Which Entity is Right For Establishing a Retail Business

Which Entity is Right For Establishing a Retail Business

Starting a retail business is nothing short of a challenge. But one of the most challenging aspects here is choosing an entity that you’ll use to establish your retail business.

So, which one should you choose?

Here are the three main types of business entities and what they offer.

1. Sole Proprietorship

This is an unincorporated business. Very minimal paperwork is required in its formation, and maintaining it is easy.

When to Choose a Sole Proprietorship

A Sole Proprietorship is ideal if you want to open a small-scale retail business, as all the liability lies with you. All the income will also pass through to your personal income tax returns, so that’s a major advantage if you start a small retail business.

2. Limited Liability Company (LLC)

A Limited Liability Company is a business structure where owners’ assets get protection from the business’s debts and liabilities.

It’s formed by filing Articles of Organization with the Secretary of State.

When to Choose an LLC

Go for a Limited Liability Company if you want to start a slightly larger retail business.

An LLC shields you from paying corporate taxes. At the same time, you’re protected from liabilities, which means you can grow your business well. Income from the retail business passes to your personal income tax returns too. 

You only need to pay self-employment taxes and any other taxes imposed by your state. So, be sure to research the best states for starting your LLC for your retail business.

The only drawback here is that it’s difficult to raise funds when compared to Corporations.

3. Corporation

A Corporation is distinct from its owners and offers the best liability protection.

These business structures are formed by filing the Articles of Incorporation with your Secretary of State. It’s a complex process that requires a lot of paperwork compared to Sole Proprietorships and LLCs.

When to Choose a Corporation

If your goal is to have franchises or set up multiple branches for your business, a Corporation is the way to go.

With a Corporation, you get better access to capital. You can raise additional funds by issuing stock to your investors or the public. It also offers the best liability protection.

Over to You: Choose the Right Entity

You’re about to make a critical choice that’ll affect the daily operations of your retail business, its management, scalability, and more. So, make sure that you choose the right one.

Have a look at this infographic by GovDocFiling for more information about these entities and make an informed decision.


Infographic via: GovDocFiling.com
Which Entity is Right For Establishing a Retail Business

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