Do you want to know the legal requirements you need to start an amazon fba business? If YES, here is a checklist of Amazon FBA business licenses, permits & insurance.

The term FBA stands for ‘Fulfillment by Amazon’ which means that as a seller on Amazon your products are shipped by the Amazon Prime shipping services and should anything go wrong during shipment, liability in this case will fall on Amazon and not on you the seller.

This option is often most times preferred by sellers as it allows them focus their attention on other aspects of the business especially if the business is one that is still in the growth stage. Another reason why an Amazon seller will likely prefer the FBA option is if they are selling products that have international clients, which means they won’t need to bother about the varying import regulations for the different countries they are shipping to.

Having provided you with a:

  1. Amazon FBA Industry Overview
  2. Market Research and Feasibility
  3. Amazon FBA Business Plan
  4. Amazon FBA Marketing Plan
  5. Amazon FBA Name ideas
  6. Amazon FBA Licenses and Permits
  7. Cost of Starting an Amazon FBA Business
  8. Amazon FBA Marketing ideas

We will consider what it takes to get operating license and permit for your amazon fba business including insurance coverage and intellectual property protection.

Starting an Amazon FBA Business – Licenses, Permits & Insurance

Before you can get the necessary licenses and permits that will allow you to be able to become an Amazon seller, you must first ensure that your business is set up legally. Most sellers often start as sole proprietors. Others usually incorporate their businesses in states where it is not so expensive and then register an unlimited number of company names as ‘Doing Business As’ (DBA) which is usually controlled by a master corporation.

However, if you are going to be earning over a certain amount ($30,000) each year, then it is best that you consider incorporation especially for tax reasons. If you are looking to incorporate, then consider choosing between a corporation or Limited Liability Corporation (LLC) as they also work well for small businesses.

Once your business has been registered legally with the federal, state and local tax authorities and incorporated, then you can consider getting the necessary licenses that will allow you operate as an Amazon FBA business. If you are looking at what businesses licenses you will need in order to become an Amazon FBA seller, they are Local Business License and State Sales Tax (Sellers Permit).

List of Legal Documents You Need to Run an Amazon FBA Business

i. Local Business License: The Local Business License is usually issued in the city where you are operating from or live in. while some states require a business license for brick-and-mortar stores or businesses that has customers visiting; there are cities where those that operate from home also require this license. However, in most cities, you are not expected to have a local business license if operating from home or owning a warehouse where you have not hired any employees.

ii. State Sales Tax Number/Sellers Permit: If you are an online retailer who intends to buy products from true wholesale companies in order to re-sell, then you will need to get a sellers permit. This permit is used every time you sell any product on Amazon as a business as you will need to charge the taxes. The taxes charged are then collected and paid to the state.

Another reason why a seller’s permit is important is because each time you buy wholesale, you will need to create a resale certificate that will require the sellers permit number. Even if you sell wholesale, you will still require the sellers permit as well.

If you are however operating in a state where sales tax is charged, you must ensure that you also charge it on buyers within the same state when you ship them their products. Not doing this might result in you being fined and also losing your sales tax license. There are some products and services that are however exempt from sales tax and so you must make your findings to be sure.

Other Legal Documents Required

In running your Amazon FBA business successfully, there are other documents asides your licenses that you would require so that you have no problems whatsoever with the regulatory authorities. One major document that is important for you is a Taxpayer Identification Number (TIN) which is what the Internal Revenue Service (IRS) uses in identifying your business.

While most entrepreneurs make use of the social security number especially if they are sole proprietors, getting a TIN is however highly recommended as against sharing your social security number with strangers. TIN is however important for sellers that are incorporated or have hired employees. Another reason why you would need a TIN is that most wholesale companies will take your seriously if you have one in addition to your sales tax or resale number.

Other documents that you would require in order to be able to run your Amazon FBA business successfully includes;

  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Non – disclosure Agreement
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Consulting contract documents
  • Online Terms of Use
  • Online Privacy Policy Document
  • Apostille (for sellers intending to operate beyond the United States of America)
  • Federal Taxpayers Identification Number (TIN)
  • State Employee Identification Number (EIN)
  • Employees Agreement
  • Records (for shipping supplies and expenses, charges for DSL, office supplies and hosting fees)

Choosing the Best Insurance Policy for your Amazon FBA Business

In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance that are required by the industry you want to operate from. So it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your Amazon FBA business cum e-commerce business.

