How best to structure import and ecommerce business?

[DBXI]

So I've been rethinking my business structure. I thought I run it by some of you guys who may have some experience in this area. I will also be consulting a corporate attorney on this but I wanted to reach out to other ecommerce folks as well. This is long so feel free to jump to the questions at the end.

Like a lot of you I run a physical products business that imports from various parts of the world and also domestically (from the USA). We brand these products and sell to some small stores and on various websites including our own website, Amazon, eBay, etc

I'm wondering if I should setup two separate business entities... one for import / export and one for the ecommerce / retail side of the house.

The reason being is for separation of the two entities for liability and to keep the import records off the ecommerce side.

My current structure:
Amazing Widgets HQ (Hypothetical name)
Currently I only have the one business and the business name is the same name as the brand. As an example we will say it's Amazing Widgets HQ. So I import under Amazing Widgets HQ, main website is Amazing Widgets HQ, all of my product names have this as their brand name etc.

Turns out there is a bigger brand that has a trademark on the name Awesome Widgets and per two different trademark attorneys I have a less than 20% chance of getting a trademark for Amazing Widgets HQ because a similar mark is already in use. The additional risk here is that if Awesome Widgets decides I'm infringing on their mark they could serve me a cease and desist and I could be caught in a bad spot. Potentially disastrous if they force me to liquidate my inventory in X amount of days. I don't want to be caught in that situation.

They both have recommended a rebrand. Bummer, especially since sales have started to pick up nicely with Amazing Widgets HQ. I also need to figure out how to move my existing products over to this new brand that I need to make (new brand registry etc). For Amazon at least I think I just need to apply for a new brand for brand registry and switch over the business details.

So here's my current plan which I plan to run by the attorney and my accountant.

Setup a new LLC called something along the lines of:

Widgets Trading LLC (New Import / Export Business)
Use an address at the local UPS and put myself and a partner on the business. My current business has my house as the address and I’m the sole person on the business. Another rookie mistake apparently. This business would only be used for import / export / buying / trading and developing new products.

Widgets Brands LLC (New Ecommerce Business. Holding company?)
Again a separate address. This business would be known to the retail side of the house. Walmart, Amazon, maybe even a customer facing website. I would put trademarked brands underneath this main ecommerce business. Something like www.widgets123.com would be trademarked but would belong to Widget Brands LLC.

Create a new more distinct brand name and apply for the trademark which I will roll underneath Widget Brands LLC. Rebrand website, Facebook, Instagram, apply for brand registry and start migrating my existing products over to this new brand.

Transfer funds out of my old Amazing Widgets HQ LLC into new Widgets Brands LLC (holding company) and shutdown the old business.


TL;DR

1) What's the best, most scaleable, safest way to structure an import / ecommerce businesses? The goal in mind with eventual sale of brand(s) or the entire business itself.
2) What's the easiest structure if you are planning on selling one of your brands but not your entire import business?
3) Would you name your ecommerce business the same name as your brand or would you go more generic for the business itself?

Since I'm going through a rebrand anyway I'd rather do this right the first time. I didn't have a clue what I was doing when I started so I'm trying to get this cleaned up now.

 

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[biophase]

So I've been rethinking my business structure. I thought I run it by some of you guys who may have some experience in this area. I will also be consulting a corporate attorney on this but I wanted to reach out to other ecommerce folks as well. This is long so feel free to jump to the questions at the end.

Like a lot of you I run a physical products business that imports from various parts of the world and also domestically (from the USA). We brand these products and sell to some small stores and on various websites including our own website, Amazon, eBay, etc

I'm wondering if I should setup two separate business entities... one for import / export and one for the ecommerce / retail side of the house.

The reason being is for separation of the two entities for liability and to keep the import records off the ecommerce side.

My current structure:
Amazing Widgets HQ (Hypothetical name)
Currently I only have the one business and the business name is the same name as the brand. As an example we will say it's Amazing Widgets HQ. So I import under Amazing Widgets HQ, main main website is Amazing Widgets HQ, all of my product names have this as their brand name etc.

Turns out there is a bigger brand that has a trademark on the name Awesome Widgets and per two different trademark attorneys I have a less than 20% chance of getting a trademark for Amazing Widgets HQ because a similar mark is already in use. The additional risk here is that if Awesome Widgets decides I'm infringing on their mark they could serve me a cease and desist and I could be caught in a bad spot. Potentially disastrous if they force me to liquidate my inventory in X amount of days. I don't want to be caught in that situation.

They both have recommended a rebrand. Bummer, especially since sales have started to pick up nicely with Amazing Widgets HQ. I also need to figure out how to move my existing products over to this new brand that I need to make (new brand registry etc). For Amazon at least I think I just need to apply for a new brand for brand registry and switch over the business details.

So here's my current plan which I plan to run by the attorney and my accountant.

Setup a new LLC called something along the lines of:

Widgets Trading LLC (New Import / Export Business)
Use an address at the local UPS and put myself and a partner on the business. My current business has my house as the address and I’m the sole person on the business. Another rookie mistake apparently. This business would only be used for import / export / buying / trading and developing new products.

Widgets Brands LLC (New Ecommerce Business. Holding company?)
Again a separate address. This business would be known to the retail side of the house. Walmart, Amazon, maybe even a customer facing website. I would put trademarked brands underneath this main ecommerce business. Something like www.widgets123.com would be trademarked but would belong to Widget Brands LLC.

