The pandemic caused a lot of retail activity to move online. Some assumed that it was the end of retail. Nothing could be further from the truth.
As the pandemic slowed down and the world opened up, people flocked back to brick-and-mortar stores.
According to a report, ecommerce growth is declining while in-store spending is increasing after the pandemic.
If you have been thinking about starting a retail business in 2023, we must say it is a good decision. Investing a bit of time in research can set you up for success.
When it comes to starting a retail business, there are many things to consider. One key aspect to consider is choosing the right business entity.
Which business entity is right for a retail business?
Let’s find out.
If you are starting on a small scale, then this could be the right entity for your business.
In fact, it is the preferred business entity for people who want to start a small business and for those that want to start freelancing.
It is quite easy to form and requires very little paperwork. You don’t need to pay corporate taxes either.
However, if you want to expand your retail business and open multiple stores, this may not be the right choice for you.
Limited Liability Company (LLC)
When you form a Sole Proprietorship, there is no legal separation between you and your business. Since you and your business are considered a single entity, any lawsuit against your business also puts your personal assets at risk.
An LLC makes your retail business a separate legal entity. This helps to protect your personal assets.
Starting an LLC is a little more complicated than forming a Sole Proprietorship, and requires more paperwork. You don’t have to pay corporate taxes, but you may need to pay self-employment taxes.
Like LLCs, Corporations also create a legal demarcation between you and your retail business. One of the biggest advantages of Corporations is that they provide the best liability protection.
Corporations are also the best choice if you want to raise funds and scale your business quickly.
However, corporations require a considerable amount of paperwork and can be difficult to set up. They also require a significant monetary investment. High corporate taxes is another drawback of Corporations.
Check out the infographic below for more information on the right business entity for your retail business.
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.