Which business structure is right for your eBay business?

One of the most important decisions you can make regarding your eBay business is which business structure to create.  This is both a legal and a tax decision, so you should research each type carefully before starting your business.

Most eBay sellers start out as a sole proprietor.  It’s the easiest form of business to organize, and your profits and losses flow through to your personal income tax return.  Other advantages include the ability to deduct losses against other income, very few legal restrictions, and the business is easy to discontinue. 

The disadvantages of a sole proprietor include unlimited liability for the owner, self employment tax on the entire profit, limited ability to raise capital to grow your business, and fewer tax benefits than with an S Corporation or a C Corporation.

There are several other business entities you could operate under, however.  It’s important to review each business entity to determine which one is right for you.  Although the sole proprietor is the easiest form of business to setup, it may not have the liability protection or tax benefits of a corporation or LLC. 

To learn more about the different business entity types available, check out our Business Entity Comparison chart.

For more great eBay tax tips, please read our free special report, Tax Tips for eBay Sellers.

Tags: ebay business, business type, incorporate ebay business, ebay tax

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