Should I Register My Company Before Selling On Amazon
Last updated: v Jun 2021
Choosing to sell on Amazon is becoming increasingly popular for individuals, sole traders, and limited companies, providing enhanced exposure and access to millions of potential customers online.
According to Mintel, near 90% of all U.k. shoppers apply Amazon, and around 70% brand purchases on the site at least in one case a calendar month. As a result, Amazon is now the 5th largest retailer in the Uk. It's easy to meet why it's such an appealing selling platform for new and existing businesses of all sizes.
At Rapid Formations, we receive a lot of enquiries from people who are interested in setting upward a limited company for an Amazon concern. The two most common queries are:
- Is it better to sell on Amazon equally a express company or every bit a sole trader?
- Can I change my Amazon Seller account from sole trader to limited company?
To answer these questions and assistance you to make the right decision, nosotros will discuss the sole trader and limited company options available in the UK, too equally the process of setting up an Amazon Seller account. By the finish of the blog, you should have a ameliorate understanding of this confusing topic and be confident in your determination to sell on Amazon as a limited company or sole trader.
Should I sell on Amazon as a sole trader or express company?
Deciding whether to utilise a sole trader or limited company business construction depends on how much y'all're going to sell on Amazon. Choosing the wrong type of business structure could significantly bear on your Income Tax bill and National Insurance contributions (NIC), so it is non a decision that should be taken without careful consideration.
More often than not, if you're but likely to sell a small-scale number of items each month, or you are planning to sell on Amazon on a casual basis, registering as a sole trader will probably exist best. In these situations, you're unlikely to gain any tax advantages by setting up a company. However, if you're intending to sell a lot of products on Amazon on a regular ground, it will exist more tax-efficient to prepare a limited company. You will likewise benefit from express liability.
Potential taxation savings
Limited companies pay 19% Corporation Tax on profits. Sole traders pay 20-45% Income Tax on profits. Value Added Revenue enhancement (VAT) may also be payable. However, the rules and requirements for VAT registration are the same for companies and sole traders, so this potential taxation liability volition apply either way and should non influence your choice of concern structure.
Choosing to sell on Amazon as a limited company will enable you to minimise your personal tax and NIC liabilities. This is considering you will be able to pay yourself a combination of salary and dividend payments. By paying yourself less than the National Insurance threshold of £9,568/twelvemonth (2021/22 tax twelvemonth), yous won't have any National Insurance or Income Tax to pay.
Meanwhile, the first £2,000 of dividends will exist taxation free. Any dividend income above that corporeality will be field of study to Dividend Taxation rates betwixt 7.5% and 38.one%, which are far lower than Income Tax rates. Furthermore, neither you nor your company will have to pay NIC on dividend income.
Conversely, if you cull to sell on Amazon as a sole trader, all profits will be treated every bit personal income. This means that all of your profit will exist discipline to varying rates of Income Revenue enhancement and NIC.
As a full general rule of pollex, yous will pay more than tax equally a sole trader than a limited company when your almanac income from all sources reaches around £30,000 per year. And if your income exceeds £50,000, you'll go a Higher-rate taxpayer, which ways you will pay 40% tax on any personal income higher up that corporeality.
Express liability
Aside from the tax-saving benefits, setting up a express company will as well protect your personal finances. This is considering limited companies are treated as singled-out legal entities (just like people), then they are responsible for their own debts and liabilities.
If your business organization faces any legal issues or is unable to pay its bills, your personal finances and avails will be protected across what you've already invested in the business.
If you set up as a sole trader, there will be no legal distinction between y'all and the business. All business debts and liabilities will be your debts and liabilities, and then your personal finances and assets will be at risk if annihilation goes wrong.
Is it difficult and expensive to set up a company?
There are many misconceptions regarding setting up a limited visitor. People assume information technology is difficult, expensive, and requires a lot of work. In reality, information technology'due south actually quick and easy to prepare upward a company, it can cost as little as £12.99, the almanac reporting requirements are pretty straightforward, and using an accountant to deal with your revenue enhancement affairs will probably salve you lot money.
You tin can register a limited visitor for your Amazon business online. It takes around 5 minutes to fill out the awarding form, and most companies are set up within 3 to 6 working hours. When your company is registered, you will receive all of your incorporation documents and yous can start trading immediately. Yous can then set your Amazon business on the very same mean solar day.
The simplicity of company formation comes every bit a surprise to many people. It is no longer an exclusive business structure reserved only for affluent entrepreneurs and big businesses. Limited companies are suitable for all types of traders and all sizes of businesses, both new and established.
