Market research, sourcing capital, and developing a sales and marketing plan are just a few of the critical things you need to handle when establishing a retail business.
An even more important step here is choosing a business entity.
It’s important to analyze what each entity offers for retail businesses and pick the right one.
Let’s get started.
3 Prime Retail Business Entities And Their Offers
Overview:
- Sole Proprietorship
- Limited Liability Company (LLC)
- Corporations
1. Sole Proprietorship
If you’re looking for a simple structure for your retail business, a Sole Proprietorship is ideal. It’s great for individual-owned businesses that are usually self-financed.
The Sole Proprietorship business structure is great for a retail business because it has:
- Fewer registration fees and paperwork
- No legal filings are required
- You don’t pay corporate taxes
- Income is passed through to your personal income tax
A major drawback to Sole Proprietorships is that there’s no separation between you and the business. Any lawsuit or debt of the business can put your personal belongings at stake.
2. Limited Liability Company (LLC)
If the thought of losing your personal assets to business debts scares you, a Limited Liability Company is for you.
An LLC formation helps you set up a business that’s a legal and separate entity from you. It comes with advantages, such as:
- Protection of your personal assets
- Flexible tax requirements
- Less administrative responsibilities compared to Corporations
- Pass-through income to your personal tax return
This makes it great for a retail business as you need massive capital investments here and those debts could come back biting and put your personal assets at risk.
That said, LLCs require more documentation than Sole Proprietorships and you also need to pay annual state filing fees.
An LLC is also not ideal if your goal is to have a publicly-traded company or to offer shares to your employees.
3. Corporations
A Corporation is distinct from its owners like an LLC.
Some of its advantages include:
- Best liability protection
- You can go public without any complications
- Securing funds with a Corporation is easier
Corporations are well-structured business entities, but this also means a lot of time, work, and monetary investment is needed to start and run them. Corporations are also subjected to double taxation.
That said, if you’re planning to open franchises or multiple branches of your retail business, Corporations are your best bet.
You have the pros and cons of each business structure, now it’s up to you to make the best choice based on your current and future needs.
The infographic below by GovDocFiling provides more details to help you make your decision.
Author Bio:
Brett Shapiro is a co-owner of GovDocFiling. He had an entrepreneurial spirit since he was
young. He started GovDocFiling, a simple resource center that takes care of the mundane, yet
critical, formation documentation for any new business entity.