Here are some of the basic insurance covers that you should consider purchasing if you want to start your own Amazon FBA business with private label in the United States of America;

  • General insurance
  • Health insurance
  • Liability insurance
  • Workers compensation
  • Overhead expense disability insurance
  • Business owner’s policy group insurance

Getting Intellectual Property Protection / Trademark for your Amazon FBA Business

Depending on the products you intend to sell on Amazon, you might require applying for an intellectual property protection before you even consider listing the product for sale to your intended target market. If you do not apply for an IPP before listing your products or services, then Amazon cannot be held liable for property theft of your products or services by other similar sellers in the market place.

If your product or service is one that will require intellectual protection, you should get the services of a lawyer that will help you apply for one. You should however be prepared to pay the required fees necessary. Even though you have no products or services worth protecting, it isn’t out of place to intellectually protect the name of your company, logo or even domain names if you have one.

If you just want to protect your company’s logo and other documents or software that are unique to you. Then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.

Best Legal Entity to Use for an Amazon FBA Business

Starting an amazon fba business is indeed a serious business so the legal entity you choose will go a long way to determine how big you want the business to grow. No doubt choosing a legal entity for a business can be a bit challenging.

When it comes to choosing a legal entity for your amazon fba business you have the option of choosing from general partnership, a limited partnership, an LLC, a “C” corporation, or an “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice.

These are some of the factors you should consider before choosing a legal entity for your amazon fba business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.

If you take your time to critically study the various legal entities to use for your e – commerce business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporations especially when you have the plans of going public.

Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your amazon fba business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.

Is Professional Certification Needed to Start an Amazon FBA Business?

Basically, you do not necessarily need to have any professional certification before your launch an Amazon FBA business with private label business. This is so because Amazon tries as much as possible to give people leverage on their business platform.

On the other hand, if you have plans to someday start your own independent e – commerce business / online store then you should source for relevant certifications that will aid the success of the business.

Steps to Becoming an Online Retailer on Amazon

Once you have conducted a thorough market research and have seen that your business will generate more revenue if it has an online platform and have researched on which e-commerce platform will give your business the best exposure, then becoming a seller online should be very easy.

If your intention is to use Amazon, then before you can register as a seller, you must first decide on what you intend to sell and this is because, while there are more than 20 product categories that are open to all sellers on Amazon, which means these products categories can be listed without having to get specific permission from Amazon, some categories only allow for new products to be listed while some may have specific guidelines for sellers to follow.

There are however products in some of these categories that might require specific permissions from Amazon and to be able to sell in this category, you will need to subscribe to the Professional Selling Plan. The reason why these categories have limited access for sellers except those on the professional platforms is because Amazon has to be able to vet what is being sold so that it meets with overall standards and quality, thereby boosting the confidence of customers who have to buy from these categories. Also, the professional plan allows the seller to sell an unlimited number of products compared to the normal plan where only a limited number of products can be sold.

Once you have decided on what selling plan will be most suitable for you, you can then register by creating an account on Seller Central that will allow you to conveniently manage your selling account before you can then list the products you intend to sell after checking if your products will not require specific permission from Amazon.

In listing the products you intend to sell, you must first check if such products are already on Amazon and if they are, it makes listing easier for you as all you have to do is indicate how many of the products you intend to sell, the condition of the product (new or fairly used) and the shipping options you are providing.

If your products haven’t been ever listed on Amazon, then you have to identify the UPC/EAN and SKU as well as list all the attributes of the products. If you are on the individual selling plan, then your products will be added to the Amazon Marketplace catalog one at a time but as a professional you can add large batches of items you intend to sell using the bulk tools.

Once you have been able to list your products, customers can then see them and buy. Once an order has been placed and you have been notified by Amazon, you can then determine if you intend to ship the products by yourself or allow Amazon handle the shipping. If Amazon is going to handle the shipping, they will ensure that the product is not only picked, packed and ship but they will also provide the required customer service till your products reach the customer.

Fulfillment by Amazon (FBA) also ensures that sellers who list their products with them are eligible for free shipping as charges are done only for storage space and orders. The cost of shipping is already included in the initial fees of the seller and so there are no charges for Amazon Prime free two-day shipping as well as eligible orders. Because Amazon’s marketplace spreads to Mexico and Canada, sellers that have enables FBA for their products will be able to reach more of their customers outside the United States. Asides from customer service, FBA also handles returns.

As a seller, once you have had a successful sale, Amazon ensures that deposits are made into your bank account on a regular basis and notification is always sent once payment has been made.

Conclusion

Therefore why Amazon might offer the best platforms available for any seller who intends to further their online business and generate revenue, there are several requirements and legalities that must be adhered to before this can be achieved.

It is therefore very pertinent that as you would do as regards an offline business, so also must you do for an online business by conducting the necessary researches intended to ensure that you are able to become an Amazon FBA seller with as little hitches as possible. Amazon also has forums where questions and things that need clarifying can be handled.