Choosing the right legal structure while starting your retail business is a very important decision. This decision should be based on two crucial elements – your business goals and a good understanding of the different business structures available in the US.
Here in this post, we make an attempt to get you acquainted with the three popular legal entities and their pros and cons. With this read, we want to help you choose the best legal structure for your retail business.
Are you ready? Then let’s get started.
Sole Proprietorship
Sole Proprietorship is the most suitable business structure for an entrepreneur who wants to get started with a business idea on a small scale. With this simple and easy form of an entity, you can avoid extensive paperwork and complicated regulations.
In Sole Proprietorship, the owner is solely in control of all the daily operations. The profit earned by the establishment is considered the owner’s personal income. The biggest drawback of a Sole Proprietorship is that the owner’s personal assets are not protected against business liabilities.
Limited Liability Company (LLC)
In a Limited Liability Company, the owners have limited liabilities. It is relatively easy to start an LLC and is not subjected to double taxation. The owners here are called members who take up limited responsibilities in the business.
LLC is the most suitable business structure for startups and small businesses because of its enhanced security. While starting your retail business, you can opt for the state to start as an LLC and later expand into a corporation.
Corporation
A Corporation is the most organized and complex legal entity. Starting a corporation involves lengthy paperwork and is subjected to multiple regulations.
This business structure is most suitable for retail business owners who desire to open branches of their store at different locations. A Corporation is considered as a separate entity, apart from its owners, and pays corporate tax. In order to make the choice of a business model easier, consider these entrepreneurial statistics a good resource to take a look at.
These three business entities are unique and have their own pros and cons. To grasp all this information in a simple way, take a look at this infographic by GovDocFiling. By understanding these entities thoroughly, you can confidently make a choice for your own venture and start a retail business. Here’s to great success!
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.
