When starting an Amazon business, deciding the right type takes time. There are three main types: private label, online arbitrage, and wholesale.
Private Label
Private label involves creating your own branded products. A pro is having control over your product and brand. A downside is significant time and money to develop a product and market it. You must compete with established brands. Knowing how to find reliable suppliers can be tricky. Most sellers use private label.
Legal Structures and Business Models
Selecting the appropriate structure impacts profit and legal responsibilities. We recommend an LLC for third-party Amazon sellers. An LLC provides liability protection. There are six models sellers use. Over half use private label. Some use more than one model.
Amazon Business Setup
When signing up, have your business location, type and name ready. Enter your EIN if available. Confirm your SMS number. Enter contact information. Amazon checks everything before approving selling. Typically individual sellers default to sole proprietorships. However, an LLC better protects your Amazon business. A sole proprietorship is owned by one person. It’s an easy start with complete control.
Business Models for Amazon Sellers
There are six most popular business models used by Amazon sellers:
- Private label
- Wholesale
- Retail arbitrage
- Online arbitrage
- Dropshipping
- Handmade
Other options include Sole proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. An LLC typically provides the best protection while allowing business flexibility.
Private Label Specifics
In the private label model, you create your own branded products. This allows control over your product and brand. But significant time and money are required to develop and market a product. Despite this, private label is used by most Amazon sellers.
Overall, the choice depends on your specific business model and goals. Analyze the pros and cons of each structure to determine what works best for you.