You will take a few additional filing obligations and may take to spend a footling more money on an accountant (which is optional, not required), but yous will take the opportunity to retain more of your Amazon profits. Your accountant tin can advise on the all-time ways to minimise your tax bill and operate your business in the nearly tax-efficient way, so you will probably relieve more money than yous spend on whatever such additional services.
Changing Amazon Business relationship from sole trader to limited company
If you are already ready up as an Amazon Seller, irresolute from a sole trader to a limited company can be catchy. It actually shouldn't exist, but the process of moving an Amazon Seller Account to a new entity requires re-verification, which seems to result in significant delays.
In many cases, sole traders who request to transfer an existing seller account to a new limited visitor are unable to sell through Amazon for several weeks or months whilst their accounts are waiting to be reverified. During that time, seller accounts are often suspended, resulting in lost income.
Given the credible difficulty that nearly people face when attempting this process, nosotros would advise setting up a limited company before creating an Amazon Seller Account – especially if yous know or think that you will want to trade as a limited company at some bespeak in the futurity.
Setting up an Amazon business
There are ii ways you tin sell on Amazon – past registering as a vendor on Amazon Vendor Central, or by registering equally a seller on Amazon Seller Central. As an individual or a startup or small business, you will merely exist able to create an business relationship on Amazon Seller Central, only information technology's worth understanding the deviation between the 2 types of accounts.
Amazon Vendor Central Business relationship
A popular option for established manufacturers and distributors, Amazon vendors act as suppliers, selling their inventory (i.e. products) directly to Amazon at wholesale rates. Amazon then resells the products to customers under its own make name, taking care of everything from pricing and shipping to customer service and returns.
It is not possible to utilize to exist an Amazon Vendor – registration is past invitation only, reserved for top sellers and well-known brands. Products being sold through Vendor Central will normally feature the phrase "ships from and sold by Amazon.com." Simply you never know, 1 day you may receive an invitation!
Amazon Seller Central Account
Amazon Seller Fundamental is suitable for individuals and whatsoever size of business concern. Information technology is designed as an online marketplace for brands and merchants to sell products under their own proper noun straight to Amazon customers. To sell on Amazon, you lot will need to choose a selling program and set up an account on Seller Central.
Amazon Selling Plans
Amazon Seller Primal offers 2 selling plans – a Bones Selling Plan (to sell a little) and a Professional Selling Plan (to sell a lot). You lot must choose the most suitable plan before creating an business relationship.
Basic Selling Programme | Professional Selling Programme |
| Ideal for individuals, casual or seasonal sellers, and very pocket-size businesses | Ideal for businesses with high-volume sales and/or those selling restricted products |
| Sell upward to 35 items per month | Unlimited selling |
| 'Pay as you go' pricing – £0.75 (+VAT) fee per item sold | No per-item fee |
| Additional referral fee percent calculated on the total sales cost | Referral fee percentage calculated on the total sales price |
| No monthly subscription fee | Subscription fee of £25 (+VAT) per month |
| Sell products in certain categories only | Sell in all categories |
| Add together items to Amazon Marketplace ane at a time | Add big batches of products using bulk tools |
| Amazon-set commitment rates for all products | Seller-set delivery rates for non-BMVD products (Books, Music, Video, and DVD) |
Which selling plan is correct for you?
Your choice of selling programme will depend on ii things: the products that you're selling, and the number of items that you plan to sell each month.
If yous're selling products in a category requiring blessing and/or y'all're planning to sell more than 35 items per month, you lot will need to choose the Professional Selling Program.
Here is a simple cost-do good assay to help you make up one's mind which selling plan in all-time:
- The Bones Selling plan offers a pay-as-y'all-go rate of £0.75 (+VAT) per social club
- You would demand a minimum of 34 sales/month to offset the £25.00 (+VAT) subscription fee for the Professional Selling Program (34 x £0.75 = £25.fifty)
- If you have fewer than 34 sales per month, the Basic Selling Plan will probable be the best choice for you.
You tin can hands switch between Amazon's Bones and Professional person selling plans at any time, downgrading if you're not selling enough each month or decide to accept a break, and upgrading if y'all need access to additional features or information technology becomes cost-effective to utilize the Professional person Selling Plan at any point.
Please note: Amazon sometimes refers to the Basic Selling Plan as the 'Individual' selling plan, so don't exist thrown if you come up beyond this term when y'all're creating an account or reading articles on Amazon or other websites.
