Do You Need an LLC for Affiliate Marketing?

Do You Need an LLC for Affiliate Marketing

Starting an LLC isn't just about protecting yourself against legal troubles; it's also about increasing your tax options and credibility as an entrepreneur.

Most affiliate marketers choose to get a Limited Liability Company (LLC) for their business. You'll find out why you need an LLC for affiliate marketing in this post.

Of course, the purpose of this article is to help you decide whether it's a good option for you or not, depending on your country, your needs, and local laws and regulation.

But, there is one universal truth. You will need a registered business for your affiliate marketing business.

PS: I am not a CPA, and I am not a lawyer. This article is not legal advice!

Table of Contents

Do you need an LLC for affiliate marketing?

In short, yes. I believe that is the best option to protect yourself and your assets and save money on taxes. Many small businesses prefer LLCs over corporations because of their flexibility, low cost, and ease of run.

So, it’s a great way to start affiliate marketing legally! We will further see the advantages of having an LLC for affiliate marketing.

What is an LLC?

An LLC is a legal entity formed under state law to shield owners from liability and liabilities associated with ownership. Their personal assets are protected if a business owner is sued or defaults on a debt. In addition, forming an LLC allows you to take advantage of certain tax benefits.

Moreover, they are different from corporations, partnerships, and sole proprietorships. They’re often confused because they sound similar but serve other purposes.

Corporations are heavier to run with extensive record-keeping, operational processes, and reporting; partnerships are ideal when two or more people run a business, and sole proprietorships are treated as individuals without distinction between personal and business assets.

Different business structure
The different business structure from the US government website

In a nutshell, it’s the most popular legal structure in the US because they are inexpensive, simple to form and operate, and business owners are protected from lawsuits and creditors.

I highly recommend getting an LLC formation service to have every well done and written to avoid any issues…

The advantages of having an LLC for affiliate marketing

Having an LLC for affiliate marketing involves a lot of benefits, including your assets protection, a higher perceived value of your business, and tax benefits…

Let’s dive into each benefit.

Protect your personal assets

Starting an LLC for affiliate marketing is one way to protect yourself from personal liability and increase your business’ credibility. It protects assets such as your home, car, and retirement funds.

You don’t want to lose everything because of an accident or lawsuit. If you’re self-employed, having limited liability protection gives you this freedom and flexibility.

Even if there are low risks involved in running an affiliate business, you may benefit from liability protection. There are always risks, such as financial data breaches, trademark infringement, and workplace accidents.

Have more tax benefits and options for affiliate marketing

An LLC for affiliate marketing offers many tax advantages, including deducting expenses against profits, claiming depreciation deductions, writing off interest payments, and taking advantage of losses carried forward. Plus, it allows you to form multiple businesses under one umbrella.

It is an excellent choice for many small businesses because it provides several benefits, just like a sole proprietorship or partnership. For example, you don’t have to pay personal income tax on the profits of the business, and there are no double taxation issues. Your company’s net income is thus liable to income taxes and self-employment taxes.

However, it does require some additional steps and paperwork to set up, so it’s essential to understand how each option works before choosing one.

S Corp Option for LLCs

An LLC may choose the IRS tax status of an S company (S corp). It allows business owners to be considered employees (for tax purposes).

Due to the S corporation option, the business must pay the employee-owner(s) a decent compensation for their labor.

Additionally, you will have to pay for accounting, bookkeeping, and payroll services. You must save around $2000 per year in taxes to be worth it.

If an affiliate marketer can pay themselves fair compensation and at least $10,000 a year, I think they could benefit from the S corp option.

Gain credibility and trust

Affiliate marketing businesses rely on customer trust. They are built over time and require constant maintenance. Consumers must believe that you are trustworthy and reliable to continue doing business with you and the products you recommend through your links. Credibility plays a massive role in building any successful business. Without it, consumers won’t buy anything.

Business owners often think that starting up an affiliate marketing business is easy. However, there are many things to consider. Some of those include choosing a name, registering the domain name, setting up the hosting account, and even deciding what type of business structure to form.

Once those decisions are made, many steps are still involved in the process. For example, how do you build credibility? How do you establish yourself as an authority figure in your industry? What about brand recognition? These questions and others like them are important because no one will give you their money without them.

The best way to build credibility is to start with a simple LLC for affiliate marketing. This allows you to set up a separate legal entity for your business. You can use this entity to apply for small business loans, government grants, and credit. In addition, you can file taxes under the LLC’s tax ID number.

Additionally, you are asked for your business ID and tax number to join affiliate programs and get paid. Without it, you won’t be able to get into the affiliate program.

Do You Need an LLC for Affiliate Marketing
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How to create an LLC for affiliate marketing?

