Do Resellers Need an LLC?

No, you don't need an LLC to resell in the US. When you start selling for profit on your own, you're a sole proprietor by default, and an LLC is an optional structure you can add later. This guide explains what an LLC actually changes, what it doesn't, what it costs in a few real states, and the paperwork that applies either way.

This is general information for US resellers, not legal or tax advice. Rules vary by state and change, so check your state's own pages or ask a professional before you file anything.

The short answer#

• You can resell without an LLC. The SBA says you're automatically a sole proprietor once you do business activities without registering another structure.
• An LLC is mainly about liability. It's meant to keep business debts and claims separate from your personal assets.
• It doesn't change your taxes by default. A single-member LLC is taxed like a sole proprietorship unless you make a separate election.
• It has its own costs and filings, which depend on your state.
• It doesn't replace a sales tax permit, a resale certificate or good records.

What an LLC is#

An LLC (limited liability company) is a business structure created under state law, so each state sets its own rules and fees. Its main feature is in the name: the SBA says LLCs protect owners from personal liability "in most instances," and IRS Publication 583 says LLC members aren't personally liable for its debts.

That protection has limits, which vary by state and by how you run the business. An attorney in your state can explain them.

Sole proprietor: the default#

As a sole proprietor, you and the business are the same thing legally. The SBA says there's no separate business entity and you can be held personally liable for the business's debts. On the plus side, there's nothing to form: you report business income and expenses on your own tax return, usually on Schedule C.

Most resellers start this way. Our guide to reseller taxes and 1099-K forms covers how that income is reported.

Taxes: what an LLC changes and what it doesn't#

By default, the IRS treats a single-member LLC as a "disregarded entity" for income tax. Its activity goes on your own return, such as Schedule C, just like a sole proprietorship. The IRS also says you pay self-employment tax on net earnings "in the same manner as a sole proprietorship," and the SBA agrees that LLC members must pay self-employment tax.

An LLC with two or more members is taxed as a partnership by default, which means a separate partnership return.

So forming an LLC on its own doesn't lower your federal tax bill, but it opens the door to a different tax election.

The S corp election#

An eligible LLC can choose to be taxed as an S corporation by filing Form 2553. The IRS instructions say such an LLC doesn't also need Form 8832, and that Form 2553 is due no more than 2 months and 15 days after the start of the tax year it should take effect.

The catch is that an S corporation must pay an owner who works in the business reasonable compensation as wages, with employment taxes, before taking other distributions. That means running payroll and filing more returns, which is why the election usually only comes up once profits are higher. Run it past a tax professional with your real numbers.

EIN, bank account and keeping money separate#

• EIN. An Employer Identification Number is the business's federal tax ID. The IRS says a single-member LLC with no employees or excise taxes doesn't need one for income tax, but you can get one for things like a bank account. It's free: the IRS says you never have to pay for an EIN and warns about sites that charge.
• Business bank account. IRS Publication 583 says to keep your business account separate from your personal checking account. That applies with or without an LLC, and it makes tracking much easier.

What an LLC costs: three state examples#

Fees vary widely. Here's what three states list, as of October 2026:

A few details matter:

• Michigan requires the annual statement starting the year after you form, though an LLC formed after September 30 skips the next one.
• Texas businesses at or below the threshold don't owe franchise tax but still file a Public Information Report or Ownership Information Report.
• California's $800 tax applies even if the LLC isn't doing business, until you cancel it. The state's first-year exemption only covered tax years beginning in 2021 through 2023, and the FTB's 2026 instructions list none, so a new LLC owes it for its first year too. An extra LLC fee starts at $900 once California income reaches $250,000.

Check your own state's secretary of state and tax agency pages, since fees and rules change.

What an LLC doesn't replace#

• Sales tax permits and resale certificates. These are separate registrations with your state's tax agency. In Texas, the permit is free, and a sole proprietor who forms an LLC counts as a change of ownership that needs a new permit. Our guide to resale certificates and sales tax explains how they work.
• Records. You still need receipts, costs and sales records for every item. See how to track reselling sales and profit.
• Marketplace setup. If you register as a business on eBay, its seller registration page lists sole proprietorships and LLCs as business types, asks for a legal business name, EIN and owner details, and requires a business checking account in the same name.

When an LLC tends to make sense#

There's no single answer, but here's how it went for us. In our experience running a reselling business, now through several LLCs, setting one up was simple. It started to make sense once 1099-K forms from online marketplaces were landing on our personal income: moving sales, banking and paperwork into the business's own name kept them apart. A single-member LLC's income still goes on your personal return by default, so the gain was separation, not a lower tax bill.

A business bank account then changed how we could buy:

• Bulk buying without sales tax. On large orders, buying for resale without paying sales tax adds up. That comes from a resale certificate or sales tax permit, not from the LLC, and sole proprietors can register too. See how resale certificates work.
• Employee and virtual cards. Separate cards for helpers and virtual cards made it easier to spend and track business money as buying grew. Using extra cards to get around a store's purchase limits is a different thing, and can break store terms and get orders cancelled.
• Business credit. Over time we built business credit separate from personal income, which added buying power. It's still debt: it has to be paid back, and carrying a balance costs money.

Other questions people weigh:

• How much risk is there? More sales, stored inventory or higher-value items can mean more exposure to claims and debts.
• Do you have a partner? An operating agreement sets out who owns what. The SBA notes some states may require an LLC to be dissolved when a member joins or leaves unless the agreement covers it.
• What does your state charge? A $25 annual statement is small; an $800 annual tax is a big share of a small budget. See how much money you need to start reselling.
• Are profits high enough to look at an S corp? That's a question for a tax professional.

Selling as a business on OOSClub#

OOSClub tracks the marketplaces and tools resellers use, including what each says about business accounts and fees. Browse them on the marketplaces hub.