Create an Amazon Seller Account
In one case y'all get to grips with the terminology, requirements, and restrictions, creating an Amazon Seller Account is (usually) quite straightforward. Substantially, there are iii master steps:
ane. Make up one's mind what you lot desire to sell on Amazon
Y'all volition first demand to choose the advisable Amazon product category nether which to list your products. More than than twenty 'open categories' are available to both Basic and Professional sellers. Additional 'categories requiring blessing' are bachelor just to sellers with the Professional Selling Plan. We discuss this in more than particular below.
2. Choose a selling programme
Basic Selling Programme or Professional Selling Programme?
iii. Register and kickoff list
Once you've chosen your production category and selling plan, yous are ready to create your Amazon Seller Account. You lot will need to provide the post-obit information (where applicative):
- Location of business (or your country of residence if y'all don't have a business concern)
- Type of concern
- Sole proprietor (sole trader)
- Privately owned business (limited company or partnership)
- Publicly-listed business (PLC)
- Land-owned business
- Charity
- Individual (a person, rather than a business)
- Legal business proper name
- Your total proper noun
- Registered business address
- Business organisation phone number
- Company registration number
- Unique Taxpayer Reference (UTR) number
- Full name of the primary contact for the seller account
- Personal information for the primary contact person
- Country of citizenship
- Country of birth
- Date of birth
- ID (passport, UK driving licence, or National ID)
- Residential address
- Telephone number
- Verify your telephone number by entering a one-time pin that is provided to you past text message or voice telephone call
- State whether primary contact is a beneficial possessor of the business or a legal representative of the business organization
- Payment method (to pay your seller fees and to receive proceeds from sales)
- Store proper noun for listing your products on Amazon Marketplace
Next, you volition be asked to enable two-pace verification to protect your business relationship. Utilise your phone number to receive a 'One Time Password' by text bulletin or telephone call and enter it when prompted.
When y'all accept successfully completed the verification, you will be taken to your Seller Cardinal dashboard where yous can manage your account details and provide whatever required documentation, such equally proof of ID, business documents, and VAT details. Once Amazon has received and validated your information, yous tin can offset listing your products.
Categories and products requiring approval on Amazon
To comply with all applicative laws and ensure that customers can store with conviction, approval is required to sell certain products on Amazon. Given that Amazon sells a vast range of products, the list is extensive. Hither is a brief overview of the types of listings that may demand approval:
- Alcohol
- Developed-oriented products
- Clothing (e.grand. branded items)
- Drugs and dietary supplements
- Electronics
- Food & drink items
- Jewellery
- 'Made in Italy' products
- Music and DVDs
- Items in the Toys and Games category from Nov to the terminate of Jan
- Streaming Media Players
- Items in Amazon Handmade
Agreeing to Amazon's Acceptable Usage Policy (AUP)
You are required to notify Amazon at the fourth dimension of agreeing to the Acceptable Usage Policy (AUP) if you are planning to sell items in one of the post-obit categories:
- Booze
- Adult-oriented, erotic, and sexual health products
- Dietary supplements and nutritional products
- Knives
- Non-prescription drugs
- Prescription and non-prescription eyewear
Amazon Payments Europe will accept to perform additional checks to verify this information, which may filibuster the process. To select the relevant AUP category, you must:
- Click the 'Settings' tab on the top right of your Seller Central business relationship, then click 'Account Info'.
- Click on 'View or Edit' side by side to the option 'Amazon Payments Europe Adequate Apply Policy'. You will observe this tab in the commencement grayness box that appears at the summit of the folio.
- Select the relevant category or categories. If yous don't want to sell in any of these specific AUP categories, no further activity is required. Otherwise, follow the adjacent footstep.
- If you want to sell goods in one of the specific AUP categories, you lot need to inform Amazon by selecting the relevant category in Seller Central.
What business organisation documentation do I need to provide to Amazon?
If you're creating an Amazon Seller Central account every bit a business (rather than as a private individual), you will exist asked to provide sure documentation to verify your identity and the being of your concern (if applicable).
Private limited visitor
- Current appointments written report / Company Report dated within the concluding 90 day
- Utility bill, bank statement, or credit carte du jour statement in the proper name of the business, dated within the past 90 days
- Articles of Clan
- Memorandum of association or statement of capital
Partnership
- HMRC correspondence that contains the partnership's UTR number, proper name, and business address, and i of the following:
- Find to complete a tax return
- Alphabetic character confirming the partnership's registration with HMRC
- Most recent taxation return of the partnership, which must include the UTR number and the name and business accost of the partnership
- Utility neb or bank statement in the name of the concern, dated within the past ninety days
- Partnership understanding
Sole trader
- Cocky Assessment welcome letter
- Class 2 National Insurance Contributions beak
- Document of registration for Value Added Taxation (VAT)
- Correspondence from HMRC acknowledging UTR number
- Notice to complete Self Assessment Tax Return
- Utility beak, banking concern argument, or credit menu statement in the proper name of the sole trader or trading name of the sole trader, dated inside the past ninety days
Registered charity
- Governing document
- Current appointments study
- Charity Commission written report
- Confirmed list of all trustees – must display full name and date of birth of each trustee
- Utility bill or banking concern statement in the proper noun of the clemency and including the registered address, dated within the past 90 days
Individual (individual) sellers and master contacts
- Full valid passport
- National Identity Card
- UK driver's licence
- Utility bill, depository financial institution statement, or credit menu statement addressed to the individual and dated within the by xc days
You volition provide the required information and/or documentation in your Amazon Seller Central account. Go to 'Settings' then 'Account Info' and select the sections that are highlighted in red to encounter what you lot demand to provide.
