own rules about disclosing a store's return policy, and a vague or missing policy can trigger consumer complaints even where no specific state law is violated. Write a clear returns and refund policy before your first sale, and keep it visible on your website, since platforms and payment processors increasingly expect to see one as part of their own merchant requirements.

Protect Customer Data From the Start

An online store collects names, addresses, and payment information by default, which brings its own responsibilities around data security and, depending on where your customers are located, specific privacy disclosure requirements. Use a reputable payment processor that handles card data securely, and have a privacy policy that accurately describes what customer information you collect and how you use it.

Sales Tax Compliance Gets Complicated Fast

Tracking economic nexus thresholds across every state you ship to, registering in each one you cross a threshold in, and filing returns on each state's own schedule is one of the most common pain points for growing e-commerce sellers. Many sellers use sales tax automation software or a dedicated service once they're registered in more than a handful of states, rather than tracking it manually.

This Isn't Tax or Legal Advice

Whether you've crossed an economic nexus threshold in a particular state, and how marketplace facilitator rules interact with your own website sales, depends on your specific sales volume and the states involved. Talk to a tax professional who works with e-commerce sellers before assuming you're compliant everywhere you ship.

Keep Shipping Promises You Can Actually Keep

The FTC's default 30-day shipping rule is a floor, not a target; customers generally expect much faster shipping today, and a pattern of delays without proper notice and consent can expose the business to FTC enforcement in addition to customer complaints. Set shipping expectations you can reliably meet, and have a process for notifying customers before a promised date slips.

Protect the Business Name Across Channels

If you sell under a brand name different from your LLC's legal name, register that name as a DBA in your state and check whether the name is available as a domain and on the marketplaces or platforms you plan to sell through, before you invest in branding around it.

Payment Processing Adds Its Own Requirements

Most payment processors run their own verification on a business before approving it to accept card payments, often asking for the LLC's formation documents, EIN, and a description of what you sell. Some categories of goods face extra scrutiny or higher fees, so confirm your payment processor supports your specific product category before building your store around it.