Choosing the right business structure is crucial to the success of any business. After all, a wrong choice can affect multiple aspects of your business including how you share profits and losses. Your choice of business structure determines how your company will be taxed, what will be the ownership structure, etc.
If you’re worried about which business structure to choose for starting a retail business, you’ve found the right post. In this post, you will learn the key features of the best business entities for starting a retail business. Hopefully, that would enable you to make the right choice.
Here are the top choices for entity types and their key features.
Sole Proprietorship
If you want to start a small retail business with complete control over it, then you should form a Sole Proprietorship. Here are its key features:
- It is easy to form
- The owner gets all the profits and bears all the losses
- The owner’s personal assets are at risk if the business fails
- The sole proprietor has complete control over the business
- All corporate income is taxed as the owner’s personal income tax
LLC
This is a great choice if you want more flexibility and less risk for your retail business.
Here are its key features:
- LLCs can be taxed either as a Sole Proprietorship or a Corporation
- It protects your personal assets in case the business fails
- You can get avoid double taxation due to separate corporate taxes
- It is slightly more complex to form and requires more paperwork
Corporation
This is the best option for starting a big retail business that can be scalable. Here are some of the features of a Corporation:
- It is the easiest to get outside funding for a corporation
- A Corporation can go public by issuing shares
- This is the best option for liability protection’
- The formation process and compliance requirements are the highest
- It requires double taxation, which can be costly for small businesses
Ready to Choose?
To conclude, the popular choice for small family businesses is Sole Proprietorship and for large businesses is a Corporation. LLCs, on the other hand, are great for businesses of all sizes as they provide the best of both worlds.
If you want more information before you can make the final decision, you can check our website for more relevant posts with helpful tips on the subject.