It usually takes Amazon betwixt 5–ten working days to verify data, but it can take longer. You may be able to sell on Amazon whilst your information is existence verified, but this is subject to certain criteria. In some cases, you may have to wait until your information is verified before you are permitted to sell on Amazon.
Where can I get a re-create of my 'business registration excerpt'?
A business organisation registration extract is an official document that confirms the registered details of a business. The certificate that you will need to provide for this purpose depends on your business structure.
If you decide to sell on Amazon equally a UK-registered limited visitor or LLP, y'all can provide a Company Report. To obtain this certificate, follow these simple steps:
- Sign into your Companies House business relationship at https://account.companieshouse.gov.uk/signin
- Enter your visitor name or company registration number in the search box
- Select the 'View all' tab
- Select 'View company data snapshot' at the bottom of the folio
- Your company report will download to your computer device
If you lot decide to sell on Amazon as a sole trader or partnership, your UTR number may suffice as a business registration excerpt, merely you might have to provide prove by uploading a copy of a letter from HMRC that contains your UTR.
Uploading more than one document at a time
There is a limit to the number of documents that you can upload and submit for review. If you need to provide several documents, you lot may have to merge them into one document. You lot tin can do this by scanning each document, merging the scanned images into a Microsoft Give-and-take certificate, and creating a PDF.
Providing VAT details to Amazon
As per the laws governing EU member states, Amazon charges VAT on all orders delivered to customers within these European union countries. Whether registered as a sole trader or a limited company, your Amazon business organization may exist subject to VAT registration in i or more than countries.
If your Amazon business is set up in the United kingdom, yous will need to register for VAT in the U.k. if:
- You lot store inventory in the United kingdom, and
- You sell these appurtenances to UK-based consumers, and
- Your annual sales exceed the Britain VAT threshold of £85,000
- If you sell appurtenances to customers in other EU countries, y'all might also have to annals for VAT separately in those EU countries
If your Amazon business organisation is fix in a dissimilar European union state, you will demand to register for VAT in the United kingdom of great britain and northern ireland if:
- You lot store your inventory in the UK, or
- You sell to non-business consumers based in the UK, and
- Your annual sales exceed the UK distance selling VAT threshold of £70,000
If your Amazon concern is set up outside the European union, you volition demand to register for VAT in the U.k. if:
- Items that you store in the UK are sold to EU customers
- If you sell to consumers in other European union countries, y'all might likewise take to annals for VAT separately in those European union countries
You tin can add your VAT registration number(s) and upload your VAT certificate(s) for your Amazon business once you accept created your seller account. We would strongly recommend using an auditor if you need to annals your sole trader or limited company Amazon business for VAT because it is an incredibly complex issue.
Getting paid for your Amazon sales
When consumers buy appurtenances from your Amazon business, they pay via Amazon Pay rather than directly to you. Amazon deducts the applicable fees based on your selling plan then transfers the remaining gain to the business bank business relationship linked to your seller business relationship.
To become paid for your Amazon sales using Amazon Pay, you must:
- Set your bank account in Amazon Seller Central
- Ensure that you lot have a valid banking company account or credit menu number every bit your charge method in Seller Key
- Sell your goods using Amazon Pay buttons
- Dispatch your sold goods but to the addresses specified by the buyer and communicated by Amazon Pay
- Capture payments for your orders to collect payments from your buyers
Amazon Pay will transfer sales proceeds to your nominated bank account xiv days after the first business concern twenty-four hours (i.e. Mon-Friday) on which the corresponding purchases were fabricated. If yous fix (or change) your banking concern account at any time, your payments will be suspended for three days as a security measure.
Should I Register My Company Before Selling On Amazon,
Source: https://www.rapidformations.co.uk/blog/how-to-sell-on-amazon-as-a-sole-trader-or-limited-company/
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