Pick the Right Business Entity For Your Retail Business

Have you been thinking of starting a business?

Starting a retail business can be challenging, especially if you are a beginner. You will have to make several important decisions, from finding the right location to hiring the right staff.
One of the key decisions that you will be making, though, is choosing the right business entity for your new business.

So, which one should you choose? And why is it so important? Let’s find out.

Importance of Choosing the Right Business Entity

Choosing the right business entity is a necessary part of running a business. It is extremely important because it determines:
● Your tax rates
● The management structure
● Paperwork requirements
● Legal requirements
● Your fundraising abilities, and more

All of these factors are critical to the smooth functioning of your retail business and achieving your goals.

What are the Different Types of Business Entities?

There are four main types of business entities that you can consider for starting your retail business.

Sole Proprietorship

This is perhaps the simplest business structure where you’re the sole owner of your retail business. It’s easy to start and manage, and your income passes through to you. However, all the liability rests with you as well, making it a risky business if you want to go big.

Partnership

Unlike a Sole Proprietorship, a partnership business has two or more owners. You can consider this business entity if you want to start a business with partners, but don’t want to get into the complexities of LLCs and Corporations.

Corporation

Corporations are independent business entities. It means that they exist separately from their owners. The owners typically get a share of the business in exchange for their investments.
This is the best entity if you want to start a large-scale retail business or go for franchising. You can easily raise funds and get investors on board with this entity.

Limited Liability Company

Limited Liability Companies or LLCs are legal business entities that protect their owners from the liability their business takes on. Like Corporations, LLCs must also be registered with the state in which the business is organized.
Your home state could be the best state for LLC formation if you conduct a majority of your business in your home state.

LLCs are great entities if you want a medium-scale retail business as you’d be able to get the advantage of pass-through taxation and liability protection.

Want to learn more about the best entities for your retail business? Check out this infographic by GovDocFiling below.