Which Entity is Best for Starting a Retail Business?

Choosing a business structure is one of the most important steps of starting a retail business as it can change the way you do business.
From how your business is taxed to how much control you have over day-to-day operations, can vary with different entity types.
So, which business structure should you choose for starting a retail business?
Well, you can choose among Sole Proprietorships, LLCs, and Corporations. However, remember that there is no single answer as to which of these is best for starting a retail business.
Why?
Because your choice should be based on your particular requirements ,preferences, and future goals, not some one-size-fits-all guide. So, it’s best to compare and contrast all these business structures and then choose the right one for starting a retail business.
Let’s discuss each in more detail.

Table of Contents

1. Sole Proprietorship

This is the best choice for small, family-owned retail businesses that intend to operate on a small scale. So, you can start a Sole Proprietorship if you intend to run a handicrafts business, thrift store, etc.

Here are some characteristics of a Sole Proprietorship that you should know:

The business is not a separate legal entity and is taxed as part of the sole proprietor’s personal income
The owner bears the sole responsibility for the business profits, losses, and legal liabilities
It gives the entire operational and administrative control to the owner
Sole Proprietorship is the easiest business to form with very less paperwork

2. LLC

LLCs offer the best of both worlds as they have the scalability of a Corporation along with the flexibility of a Sole Proprietorship. With an LLC, you can expand your retail business without having to risk your personal assets.

Here are the key characteristics of an LLC:

LLCs can be taxed both as a Sole Proprietorship and a Corporation
The profits, losses, and liabilities are shared between the members of an LLC
Members can be both individuals and institutions, but not banks or insurance companies
There can be single-member LLCs and multiple-member LLCs
These require more paperwork than Sole Proprietorship for starting a retail business

3. Corporation

Corporations are the best choice for starting a retail business on a large scale. If you want to operate a multi-regional retail business with different outlets, then Corporations are the way to go.

Here are the key characteristics of Corporations:

The business is a separate legal entity and is taxed separately
The owners’ personal assets are protected in case the company fails
It is easiest to secure funding for a Corporation, which helps in expanding the business
It is easy to go public and issue shares

Which One Will You Choose for Starting a Retail Business?

All three of these are good choices for starting a retail business. Compare their features, pros, and cons, and your future goals, to make the final decision.

Need a detailed list of pros and cons for each of these business structures?

Check out this infographic to find exactly that.

Infographic via: GovDocFiling.com