Amazon FBA business and Shopify store – How to reduce tax rates?
Many entrepreneurs with rapidly growing e-commerce businesses are wondering about one of the most common questions when it comes to their business model, that is “Where do Amazon FBA business and Shopify store owners set up their corporation to do business?”
The thought process behind such questions generally differs from person to person. For instance, if you are someone who “enjoys” paying their taxes, then any old company in Australia or Canada or wherever else will probably do.
However, if your idea is to figure out how to legally reduce your taxes and liability for your Amazon FBA business and Shopify store, there are a few factors that you need to consider.
The first thing you to focus on is your tax rate. Generally, many people don’t have the realization that they have the power to choose how they want to be taxed. More importantly, there are also few steps that you take to help reduce, or even be totally tax exempt.
One of the important steps that a seller should consider is to operate as a company and not a sole proprietor from the very start. This provides an extra layer of protection for your Amazon FBA business and Shopify store and your personal liability. When you trade online, there is a high possibility that you’re going to run into jokers and fraudsters. This might seem far-fetched but bad things do happen.
Key factors to consider for reducing taxes
Your tax rate largely is dictated based on where you live and how you run your business. If you live in the United States, for example, then an LLC is very beneficial for liability purposes. However, LLC owners aren’t going to get a tax benefit.
One of the easiest ways to reduce your taxes, in case your home country has very high tax rates, is to relocate to another country with lower or 0% tax rates. It is highly recommended setting up a company overseas for such matter.
There are a lot of jurisdictions that provide offshore companies, ranging from more “onshore” jurisdictions like Hong Kong and Malta, to the traditional tax havens like British Virgin Islands, Belize, and Seychelles.
Generally, the trend is moving away from tax havens towards more onshore jurisdictions such as Malta, Georgia, Singapore and Hong Kong. The tax rates are very low in such countries and some cases are even tax exempt.
As an Amazon FBA business and Shopify store owner, you’re going to go through a lot of inventory and every time you make a profit, you’re going to have to pay tax in the country where you live. It’s very common for online sellers operating where they live to end up paying far too much tax because of this.
Setting up an offshore company can help provide more liquidity as your tax rate is highly low, thus providing you with more opportunity to invest and grow your business. If you would like to learn more about how your Amazon FBA business and Shopify store can be set up in a way, you can send in your request here and we will gladly assist you. Also check out how to reduce taxes legally?
It is important to ask the right questions before incorporating in a foreign jurisdiction.
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