What's up guys, Trevor here with eCommerce Paradise. And today I'd like to talk to you about what is the best business structure for high ticket dropshipping. So if you're new to the channel, definitely get my free niches list and mini course for high ticket dropshipping at ecommerceparadise.com/niches.
As far as business structures go, an LLC is always gonna be the best business structure for a small business. It's limited liability company and it is a limited protection entity. So basically if you put all your business transactions actions underneath this business and you get sued and you go bankrupt because of that. They can't take your house. They can't take things that are outside of that business. So that's the main thing. It's protection. Okay. And it's very affordable to get an LLC these days. I recommend filing for an LLC in Wyoming because of the privacy protection and low costs. Also no income tax, no franchise fees.
Wyoming is one of the best places to file an LLC for an online business. So I recommend using a company called Bizzee, one that I use, B-I-Z-E-E. You can go check it out, ecommerceparadise.com/Bizzee, and you'll be helping me and my channel if you use that referral link. You'll also get a discount. They offer LLC formation services as well as EIN formation service as an add-on, which makes it really easy for you as well. But that's basically the starting point.
And if you live in a state like California, for instance, where they have high income tax and they have a high franchise fee and it costs money to file an LLC and all that stuff. It might look like filing LLC out of state is a good idea, but it's not going to really help because you're still gonna have to put that money into. The state of California, you're still gonna have to report that income. And so what you need to think about is whether it's worth it or not.
Now if you want to become a digital nomad and travel the world, the best way to do that is to go move your personal residence to an easy to form in low income tax state like South Dakota first, and then go travel the world. And then you can form in Wyoming, you'll have zero income tax statewide. If you stay out of the states for 11 out of 12 months, you'll have zero federal tax up to $100,000. All you have to pay is Social Security and Medicare, which is like 15%. Pretty well set on paying taxes at that point.
But getting back to the point, if it's your first business and you don't have that much money to spend on forming an LLC and all that stuff, and you just want to do a sole proprietorship, that's pretty much fine. Just keep in mind, if you have any assets to protect, an LLC is always going to be better for you.
When I first started, I formed a sole proprietorship and I also formed a partnership with somebody else as well. And as a partner, you could become an LLP, but that's usually more common in law offices. With an LLC, you can have multiple members. So usually if you have a partner, you would still just form an LLC and split things 50-50 or however you want to do it. Maybe if it's a silent partner, you'll do things like 80-20 or something like that.
But you definitely want to think about the long run and forming a business that's going to be profitable for you later on down the road, especially for an exit. And it's going to protect your liability as well. You don't want to be left out in the open. But when you first get started, you have nothing to lose and you just want to get started. Sole proprietorship is great to go with because you're going to be able to get started right away with a very low upfront investment. And to form a sole proprietorship, all you really need is an EIN number and you can take that to the bank and start a bank account.
Okay. So they don't require you to have an LLC. They just require you to have an EIN number so you'll pay your taxes. All right. So again, LLCs are good for people who have liabilities, assets to protect. And sole proprietorships and partnerships that don't have limited liability protection are fine for people that don't have anything to protect. Just wanna get started right away with as little as possible. And EIN is an employer identification number. It's given to you by the IRS, the Internal Revenue Service. You go to the IRS website or just type on the line, apply for EIN and it's free. You can just fill out the form and send it in. And that's how you get your business started.
So just think about that, guys. Definitely do the right thing for you for the future. If you like this video, definitely hit the like button and subscribe and leave comments below if you have any questions. I'll see you guys out there.
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