Uncategorized

3 of the Best Entities to Start a Retail Business in 2022

Starting a business is challenging, especially for new business owners. 

When choosing the business entity to start to open a retail business, it’s important to understand the needs of your business.

There are several options you can choose from, each with its own set of pros and cons. Let’s discuss each in detail and then you can make your decision.

1. Sole Proprietorship 

A Sole Proprietorship is the best business entity if you want to start a small-scale retail business.  

Here are some of the advantages and disadvantages of a Sole Proprietorship. 

Advantages of a Sole Proprietorship

  • You have control over the administrative and operational aspects of the business.
  • Sole proprietorships are easy to form, and they require less paperwork. 
  • All income is your personal income. Thus you don’t have to pay corporate taxes. 

Disadvantages of a Sole Proprietorship

  • The owner carries all the liabilities.
  • It’s not easy to expand as you cannot go public or issue shares. 

2. Limited Liabilities Company

LLCs are one of the most common business entities used by startups. 

There are advantages and disadvantages of forming an LLC; here are some of them.

 Advantages of LLCs

  • LLCs are a flexible business entity structure.
  • Your personal assets are protected by limiting your liability as an entrepreneur. 
  • You can choose to include other members or form a one-member LLC
  • Profits and losses are shared amongst the members. 
  • You are excused from corporate taxes.

Disadvantages of LLCs

  • LLCs are more complicated to form than Sole Proprietorships.
  • You can’t go public with an LLC like you could with a Corporation.
  • Even if you’re exempted from corporate taxes, you pay a self-employment tax.

3. Corporations

Corporations are the best option to start a large-scale retail business. If you want to start a business with many locations and outlets, this is a perfect choice. 

Like its counterparts, it has its advantages and disadvantages. Here are some of them. 

 Advantages of Corporations

  • Owners’ personal assets are protected from liability as the business is a separate legal entity.
  • It is easy to get funding and expand the business. 
  • It separates personal and corporate taxes.  
  • It is easier to go public with corporations than with other business entities.

 Disadvantages of Corporations

  • They require a lot of paperwork to form.
  • They are more expensive to form than other business entities. 

Bottom Line

The best business entity to start a retail business depends on the needs of the business and the entrepreneur’s personal preferences.

Simply put, analyze the advantages and disadvantages of each business entity to know which one works best for you. 

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

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. 

TIME BUSINESS NEWS