Benefits Disadvantages Is dropshipping for you?

Sole Proprietorship
. This is the simplest business structure. 
The IRS defines this 
structure as
‘someone who owns an unincorporated business by himself or herself. 
Many self-employed workers (like freelancers) are sole proprietors.
Think of a sole proprietorship as a personal business. Under this structure, nothing 
much changes. You essentially just communicate to the IRS that you’re making 
money online. When filing taxes, you simply report business earnings on your 
personal taxes.
Keep in mind that a sole proprietorship offers no liability protection, so if your 
business is sued, your personal assets could be in trouble. So while a sole 
proprietorship is easiest to get started with, it’s not necessarily the best.
Partnership
. If you want to start up your business with a partner, your company may 
fall under partnership jurisdiction. This is simply ‘the relationship existing between 
two or more persons who join to carry on a trade or business,’ 
according to the IRS
.
Partners must file an annual information return, but the business does not pay 
income tax. Instead, each partner reports his or her profits and losses.
Obviously, for solo entrepreneurs, this structure doesn’t apply. Many dropshipping 
stores are run by one person, so you don’t see this structure a lot. However, it’s 
definitely useful in some cases, and you should be aware of it in case you’re co-
founding a business with a partner.

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5. Making Your Business Official
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Limited Liability Company (LLC)
. Ever seen a business name with LLC at the 
end? That means it’s a Limited Liability Company. Under this structure, personal 
and business finances are separated, meaning your business will be a separate 
legal entity from your personal finances. This affords more protection than a sole 
proprietorship, but it doesn’t come with the heavy regulations that a C Corporation 
demands.
You’ll often see medium-sized businesses opt for an LLC, and it’s appealing for its 
balance of protection and flexibility. Even though it’s popular, it may or may not be 
right for you. Check out 
the IRS guidelines on LLCs
 as well as any local rules that 
apply.
C Corporation
. This option provides the highest level of liability protection. This 
is how most major businesses are set up. However, becoming a C Corp is a more 
complex process, and a C Corp may be subject to double taxation.
For most dropshippers, this option is off the table. However, more ambitious 
entrepreneurs might want to give it a look. 
Here’s some information from the IRS on 
C Corps
.
Again, since I’m not a legal expert, I can’t suggest one of these structures. I can 
say that most entrepreneurs who have smaller businesses usually choose a sole 
proprietorship or an LLC. A one-person business isn’t too complex to set up, but 
a business attorney can help you make the best choices and help you protect 
yourself, your personal assets, and your business from harm.
Another reason to consult an attorney is that different states have different 
requirements for businesses. A professional in your state will be able to tell you 
everything you need to know about incorporating. If you don’t know where to start 
looking, look at 
this FindLaw page
 that lists business and commercial lawyers by 
state.

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