Shipping is a key element of customer experience and can provide businesses with an edge in terms of competitive edge. Focusing on shipping can increase average order value while spurring repeat purchases.
Launching a shipping business takes careful planning, financial backing and dedication. Your chosen type of entity will determine both its legal structure and tax obligations.
As its name implies, a sole proprietorship is an unincorporated business with one owner, which helps selling items online. There is no legal distinction between profits and debts belonging to both entities and its owner, meaning all earnings and losses reside with one individual. Should there be a claim against the sole proprietorship, creditors can seize personal assets to cover its amount due.
One benefit of sole proprietorships is their ease of establishment; owners can start operations quickly with minimal paperwork and without notifying local authorities. Furthermore, changing structures of your business is generally simpler – though depending on where and how it takes place there could be legal ramifications that need to be considered when switching structures.
Sole proprietorship offers another advantage in taxation: simplified reporting. Profits are added directly into an owner’s personal income and reported on his or her tax return, providing ease of cash flow management; additionally, bank accounts in the name of the business may also help.
An essential step when starting up a shipping company is creating a business plan. A solid business plan ensures you fully comprehend your market, business strategy and creates a roadmap. Furthermore, business plans help secure financing from various funding sources – Growthink’s Ultimate Business Plan Template offers an easy way to write one.
Insurance should also be an essential consideration when running a shipping business. You should purchase professional liability coverage to safeguard you from accusations of negligence and commercial property and general business policies to cover equipment, office space and assets.
C corporations are legal structures that enable owners to limit their personal liability for debts incurred by their business. Multiple shareholders may own shares in a C corp, and it offers tax advantages like pass-through taxation (avoiding double taxation on profits) but require more paperwork and may not be available in all states.
Limited Liability Company (LLC)
An LLC is an ideal business structure for shipping companies because it combines the flexibility of sole proprietorships with limited liability protection provided by corporations. As with other businesses, an LLC must select a registered agent who will accept official correspondence on its behalf; many states provide lists of third-party registered agent services providers. An LLC must also file articles of organization with their state in order to become officially established and legal structures established as well as obtain an Employer Identification Number from IRS in order to open business bank accounts and file tax returns.
An LLC’s operating agreement must outline how it will be run and profits will be divided among members, while also outlining ways personal finances will remain separate from business finances. And, at the end of the day, the LLC is definitely the best option possible for most businesses.