A few months ago, we had a casual coffee chat with one of our newer clients-a passionate founder who had recently started an online home decor store. She had a gorgeous product lineup, solid branding, and was raring to get started on Shopify. But when we started discussing the setup process, she hesitated and asked, "Do I really need an LLC to start selling?"

It’s a question we’ve heard more times than we can count. Whether it’s fashion, beauty, or home decor brands, founders often wonder if they need to handle the paperwork and legalities of forming a business entity before launching their Shopify store.

So, let’s dive into this. Spoiler alert: the short answer is no-you don't have to have an LLC to start selling on Shopify. But there’s a longer, more nuanced answer that depends on where you are in your business journey, and we’re breaking it all down based on real conversations we’ve had with our ecommerce clients.

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Shopify’s Requirements: LLC Optional

First things first. Shopify itself doesn’t require you to form an LLC (Limited Liability Company) or any other business entity before you start selling. You can set up your Shopify store and begin selling products as a sole proprietor right out of the gate.

In fact, many new entrepreneurs opt to start this way because it allows them to test the waters without dealing with the legal and administrative hurdles that come with registering a business. Shopify makes it easy-you sign up, add your products, connect payment gateways, and you’re live.

That said, just because Shopify doesn’t demand an LLC doesn’t mean you shouldn’t consider it as your store grows. The real question isn’t whether Shopify requires an LLC-it’s whether forming one makes sense for you and your brand.

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Sole Proprietorship vs. LLC: What's the Difference?

When you sell without an LLC, you’re operating as a sole proprietor by default. It’s the simplest business structure, but it has some key limitations:

Sole Proprietorship:

• No legal separation between you and your business.
• You’re personally responsible for any debts, legal actions, or liabilities.
• Easier and cheaper to set up, but may not offer much protection.

LLC (Limited Liability Company):

• Creates a separate legal entity for your business.
• Provides liability protection, meaning your personal assets (like your house or car) are protected if your business faces legal trouble or debt.
• May offer tax flexibility and allow you to appear more professional.

When we’ve walked clients through this, we typically ask them to consider their long-term goals. Are you just testing an idea? Or are you building a brand you hope to scale?

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Real Story: How an LLC Helped a Beauty Brand Scale Confidently

One beauty brand client we worked with started as a hobby. They launched their Shopify store as a sole proprietorship, wanting to focus on marketing and product development without worrying about legalities.

But after six months of steady growth and a few influencer partnerships, they were moving serious product volume. More importantly, they were starting to collaborate with retail partners and larger distributors, who wanted to see proof of their business legitimacy.

That’s when they decided to form an LLC. Not only did it give them peace of mind with liability protection, but it also made it easier to open a business bank account, secure vendor relationships, and legitimize their brand in the eyes of potential partners.

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The Pros of Forming an LLC Early

If you’re serious about turning your ecommerce brand into a long-term venture, there are some clear benefits to registering an LLC sooner rather than later:

Liability Protection: One of the biggest reasons brands form LLCs is to protect personal assets. If your business is sued or falls into debt, an LLC separates your personal finances from your business obligations.

Tax Flexibility: An LLC offers options. You can choose to be taxed as a sole proprietor, partnership, or even an S-corp, depending on what’s most advantageous for you. Your accountant can help you weigh the options.

Credibility: We’ve noticed that ecommerce brands with formal business structures often get taken more seriously by suppliers, partners, and even customers. It signals that you’re professional and committed.

Easier Financial Management: Having a formal business entity makes it much simpler to open a business bank account, apply for credit lines, and manage your business finances separately from your personal accounts.

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When It’s Okay to Hold Off on Forming an LLC

That said, we’ve also advised clients to hold off on forming an LLC in certain situations. If you’re just starting out, testing product-market fit, and unsure if you’ll continue after a few months, there’s nothing wrong with launching as a sole proprietor.

We’ve seen many fashion brands start lean, focus on building traction, and only formalize their business structure once they’re generating consistent sales and have a clearer vision for growth. There’s no need to overwhelm yourself with paperwork and filing fees if you’re in the very early stages.

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What About Business Licenses and Taxes?

Regardless of whether you form an LLC, you’ll still need to check local regulations regarding business licenses, sales tax collection, and permits. Shopify has built-in tools to help you calculate and collect sales tax based on where you operate, but compliance rules vary by location.

One client we worked with-an online fashion boutique based in California-had to register for a seller’s permit and collect sales tax from California customers, even before they set up an LLC. It’s always a good idea to check state and city requirements to make sure you’re covered from day one.

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How We Help Our Clients Decide

At Daminico, we don’t believe in a one-size-fits-all approach. Whether it’s CRO audits, Shopify store setups, or business structuring advice, everything we recommend is tailored to your brand’s unique situation.

When clients ask us about forming an LLC, we typically start by evaluating:

• Their long-term goals: Are you testing an idea or building a scalable brand?
• Revenue projections: Are you generating steady income yet?
• Risk exposure: Do you have partnerships, contracts, or high-ticket products that increase liability?
• Growth plans: Are you planning to bring on investors, expand into wholesale, or secure business loans?

Sometimes, it makes sense to launch lean and revisit business structure later. Other times, forming an LLC from day one is the smart move.

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Practical Steps if You Decide to Form an LLC

If you’re leaning toward forming an LLC, here’s what the process generally looks like:

1. Choose a Name: Make sure it’s unique and available in your state.
2. File Articles of Organization: This formalizes your LLC with the state government.
3. Designate a Registered Agent: This is the person or entity that receives legal documents on behalf of your business.
4. Get an EIN (Employer Identification Number): You’ll need this for tax filing and opening a business bank account.
5. Set Up a Business Bank Account: Keeping finances separate is crucial.
6. Comply with Local Licenses and Permits: Check your city and state requirements.

It’s worth consulting with a legal or tax professional to ensure everything’s set up properly. We’ve helped several of our ecommerce clients navigate this process seamlessly.

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Do You Need an LLC to Start Selling on Shopify?

So, back to that coffee conversation with our decor store client. She ended up launching her Shopify store as a sole proprietor, focusing first on getting her products in front of customers. A few months down the line, after seeing strong sales and starting to partner with influencers, she circled back to form an LLC-giving her both peace of mind and credibility.

Ultimately, whether or not you need an LLC to start selling on Shopify comes down to your business goals, growth plans, and risk tolerance. Shopify doesn’t require it, but if you’re building a serious brand and want to protect yourself legally and financially, it’s worth considering sooner rather than later.

And if you ever need guidance on your ecommerce journey-whether it’s structuring your business, optimizing your Shopify store, or improving conversions-we’re here for you.