A Guide on How to Choose an Entity for Your Retail Business
- Business Tips

A Guide on How to Choose an Entity for Your Retail Business

Of all the decisions you must make, choosing an entity to form your retail business is one of the most important.

It affects how you’re taxed, how you can and can’t raise additional capital, the personal liability you face, and more. It can support or hinder the growth of your retail business.

Choose an entity that gives your retail business a solid foundation.

There are three main entities you can choose from; let’s see what each entity offers.

A Guide on How to Choose an Entity for Your Retail Business

Sole Proprietorship

A Sole Proprietorship is the easiest business entity to form.

Very minimal paperwork is needed, and all management functions are left to you. As a result, running a Sole Proprietorship is a breeze compared to other business entities.

Income from the Sole Proprietorship counts as personal income, which means there are no corporate taxes.

However, be careful when taking on debts. If the retail business goes bankrupt, your assets can be used to pay off.

Your retail business is considered a Sole Proprietorship if you don’t register it as any other entity.

Limited Liability Company (LLC)

An LLC lets you set up and run a formal retail business without too much complication.

Like a Sole Proprietorship, profits and losses from the retail business pass through to the LLC’s owners’ income.

Your assets will be protected if your retail business cannot pay its liabilities.

Form a Limited Liability Company if you:

    • Have important personal assets you’d want to protect
    • Intend to open a franchise for your business
    • Want to pay lower taxes than you would as a corporation
    • Have no intention of issuing stocks or going public

A Limited Liability Company requires filing the Articles of Organization. However, you can check your state’s requirements for LLC formation before filing.

Corporations

While a Sole Proprietorship counts as the simplest business entity, a Corporation is the most complex.

A lot of paperwork goes into its formation. And to run it, it’s mandatory to hold annual general meetings and have comprehensive records.

However, in terms of liability protection, Corporations are the best.

Another advantage is the ease of raising funds and expanding. For example, you can easily operate a franchise, issue shares to investors, and go public.

To form a Corporation, you must file Articles of Incorporation with your Secretary of State.

Over to You

Each business entity can bring unique advantages and challenges to your retail business. But the best entity meets your retail business’s present and future needs.

Starting-A-Retail-Business
Starting-A-Retail-Business
Infographic via: GovDocFiling.com

A Guide on How to Choose an Entity for Your Retail Business

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