Do I Need an LLC for My Import and Export Business?

Starting a limited liability company (LLC) for your import and export business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For an import and export business, lawsuits can arise from things like failing to comply with a contract’s terms due to logistical issues or from accumulating a substantial amount of debt that you cannot pay back.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your import and export business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Should I Start an LLC for My Import and Export Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for an Import and Export Business

By starting an LLC for your import and export business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Import and export businesses will benefit from liability protection because of the risk of being held liable for personal injuries, libel, property damage, and other things.

Example 1: Your import and export business contracts to deliver a shipment of Taiwanese microwaves to a buyer in Texas. However, it is unable to do so at the time promised because of logistical problems. The buyer sues for breach of contract. Even if the court rules against you, your personal assets would be protected from the judgment.

Example 2: Your import and export business misses several installments on a term loan. The lender takes legal action to recover the entire outstanding amount. Regardless of the possibility it may succeed, your personal assets would be shielded.

Example 3: Owing to trade restrictions imposed in the countries you operate in, you decide to close your import and export business. You are worried because business assets are not enough to pay off trade liabilities. If your business is an LLC, your personal assets would be protected by the limited liability shield.

Example 4: A competing company claims that your latest marketing campaign portrayed their business in a slanderous light. The company sues you for damages.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for an Import and Export Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if an import and export business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Import and export businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Import and export businesses need insurance because of the risk of lost cargoes, particularly. This risk would be covered by various types of liability insurance, which also covers personal injury.

Common Situations Business Insurance May Cover for an Import and Export business

Example 1: A potential investor group arrives early for a meeting — before your office cleaning staff has a chance to display a “caution” sign in the newly mopped lobby. One of the investors slips on the wet floor, fractures her wrist, needs immediate medical attention, and asks you to cover the cost of her ambulance trip and hospital stay. General liability insurance would cover her medical bills.

Example 2: As an employee uses a forklift to load merchandise onto a shipping truck, he accidentally backs into a client’s luxury car. The client sues because the impact causes serious damage to his property. General liability insurance would cover your legal fees as well as any court-awarded damages.

Example 3: A few weeks after launching your new company logo, a nearby rival claims it infringes on their copyright and threatens to sue. General liability insurance would cover your legal fees and any awarded damages.

Other Types of Coverage Import and Export Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all import and export businesses should obtain.

Commercial Auto Insurance

Since you will be driving your company vehicle on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the company vehicle, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Import and export businesses invest heavily in the equipment they use. Be sure that you have enough coverage to replace all of your equipment in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your import and export business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your import and export business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, commercial property insurance, and workers’ compensation insurance.

Read our Business Insurance article for more info.

Startup costs for an import and export company are minimal if started from home. Otherwise, costs may be as low as $5,000. Basic requirements are a telephone, internet, a logo, and a website. Commercial insurance will be a recurring cost, as will utilities and rent of office premises.

Visit our How to Start an Import and Export Business guide to learn more about the costs of starting and maintaining this business.

Standard business costs such as internet access, phone, website maintenance, and travel and logistics costs comprise the bulk of ongoing expenses.

Learn more about running an import and export business.

An import and export business receives a commission for every import and export it facilitates.

Learn more about starting an import and export business.

An import and export business helps match buyers and sellers in different countries. This business can be complex, as it requires compliance with all local regulations in both countries involved. However, it is vital for facilitating global trade.

The profits of an import and export business depend on the volume of goods dealt with, the cost of those goods, the size of the operation, and overhead costs.

Learn more about starting an import and export business.