E-commerce founders selling to US customers from outside the United States face a different set of decisions compared to service providers or SaaS founders. The wrong choice of entity, the wrong state, or a misunderstanding of where your inventory is located can turn a profitable dropshipping or Amazon FBA business into a tax and compliance problem. The correct structure, on the other hand, allows you to operate clearly, maintain stable payment processing, and manage your US tax exposure legally.
James Baker is a Licensed CPA based in Miami, Florida, and the founder of James Baker & Associates. Over the past fifteen years, he has supported thousands of international entrepreneurs in forming US companies, with strong experience in e-commerce sellers, dropshippers using Shopify and AliExpress, Amazon FBA sellers, Etsy store owners, print-on-demand operators, and direct-to-consumer brand founders. Below is how James supports e-commerce founders in setting up the right US entity for their specific model, rather than a generic setup.
Why E-Commerce Founders Need a Different Approach Than Service Providers
A consultant in London billing US clients has a straightforward setup: the work is performed outside the US, payments come from the US, and the LLC is mainly used for banking and business credibility. In most cases, there is no US physical presence, no inventory, and no sales tax complexity.
An e-commerce seller operates differently. Physical products are involved. Inventory is stored somewhere. Customers are located across multiple US states. Platforms like Amazon handle sales tax collection in many cases, but Shopify sellers may need to manage this directly. Payment processors such as Stripe and PayPal also review e-commerce models closely. Some banks may decline certain dropshipping businesses altogether.
Because of this, e-commerce founders require a structure that reflects these operational realities, not a generic LLC setup.
Dropshipping vs. Amazon FBA: Two Different Tax Pictures
Dropshippers
A typical dropshipper sells through Shopify or a similar platform. The seller does not hold inventory. Orders are sent to suppliers (such as AliExpress, CJ Dropshipping, or a US-based 3PL), who then ship directly to the customer.
For tax purposes, the main question is whether the business creates a US tax connection. If the seller operates entirely outside the United States, has no US employees, no warehouse, and no fulfillment activity in the US, the income is often not considered Effectively Connected Income (ECI). In such cases, US federal income tax may not apply to profits.
However, sales tax is a separate area. Even without ECI, a dropshipper may trigger economic nexus in multiple US states once sales pass certain thresholds. James reviews each client’s situation and explains potential sales tax obligations in a clear way.
Amazon FBA Sellers
Amazon FBA operates differently. When inventory is stored in Amazon’s US warehouses, that storage activity can create both ECI and state-level nexus. The IRS position on FBA inventory has been debated, and Amazon’s distribution of inventory across multiple states adds further complexity.
For Amazon FBA sellers, James typically suggests a more structured approach, often involving a US LLC with proper bookkeeping that tracks inventory costs, fulfillment fees, and any ECI exposure. The choice between an LLC and a C-Corp becomes more important for FBA sellers due to potential US-connected operations and reinvestment strategies.
The Three Critical Decisions James Helps E-Commerce Founders Make
Decision 1: LLC or C-Corp?
Most e-commerce founders start with an LLC because it is commonly recommended. For many dropshippers with no US presence, this is appropriate. For Amazon FBA sellers with US inventory and higher revenue levels, a C-Corp may sometimes be more suitable, especially when profits are being reinvested rather than distributed.
James reviews your revenue, operations, inventory model, and future plans before recommending a structure aligned with your situation.
Decision 2: Which State?
For dropshippers with no US physical presence, Wyoming and Delaware are both common options. Wyoming generally has lower costs. Delaware is often preferred by lenders and payment processors due to familiarity.
For Amazon FBA sellers, the decision becomes more detailed because inventory stored in US warehouses can already create state-level exposure. James reviews these factors for each case before making a recommendation.
Decision 3: How to Position the Business for Stripe and PayPal
Payment processors are often a key factor for e-commerce founders. A dropshipping store with unclear product descriptions, low-quality supplier sourcing, or limited customer information may face Stripe or PayPal reviews, including account holds.
James helps clients present their business clearly in both their website and application process to reduce avoidable issues during onboarding and review.
The James Baker Process for E-Commerce Founders
Step 1: Business Model Review
James begins with a detailed review of your e-commerce model: what you sell, where customers are located, where inventory is stored, how fulfillment works, how returns are handled, which payment processors are used, and your revenue level. This forms the base for all decisions that follow.
Step 2: Entity Formation
Based on the review, James forms the appropriate entity in the selected state. For most dropshipping businesses, this is typically Wyoming or Delaware. For Amazon FBA sellers with US activity, the structure may differ depending on exposure and scale.
Step 3: EIN and Banking
James obtains the EIN within 24 to 72 hours and guides clients through US business banking options such as Mercury, Wise, or Relay. Each provider has different approval criteria for e-commerce models, and selection is based on fit with your business type.
Step 4: Payment Processor Setup
This is a key area of support for e-commerce founders. Stripe and PayPal applications require consistency between the website, business description, and actual operations. James reviews the application, website content, and product pages before submission to reduce avoidable rejections or delays.
Step 5: Sales Tax and State Nexus Review
James reviews your sales activity to identify potential state-level sales tax obligations. For Shopify sellers in particular, economic nexus rules apply across most US states once thresholds are met.
Step 6: Ongoing Compliance
Each year, James prepares required filings such as Form 5472, pro forma Form 1120 (for foreign-owned single-member LLCs), state annual reports, and other applicable filings. For C-Corp structures, full corporate tax returns are handled as needed.
What James Provides to Every E-Commerce Founder
• Free consultation to review your business model and recommend a suitable structure
• Full LLC or C-Corp formation in the selected state
• EIN processing within 24 to 72 hours
• Guidance for Mercury, Wise, or Relay banking applications
• Stripe and PayPal application review for a smoother approval process
• Sales tax nexus review and registration guidance
• Annual federal and state compliance filings
• Ongoing CPA support as the business grows
Frequently Asked Questions From E-Commerce Founders
Can I run a Shopify dropshipping business as a non-resident with a US LLC?
Yes. Many of James’s clients operate Shopify dropshipping businesses from outside the US using a properly structured US LLC. The setup works well when formed correctly, and payment processors are handled properly from the start.
Do I owe US tax on my dropshipping profits as a non-resident?
In many cases, no, if your business activity is outside the US and the income is not classified as ECI. However, this depends on your specific situation, and James reviews each case individually.
Will Stripe approve my dropshipping store?
Stripe can be selective with dropshipping businesses. Approval is possible when the website is professionally structured, product information is clear, customer support details are visible, and the business description matches actual operations. James assists in reviewing these areas before submission.
What about sales tax in US states?
Sales tax depends on where your customers are located and your sales volume in each state. Once you pass economic nexus thresholds, registration and collection may be required in those states. James reviews this on a case-by-case basis.
Should I form an LLC in Wyoming or Delaware for dropshipping?
For most dropshipping businesses, Wyoming is more cost-effective. Delaware is often selected when there are plans for external investment or formal funding structures. James advises based on your goals and model.
I sell on Amazon FBA. Is my situation different?
Yes. Amazon FBA involves storing inventory in US warehouses, which can create additional tax and state nexus considerations. James treats FBA sellers separately and structures their setup accordingly.