Now we have seen what an LLC is and its benefits, it’s time to see how to create one for affiliate marketing.

Before we get started, be aware that there are two options: you can decide to go through an LLC formation service or create one yourself from one of the states below.

Step 1: Choose your state

You can create an LLC from any US state. Generally, the business owner decides to create their company in their state.

If you need help choosing the best state for your business, you should read this article.

Step 2: Select a name for your LLC

Once you have chosen the state where you want your LLC based, it’s time to select a name for it. This name will be asked when you file your LLC’s formation documents.

This name must be unique, trademark free, and identifiable. Most of the time, people decide to give her name to the company. However, you can choose to go for a brand name, of course. If you need help finding one, you can use a business name generator to give you some ideas.

Don’t forget to check if the name is available on social media platforms and if the domain is free for your future website.

Step 3: Choose an LLC registered agent

When you are ready, you can start selecting an LLC registered agent. Concretely, this agent will file all the documents to create your LLC for affiliate marketing on your behalf with the institutions. Privateness and peace of mind are advantages of using a registered agent service.

There are dozens of online service providers that will act as your registered professional agent for a fee. Personally, the best is ZenBusiness, and it’s the cheapest one I found and also the more experienced.

With its LLC creation options, ZenBusiness not only includes a year of registered agent services but also provides outstanding value by protecting your company and privacy for just $119 each year. Once more, it offers a fantastic offer of $99 per year if you are simply looking for registered agent services and are not forming an LLC.

ZenBusiness logo
Create Your LLC In Minutes With ZenBusiness

Starting a business is easy with ZenBusiness. The streamlined process helps you create your LLC in just minutes, without the hassle and expense of traditional legal services.

Step 4: File your LLC’s articles of organization

You must submit the Articles of Organization to the state to formally register your LLC for affiliate marketing. In some states, this document is also referred to as a Certificate of Formation or a Certificate of Organization.

Step 5: Create an LLC operating agreement

An LLC operating agreement is a critical piece of paperwork you must complete before forming an LLC. This article explains how to draft an operating agreement for your LLC step by step. You’ll learn what it contains, why it’s important, and most importantly, how to ensure you’ve covered everything.

Step 6: Get an EIN

An employer identification number (EIN) is basically a Social Security number for your business. You can use it to file taxes yearly, pay payroll taxes, open bank accounts, and many other things. You must go directly to the IRS website to get one for free.

Let’s wrap up this “do you need an LLC for affiliate marketing” post!

In conclusion, you need an LLC for affiliate marketing. Moreover, having one does provide certain advantages over doing business without one. For example, it allows you to protect your personal assets from lawsuits and protects your company against bankruptcy. In addition, it gives you access to tax breaks that regular companies don’t receive.

While these aren’t the only reasons to form an LLC, they help explain why so many successful entrepreneurs choose to use one. So if you want to build a profitable online business, whether it’s through affiliate marketing or another method, you should look into forming an LLC.

How to structure your affiliate marketing business legally
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LLC for affiliate marketing FAQ

Do online businesses need a business license?

The truth is, it depends on where you live. In most states, there is no requirement for a business license to operate an online business. However, many states require a seller to register with the state government to sell certain items, like food, clothing, etc.
If you buy wholesale products and resell them online, you will probably need a business license.
If you are starting an affiliate website or selling information products, you likely don’t need a business license.

How much does an LLC cost for an affiliate marketing business?

Depending on your state, the price will vary a lot.

The state filing fee is the first mandatory expense associated with creating an LLC for affiliate marketing. Depending on your state, this cost might range from $40 to $500. You can have more information in this article from Forbes: how much does it cost to start an LLC?

Is an LLC good for an affiliate marketing business?

In my opinion, yes. There is no better alternative to starting an affiliate marketing business because it gives you personal liability protection against possible business risks and is inexpensive and easy to run.
An LLC for affiliate marketing includes protecting you from lawsuits related to your products or services. In addition, it provides you with more tax options and credibility within the industry. You can use an S corporation to reduce taxes while maintaining some personal liability protection.

Do I need to open a business bank account for my LLC?

Absolutely, yes. It’s mandatory to distinguish your professional assets from your personal ones.
If your LLC is sued after you mix your personal and business accounts, your personal assets, including your home, car, and other possessions, could be at risk. In company law, this is referred to as “piercing your corporation veil.”

Marlene Konu
Marlene Konu
Here to help you build a business at home to create a life you love! ❤️ But first, you should read this.

Affiliate Disclaimer: I may receive affiliate commissions from any products I recommend or links I put on this page. My opinions are my own but they are truthful and I do my best to recommend products that I have purchased myself.

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