Create a new more distinct brand name and apply for the trademark which I will roll underneath Widget Brands LLC. Rebrand website, Facebook, Instagram, apply for brand registry and start migrating my existing products over to this new brand.

Transfer funds out of my old Amazing Widgets HQ LLC into new Widgets Brands LLC (holding company) and shutdown the old business.


TL;DR

1) What's the best, most scaleable, safest way to structure an import / ecommerce businesses? The goal in mind with eventual sale of brand(s) or the entire business itself.
2) What's the easiest structure if you are planning on selling one of your brands but not your entire import business?
3) Would you name your ecommerce business the same name as your brand or would you go more generic for the business itself?

Since I'm going through a rebrand anyway I'd rather do this right the first time. I didn't have a clue what I was doing when I started so I'm trying to get this cleaned up now.

I used to do option 1, and now run option 2.

Option 1:
Widgets Trading LLC (New Import / Export Business) - could also make it foreign company for tax purposes (talk to global wealth)
Widgets Brands LLC (New Ecommerce Business. Holding company?) - runs website and amazon etc...

Option 2:
Widgets Brands LLC (New Ecommerce Business. Holding company?) - imports product, runs website and amazon etc...
ABC LLC - holds all the intellectual property such as the trademark, product designs, domain names, licenses all property to Widgets Brands LLC.

 

[Walter Hay]

I like the Option 2 by @biophase, but I think another factor could be considered.

If you want to keep all of your retail activities to yourself, and hide them from your supplier, as some want to do, you could add another layer.

1. Use XYZ Co, as the name you use in all contact with potential suppliers. Don't disclose your real website address. Avoid having your brand or logo attached to your product. This will mean post production branding or labeling. Not as difficult or expensive as you might think. That can be a foreign company if you so choose.
2. Widgets LLC can run your website, amazon sales etc. It could also hold all IP rights.

Walter

 

[DBXI]

I used to do option 1, and now run option 2.

Option 1:
Widgets Trading LLC (New Import / Export Business) - could also make it foreign company for tax purposes (talk to global wealth)
Widgets Brands LLC (New Ecommerce Business. Holding company?) - runs website and amazon etc...

Option 2:
Widgets Brands LLC (New Ecommerce Business. Holding company?) - imports product, runs website and amazon etc...
ABC LLC - holds all the intellectual property such as the trademark, product designs, domain names, licenses all property to Widgets Brands LLC.

@biophase
Thanks for the response. You have helped point me in the right direction again.

For option 2...
Hypothetically, does Amazon / Walmart / wholesale purchase deposit money into ABC LLC or Widget Brands LLC? How would money flow from one entity to another? Is the idea to keep the bulk of the IP and liquid cash assets in the ABC LLC holding company?

If Widget Brands LLC is buying the product from a supplier and branding it "Awesome Mugs".. would you wire the money from Widget Brands LLC or ABC LLC?

 

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[biophase]

@biophase
Thanks for the response. You have helped point me in the right direction again.

For option 2...
Hypothetically, does Amazon / Walmart / wholesale purchase deposit money into ABC LLC or Widget Brands LLC? How would money flow from one entity to another? Is the idea to keep the bulk of the IP and liquid cash assets in the ABC LLC holding company?

If Widget Brands LLC is buying the product from a supplier and branding it "Awesome Mugs".. would you wire the money from Widget Brands LLC or ABC LLC?

All operational money like sales go into Widget Brands LLC. The only money going to ABC LLC is the licensing fee being paid by Widget Brands LLC to ABC LLC for the right to use the IP.

 

[DBXI]

All operational money like sales go into Widget Brands LLC. The only money going to ABC LLC is the licensing fee being paid by Widget Brands LLC to ABC LLC for the right to use the IP.

Very interesting... I'm also considering spinning up a separate company just for the trading side.

So something like this:

ABC Holding LLC
Trademarks brand names, website registrations etc, licenses all property to Widget Brands LLC

Widget Brands LLC
Runs website / wholesale and is customer facing

XYZ Trading LLC
Separate company to Import/ Export supplier facing
Sells product to Widget Brands LLC

I think this provides the greatest protection ... I suppose you could have even more protection by putting the ABC holding company as a foreign entity but that's probably another conversation.

At the same time.... just running Widget Brands LLC for everything import / export / customer facing / IP is sooo much easier to manage.

Decisions decisions

 

[CareCPA]

Very interesting... I'm also considering spinning up a separate company just for the trading side.

So something like this:

ABC Holding LLC
Trademarks brand names, website registrations etc, licenses all property to Widget Brands LLC

Widget Brands LLC
Runs website / wholesale and is customer facing

XYZ Trading LLC
Separate company to Import/ Export supplier facing
Sells product to Widget Brands LLC

I think this provides the greatest protection ... I suppose you could have even more protection by putting the ABC holding company as a foreign entity but that's probably another conversation.

At the same time.... just running Widget Brands LLC for everything import / export / customer facing / IP is sooo much easier to manage.

Decisions decisions

One detail to watch out for: make sure your licensing costs from Widget Brands to ABC Holding and product costs from XYZ Trading to Widget Brands are based on something of economic substance, especially if you go the foreign route for any of the entities.
The IRS is very strict on transfer pricing if they think you are doing it to avoid taxes. Obviously that isn't your intention in this setup, but that doesn't mean they won't interpret it that way.

 

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