Guide to Amazon Account Verification and U.S. LLC Setup for Non-Resident Sellers
Selling products on Amazon USA is a profitable opportunity for business owners around the globe. With Amazon accounting for 39.5% of total U.S. retail ecommerce sales in 2022, there are lucrative opportunities for businesses to set up a seller account and start earning revenues. However, for non-US residents, there are several things to consider. Having an Limited Liability Company (LLC) can be crucial for non-US entrepreneurs looking to sell there.
Advantages of Opening an LLC for Non-US Residents
Forming an LLC ensures that you fulfill legal requirements and offers a structure that separates your personal assets from your business liabilities, shielding your personal finances from potential legal disputes. By default, an LLC is treated as a pass-through entity for tax purposes. Therefore, profits and losses go through to the owners’ personal tax returns, which can help non-US residents avoid double taxation and reduce your tax liability.
Moreover, Amazon requires sellers to have an US-based bank account to receive payments. Establishing an LLC enables you to open a business bank account in the United States, which leads to a smooth financial operation. Having an LLC legitimizes your business and instills trust among potential buyers, eventually boosting your sales.
The Amazon Account Verification Strategy
Expanding your business to Amazon as a non-resident with a U.S. LLC involves more than just setting up the entity. One of the biggest challenges is getting through Amazon’s account verification process, which requires careful alignment between your business address and personal address and the documents submitted to Amazon, the IRS, and your bank. Amazon’s verification can be tricky, especially regarding the addresses you use during your LLC formation, tax filings, and Amazon setup.
Amazon requires consistency between:
- Your business address: used on your U.S. LLC formation, bank account, and IRS EIN filing.
- Your personal address: especially for non-residents; this must match your official documents from your home country.
If discrepancies are found between these documents, Amazon may require additional verification steps, such as submitting a utility bill from your home country. This can lead to delays of 30-60 days or more. When Amazon requests additional documentation, it often requires a valid credit card on file and a bill dated within the last 90 days for gas, electricity, water, or internet service.
Tax Reporting and Essential IRS Forms
It is important for you to have an understanding of your tax requirements as a non-resident Amazon FBA seller. Understanding your taxation scenarios is critical to staying compliant and avoiding fines. If you are a non-resident in the USA and own a LLC Registration in the United States, your LLC is by default treated as a disregarded entity for tax reasons. Thus, the profit earned by USA LLC is treated as owners’ income.
However, if your LLC has many members, it is usually recognised as a partnership and gets corporate status. If elected LLC to be treated as a corporation for tax reasons, then LLC must pay flat 21% taxes on profit. Below is a guide to the essential forms required by the IRS:
| Form | Who Needs to File? | Why is it Necessary? |
|---|---|---|
| Form 1040-NR | If you elected LLC to be treated as a disregarded entity. | Owner of the LLC has to file his/her personal tax return and pay tax at the rate of 10-37% on LLC’s profit. |
| Form 5472 | If your LLC is foreign-owned, even as a disregarded entity. | To report transactions between the LLC and its foreign owner; failing to file can result in substantial penalties. |
| Form 1120 (Pro Forma) | A foreign-owned LLC treated as a disregarded entity. | Acts as a cover sheet for Form 5472 and does not indicate the LLC is taxed as a corporation. |
New Compliance: Beneficial Ownership Information (BOI)
Effective January 1, 2024, the Financial Crimes Enforcement Network (FinCEN) will compel firms founded or registered in the United States to provide beneficial ownership information under the Corporate Transparency Act (CTA). This new law is intended to increase openness and combat financial crimes. To avoid penalties, ensure that your company meets these reporting requirements.
Setting Up Your US Bank Account
When you open a business bank account in the US, you can transact in dollars. This means you can hold the dollars earned through your Amazon account in dollars. Hence, you do not need to exchange them back or deal with exchange rates. Transacting in multiple currencies can also be beneficial for your business as you have the option to use the most cost-effective one when required. This leads to a smooth financial operation and simple payment reconciliation processes.
