What does it take to establish a successful retail business? You need a good blend of self-motivation, an in-depth understanding of your sector, industry-specific skills, marketing skills, and good customer service.
But even before starting a retail business, you have to decide on the kind of business structure you want to adopt: Sole Proprietorship, LLC, or Corporation.
If you are at that stage, read on to understand each of these business entities, their pros, and their cons. This would help you make the right choice.
Let’s get started.
1. Sole Proprietorship
A Sole Proprietorship is a simple business structure that is easy to start. You can begin running a Sole Proprietorship in your name with limited documentation.
For a small-scale retail business, this is the most ideal entity giving you complete control over operations and how you want to grow.
The biggest disadvantage of a Sole Proprietorship, however, is that you, as the owner, are solely responsible for debts and losses, which puts your personal assets at risk.
2. Limited Liability Company (LLC)
LLC is a versatile legal business entity owned by an individual or partners. The major advantages of an LLC are limited liability, legal protection for private assets, and no corporate taxes.
However, you’d still be required to pay self-employment tax and state fees.
It’s the best entity for medium-risk businesses and for entrepreneurs who prefer shared responsibilities. The limited liability factor makes them more favorable too.
However, it’s important to know the rules for your state while starting an LLC as the rules differ from state to state.
3. Corporation
A Corporation is the most organized legal business entity which is independent of its owners, just like an LLC.
A change in shareholders doesn’t affect the operations of a Corporation as it’s managed by the board of directors. This makes it the best entity for a large-scale retail business that can practically run perpetually.
A small business owner may not opt for this entity though due to its double taxation, complicated structure, and extensive regulations.
Take a look at this infographic by GovDocFiling for a clearer and detailed analysis of these three business structures.
Choose the most appropriate entity that best suits your business goals and go on to establish a successful retail business.
