How to Choose the Best Entity for Starting a Retail Business


Choosing the best entity when starting a retail business can be challenging. However, with the right guidance, you can choose a business structure that will enable you to launch and run a successful retail business. This article shares the 3 common types of business entities you can choose from. Let’s get started.

1. Sole Proprietorship

This is a type of entity formed by one person or a married couple who take full responsibility for the daily activities of the retail business.

Sole Proprietorships are the easiest to form. There’s no barrier to entry since formal registration isn’t required. This means if you don’t register your business under any other entity, you’re automatically a Sole Proprietorship.

However, you’ll need to get the necessary permits and licenses.

It’s also easy to get started because startup costs are low plus tax filing is simple. 

On the downside, you’re responsible for all business debts, losses, and failures, as well as any legal actions against the retail business.

2. Corporation

A Corporation is formed as a separate entity from the shareholders. If you want to start a large-scale retail business then forming a corporation would be a great idea.

The best thing about this business structure is that its owners are protected from liability. 

You also get opportunities to raise funds and attract investors with this business entity, which makes it easy to scale your business.

It’s worth noting that Corporations are complex businesses to form. They also cost more than other business entities to start.

Besides, they are prone to more regulations and you risk getting taxed twice. 

3. Limited Liability Company

A Limited Liability Company is a business structure whose owners are protected from liability for any financial losses and company debts.

A Limited Liability Company offers management flexibility, plus its formation requires less paperwork than a Corporation. Besides, an LLC allows flexible profit distribution.

An LLC enjoys pass-through taxation. However, you may be subject to LLC taxes depending on the state you choose for the LLC formation.

On the downside, though, forming an LLC is more costly than a Sole Proprietorship. It’s also hard to transfer ownership.


Choosing the best entity when starting a retail business is a great idea. 

Forming the right business structure can save you a lot of future headaches and frustrations. We hope this article will help you pick the right entity for your business.

You can get more details on the best entities for a retail business from this infographic by GovDocFiling.



Infographic via:


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