Accounting for Amazon (Penny Lowe 1 of 2) - a podcast by Michael Veazey

It's long overdue that we've had an accountant on Amazing FBA. Today I'll be sitting down for part one of my interview with Penny Lowe, owner of Wellington Consulting. If I had to name one single item as the most significant pain point for most entrepreneurs, it's accounting. So many people in all walks of business struggle with tax accounting, bookkeeping, and payroll. It’s impossible to cover everything accounting in just an hour’s worth of interviews, but today in part one of this two part series on accounting, we’ll be covering the basics for new sellers on Amazon.





Registering as a Sole Trader vs. Limited Company

There are advantages and disadvantages to running an Amazon business as a sole trader or limited company. The first question in setting up a company is trading name. As a limited company, it's essential to find out if the name is available. As a sole trader, it's still a good idea to make sure the name is available in the event a business should need to become a limited company after doing business for a time as a sole trader. The rules for sole traders regarding tax reporting and obligation are less strict than those of a limited company. As a sole trader, one can use a portion of many expenses to offset other income; as a limited company, the rules are much much stricter, both in the way in which one keeps books and in what can be claimed as an allowable expense.



From an ease point of view during the first few months of running a company, you may want to choose to do business as a sole trader. You'll have a three month period in which you don't have to register. That means if you decide after two months this industry isn't for you, you won't have spent all your time and money registering a business you've got no intention of getting off the ground. Conversely, if after two months business is booming, you can have the option of skipping registry as a sole trader altogether and move on to becoming a limited company. Do keep in mind though that if you want to switch your Amazon or bank account from sole trader to limited company, you may not be able to do that without starting over from scratch. If you're serious about the business of selling with Amazon, jumping straight to registering as a limited company may be the right choice.

Setting up a Limited Company

Whether you decide to do it yourself or use an online or brick-and-mortar solution to set up your limited company, the process is quite simple. One of the things you need to decide is where you're going to have your registered office. It can be your home. It can be a family member's home. Just make sure as part of your rental agreement you're not restricted from running a business at your address. You can change your address later, so don't fret too much over this. Once you've made this decision, you're ready to begin the process of setting up your company. Keep in mind there are some restrictions on who can and can't set up a limited company; for example, you can't serve as director of a limited company if you're bankrupt.



The next step in setting up a limited company is choosing a name. Penny likes to search the web for names that are the same or similar to the name of the new company.  Should there exist a name similar to the one you've chosen, it may be a good idea to pick another. Changing the name of a company later due to legal considerations can mean serious headaches down the road.



People often assume that a business name, the brand name, and the name you're selling under are one in the same. There can, however, be more nuance. My pro-tip is to make the name you're trading under on Amazon different than that of your limited company. The reason for this is not because you're trying to fool any consumers; it's because the only people who would be interested in that are people trying to reverse engineer your business and steal your best product ideas.

Further episodes of Amazing FBA Amazon and ECommerce Podcast, for Amazon Private Label Sellers, Shopify, Magento or Woocommerce business owners, and other e-commerce sellers and digital entrepreneurs.

Further podcasts by Michael Veazey

Website of Michael Veazey